Hi, I have four credit cards with a total debt of roughly $20,000 that ranges in interest from 24% to 29% and minimum payments from 140 to 280. I currently make about $2,500 a month working full-time, with monthly costs of roughly $900. Is it wise to take out a debt consolidation loan, pay off all of the debt, and then pay back the loan? Or simply tighten my belt and gradually pay off the credit card?
This can be paid off without a loan if you sell items, spend any extra money you have, practise frugal living, and engage in free hobbies. It should only take a year or less.
Take up a second job and pay off your credit card debt with every dollar. Next, continue working until you have enough money saved for emergencies.
After deducting your charges, your post indicates that you have $1400 remaining. If you put every penny towards your debt, it will be paid off in around one and a half years.
To make an additional $500 to $1,000 a month, take on a second job and finish it in 12 to 14 months. It’s fantastic if you can secure one loan, but why do you need more income?
One thing I would do is include all four credit cards on a spreadsheet, with the interest rate and repayment amount listed next to each card. After that, I would decide which balance or card to pay off first and devise a plan. Prioritise that card first if it has the lowest balance but the highest interest rate. Are there any cards that come with bonus points? You can use these points to reduce your balance on certain cards. I utilise the gift cards that come with other cards to pay for needs.
You never take out a loan for debt consolidation before your behavioural problems are resolved; otherwise, you would pay off your credit card debt, promptly accrue more, and wind up with $40,000 in debt after a year.
Reduce every expense you can, such as subscriptions, eating out, and sporadic unnecessary purchases. Start with the smallest debt and work your way up. You have no debt after 18 months.
Undoubtedly, a reduced interest rate consolidation loan would be beneficial, but only if you could prevent yourself from reloading the cards once they have been paid off. After receiving the loan, far too many people continue to use their credit cards in the same way and accumulate even more debt.