5 ways to pay off $5,000 in credit card debt
The vast majority of adult Americans (82%) currently have at least one credit card in their wallet, and credit card debt is growing. Over the summer, the total credit card debt owed in the United States broke the $1 trillion mark.
Just because credit card debt is commonplace, though, doesn't mean it's easy to deal with. "Due to increases in the fed funds rate, credit card and other revolving debt interest rates have shot up to new levels," says Shane Cummings, CFP, CEPA, AIF, and wealth advisor and the director of technology/cybersecurity at Halbert Hargrove. As a result, he says, these debts "can be difficult to pay down."
But what if you have $5,000 or more in credit card debt and dream of eliminating it? There are a few different routes you can take to try and get out of debt quickly.
Let the professionals help you realize the debt relief you deserve now.
Five ways to pay off $5,000 in credit card debt
Here are a few ways to pay off $5,000 in credit card debt quickly:
Take advantage of debt relief programs
Debt relief programs can offer an effective way to get out of debt. Regardless of the program you choose, you'll likely have a fixed payment that shrinks as you pay off your balance.
- Debt consolidation programs: Debt consolidation programs typically combine multiple debts into one with a lower interest rate. In most cases, this involves a debt consolidation loan with a fixed interest rate and minimum payment. In some cases, the debt consolidation company may negotiate your interest rates with your lenders on your behalf. Either way, lower interest may equate to meaningful savings.
- Debt settlement programs: Debt settlement programs negotiate on your behalf with the goal of reducing the total amount of credit card debt you owe. If you choose the debt settlement route, it may have a negative impact on your credit score. On the other hand, you can also expect significant savings and relief in the midst of financial hardship.
Find out how a debt relief program can help you find financial stability now.
Take a strategic approach
You can also get strategic with your payments to pay your debts off faster. Two common ways to do so are the debt snowball and debt avalanche methods. Here's how they work:
- Debt snowball: With the debt snowball method, you make minimum payments to all your credit card lenders with the exception of your lowest balance. Send all of the extra money to this account. In doing so, you'll pay off smaller balances quickly, resulting in a pick-me-up that motivates you to stay on track.
- Debt avalanche: Make minimum payments on all but your credit card with the highest interest rate. Send all excess payments to that card account. Once you pay that account off, send all excess payments to your next highest rate. Repeat until all of your debts are paid off.
Tap into your home's equity
"Home equity loans offer fixed interest rates, which is one of the biggest benefits for this specific loan type," says Darren Tooley, senior loan officer at Cornerstone Financial Services in Southfield, Michigan. Not to mention, the rates on home equity loans are typically far lower than credit card interest rates.
If you own a home, you could use one of these loans to pay off your credit card debt. Home equity loans also allow "you to set up a monthly budget and know exactly how much the monthly payment will be," says Tooley.
Take advantage of financial windfalls
Every once in a while, you may come across excess cash. That may be in the form of a holiday bonus at work, a refund from a tax return or something else entirely. And, when you get your hands on this extra money, it's typically wise to use it as a means to pay down, or pay off, your high-interest credit card debt.
Cut expenses where possible
Chances are that there are ways for you to cut expenses without impacting your quality of life. For example, if you enjoy a cup of coffee every morning at the local coffee shop, you could save a couple of dollars every day by making your coffee at home. That doesn't sound like much, but $2 per day is about $60 per month, which could help you pay off your credit card debt. There are plenty of other potential ways to cut expenses, too.
The bottom line
While credit card debt is stressful, you don't have to live with that stress forever. Use the options above to put your debt behind you. And remember, if you're having a hard time cutting into your balances, credit card debt relief programs can help you find financial stability.
