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Is It Possible to Pay Off $15,000 Debt Fast?
If you are facing a substantial debt – such as a $15,000 credit card debt or more – there is no reason to feel a sense ashamed. In fact, the average U.S. household owes $16,061 in credit card debt. Considering this statistic, you are definitely not alone in this problem.
But even if you share the same problem with many people, it doesn’t mean you should neglect it. There are many reasons to tackle your debt as quickly as possible. For one, your credit card debt acquires between 15% and 29% of interest. Additionally, it negatively affects your credit score.
Dealing with a five-digit debt is a necessary yet very challenging process. This article has compiled some methods of how to pay off $15,000 in credit card debt. Learn more about each method and choose what suits your situation best.
Use Savings to Pay Off Some Debts
You always hear that you should make contributions to your savings account. Savings exist for emergencies. Being in large amounts of debt can be considered a financial emergency. If you don’t know how to pay off $15,000 in six months, now is the time to tap into it. Of course, this will only work if you have enough emergency funds.
Alternatively, you can use income tax refunds or other unexpected funds. Adopt the mindset that any additional income does not mean you can expand your budget. Whenever you have more disposable income, you direct it toward your debts.
You don’t necessarily need to empty your entire account. However, you can take out a portion of it and make one lump payment toward your debt. This action can buy you more time to figure out what to do next. Or you can use those funds to leverage your creditors during settlement negotiations.
The main benefit of using your savings is that it can save you a lot of money. If you pay off your debt faster, which big lump payments can help you achieve, you will pay less interest. Considering the enormous rates that credit cards require, this gives you an advantage.
Enter a Debt Management Program (DMP)
If you want to pay off $15,000 in one year or so, it will take a lot of restraint and willpower. A debt management program is meant to handle your expenses and keep you on track with your budget. This method is the least invasive to your credit history and scores overall.
A debt management program guides you on budgeting, lowering the interest rate on your credit cards, and achieving more accessible, affordable terms for eliminating your debt. It should be mentioned that a DMP does not yield immediate results; you do you have to be patient.
Credit counselors go over your financial situation comprehensively and discuss several options, not just a debt management plan. They will also explain the benefits, as well as risks associated with such programs. For example, you need to be aware that you may have to live without credit cards for the time being.
Create Your Own Plan
If you are sure about your ability to handle all of the difficulties associated with eliminating your debts, you can try doing everything on your own. You need to realize that the mere thought of “I need $15,000 now” is only the first step in what will prove to be a long journey. It will take many hours of research and work to become familiar with this complicated topic.
The first solution is called the avalanche method, which is considered a money-saving method. It focuses on paying off the highest interest rate cards before the others. If you don’t hold off on making high-interest payments, you won’t have to pay the associated fees and penalties. It will take more time to eliminate your biggest debt, but it will be worth it.
Another avenue you can take is the snowball method. It entails tackling the smallest debts first. It creates a snowball effect of slowly approaching your bigger debts. The main benefit is that it is emotionally rewarding and motivating. When you see some of your debts eliminated, it will give you a sense of achievement and help you go on. However, you may end up spending a lot more money with this method.
DIY methods are tempting. You may want to prove that you can manage your debt without any outside help. However, this is not the time for pride. You should be set on your goal and do whatever works best for you. In most cases, it will require a professional approach.
Take Out a Personal Loan
If you have multiple debts that start to become overwhelming, it makes sense to merge them into one convenient payment. It is especially beneficial if you have several high-interest credit cards, and you can use a low-rate personal loan to prevent enormous charges.
The benefits of this route include:
- Consolidating credit card debt with a personal loan can help you improve your credit scores. It replaces revolving debt, which takes into account your credit utilization ratio, with an installment loan, which doesn’t.
- A personal loan can mitigate overload. Since you have fewer payments to take care of, it simplifies the management of your personal finances.
- It saves you money. You will spend significantly less money on an installment loan at a lower rate than on credit cards.
However, taking out an additional loan is not the same as, “What can I do with $15,000?” Essentially, it is not free money. If you treat it irresponsibly, you will only make your situation worse. If you don’t want to end up in more debt, keep the following points in mind:
- Don’t close your credit cards. Otherwise, your credit utilization will rise and damage your credit score.
- Use as little of your credit balance as possible. You don’t want to add more complications to your problem.
- Always pay on time. It goes without saying that you should always be punctual about your payments. But in this specific case, it is even more vital.
Consider Debt Settlement
Debt settlement is a debt relief option that will help you remove a portion of your debts. The process of settlement takes place through negotiating with your creditors, such as credit card companies or collections agencies. Preferably, you should do it with the help of a specialized company like DebtQuest. Any of the presented options, in fact, are bound to be better executed by a professional.
During the negotiations, you want the creditors to accept a partial payment of your debts rather than the full balance. You can arrange up to a 50% reduction from your original sum. They might agree if you have an unexpected, financially devastating incident, like loss of income, medical issues, or divorce. However, they are known to occasionally agree to partial payments to avoid dealing with debt collectors.
Debt settlement will be a viable option for you under the following two conditions: you are late on your payments and can make one large settlement payment. Otherwise, you may be better off with other solutions.
File for Bankruptcy as a Last Resort
For those people who have reached their limits, bankruptcy may be the only viable option. Even though it is not advisable to seek it out, it may be your only way out. There are two types of personal bankruptcy:
- Chapter 13, which allows you to keep your property. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
- Chapter 7, which often requires you to surrender some of your property. It’s the type most people think about when the word “bankruptcy” comes to mind.
In either case, it will be a long, financially straining process, and you will have to deal with all kinds of legal difficulties. Therefore, always seek credit counseling before going down this path.
Eliminate Your Debt Using a Variety of Methods
Your journey toward living debt-free will not be an overnight success. You can earn or save thousands of dollars every month, even if it doesn’t initially seem like it’s possible. For example, consider these practices:
- Track your spending – Monitor and categorize your spending in a notebook, app or your bank account
- Save little pockets of extra cash – Squeeze an extra $500 or whatever you can out of your budget each month. Chances are you won’t even need to make changes to your lifestyle
- Participate in an uber frugal month challenge – You might not have heard of this challenge, but interestingly it actually works. Do more research to find out more about the rules.
While cutting your expenses and creating a strict budget is undoubtedly beneficial, it’s an excellent way to find additional income. So, if you want to make $15,000 fast, you need to make significant changes in your life. Whether you start a side hustle, ask for a raise, or work a few extra hours, all of these steps will make a significant contribution toward your debt.
We recommend choosing several methods of eliminating debt, depending on what will work for you. But don’t make the common mistake of blindly following the advice that doesn’t fit your financial situation. The trick is to find the right financial solution and form new habits that become a regular part of your life.