Christina used a personal loan to pay off over $25,000 in credit card debt and saved thousands in interest expense
Christina and her husband live in Los Angeles and both have good jobs. They make enough to live comfortably and cover day-to-day expenses, but the rising cost of living in LA with a young son makes it difficult to save money, much less pay off debt.
That’s why 5 years after getting married, the Smiths were still struggling to pay off the more than $25,000 in credit card deb they racked up after the wedding and the birth of their first child.
“When we got married in 2010, we both worked full time and barely had any credit card debt. But then we went on our honey moon and had our son soon after. I made the decision to stay home the first couple of years after he was born, and having one income really put us behind financially.”
While most cautionary tales about debt involve careless spending or financial mismanagement, it was not the case for Christina and her husband.
“We live a frugal lifestyle but living in Los Angeles with a kid can get really expensive at times. There’s always that one big expense you don’t see coming, and before you know it, you are paying catch-up financially.”
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Paying off credit cards requires that you make sizable monthly payments that chip away at both principal and interest. It takes discipline and commitment, and often-times the only way to stick with it is to have no other choice.
That’s why a personal loan with equal and finite monthly payments can be such a great alternative.
“We tried to create a payment schedule on our own, but on tight months we kept reverting back to only paying the minimum payment on the credit card statement.”
How about using a balance transfer card with a 0% APR introductory period?
“Balance transfer cards work if you can pay off most of all of the debt within the interest free period. Instead, we realized that the 0% interest almost enticed us to spend more than we typically would, since it felt like free money.”
Instead, Christina decided to take out a personal loan with Lending Club. Lending Club loans have APRs between 6.16% and 35.89%, which means that if you have good to excellent credit you could qualify for a lower APR than even the best credit cards.
Plus, they have a fixed number of equal monthly payments, so even if the APR is on the high end of their range, you could still save thousands compared to a credit card because you pay it off in 3 years or less.
“The Lending Club loan made it easy to plan out the monthly debt expense. We knew what we needed to set aside each month, which was tough at times but well worth it.”
In the end, Christina and her husband paid off the full amount in 3 years by making payments of roughly $500 each month.
Had they kept paying barely above the minimum payment, it could have taken them more than 20 years and $40,000 in interest to pay it off!
“Paying off the debt gave us an unbelievable sense of accomplishment and lifted a huge burden that we carried with us. We never want to go back to where we were a few years ago.”
Christina now understands that their financial situation can change instantly if one of them loses their job or if they face an emergency expense, so they make sure to stay on top of their bills and put away money each month, no matter how small the amount.
To help you stay on track, there are great personal finance management tools and apps that are free and easy to use. Companies like Hellowallet, Acorns, Mint or Moven provide you with a simplified and complete view of your financials, analyze and track your spending habits, and give you tools and tips to save daily.
“Will we stay debt free forever? I hope so, but understand it’s not likely. The biggest takeaway for us was that we need to be proactive during bad times and never let it get to a point where it is unmanageable.”
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