For a tale of divorce, debt, and ultimately, triumph, look no further than Julie Carman Farrer, SoFi member. Farrer’s debt payoff story could serve as inspiration for anyone going through a tough time in their life.
Farrer and her ex-partner accumulated $24,500 in debt during their marriage and divorce. Farrer took control of the situation by consolidating her credit card debt with two personal loans.
With laser focus, dedication, and the help of an unexpected signing bonus, she was able to pay off the personal loans she took out in less than three years, making her consumer debt-free for the first time in a long time.
According to Farrer, the peace of mind that she has achieved after paying off her loans, along with the lessons that she’s learned from living through the process, are “absolutely priceless.”
Knowing how to pay for divorce is particularly tricky because most people don’t necessarily plan for a divorce. It doesn’t seem likely that someone would create a special savings account to save up for divorce. Often, this leaves people feeling like they are stuck in a corner.
For those scratching their heads and wondering how to pay for a divorce, Farrer’s story shows us that there are options. But we should point out here that this story is purely an examples to learn from—and what worked for one person might not work for someone else.
Following in one member’s footsteps might not yield the same results, because everyone’s finances and life circumstances are different. Using her journey as your guide, you may find some ideas to help with a financial plan for your divorce.
How Much Does Divorce Cost?
We’ll start with the crummy news—getting a divorce, already a difficult experience, is also expensive. According to Nolo , long-time publishers of consumer-friendly legal information, the typical divorce costs around $15,500. Of this amount, $12,800 can be expected to go toward paying legal fees and lawyers.
Here are some common costs to prepare for when getting a divorce: attorney’s fees, legal and court fees, financial planner and/or accountant, and the costs associated with dividing assets, such as refinancing a mortgage loan. On an ongoing basis, one party may have to make divorce payments to the other party.
Every divorce is different. How much it will cost you could depend on a number of factors, like whether the relationship is civil and if the divorce will be settled in or out of court. According to Nolo’s findings, it may also depend on where you live and who you hire to assist with the divorce process.
Another variable that makes it hard to say just how much a divorce will cost? The status of your financial situation prior to the divorce proceedings. Julie Carman Farrer is familiar with this reality.
According to Farrer, rash financial decisions during her marriage caused their debt to spiral out of control. In addition to the expenses associated with divorce, Farrer held the burden of carryover debts.
How Do I Pay for My Divorce? One Woman’s Story
Ideally, every individual, couple, and family would have some emergency money set aside to cover unforeseen events. While many aren’t thinking the money would be for a divorce, that could qualify as an unexpected expense. If you do know that a divorce is coming, you may want to consider cutting costs as much as possible to prepare.
Plenty of people resort to using credit cards to pay for a divorce. Others may already have credit card debt from marriage, like Farrer. She and her ex-partner accumulated a mound of debt prior to their divorce, and Farrer used the split as inspiration to pay off the debt.
“I started looking for a solution immediately after my divorce,” Farrer says. “I was determined to break the debt cycle and stop living check to check.” Sick of losing sleep over her credit card bills, she crafted a plan to eliminate her debt, once and for all.
First, Farrer consolidated her credit card debt into two personal loans from SoFi, totaling $24,500. These loans helped put her on track to pay back her debt over the course of three years. If she were to have made only the minimum payments on her credit cards, it likely would have taken her significantly longer.
Note: With credit card minimum payments, only a small percentage of the debt’s principal balance is chipped away with each payment. It can be extremely difficult to pay off a card only making the minimum payments, especially if you’re continuing to use the card for new purchases and have a high interest rate.
By switching out her credit cards with personal loans, Farrer was able to significantly lower the interest rate on her debt. In general, credit cards have a high rate of interest—according to the Federal Reserve the average credit card charges around 15% interest. With the lower rates of interest that came with her personal loans, in this case also called a divorce loan, Farrer was able to apply more money to the actual principal of the loan, and less to interest payments.
While Farrer loved having those lower rates, she also appreciated having a defined path toward debt repayment.
Compare this to the cycle of credit card use she felt trapped in prior to her divorce: “My ex and I used to consolidate credit card debt all the time, but then rack up more debt on the then-empty cards,” Farrer explains.
After paying off the credit cards, she vowed to use them responsibly. She’s happy to report that she’s been successful and no longer carries a balance.
“If you’re paying off debt and you have an active debt-reduction plan, don’t shoot yourself in the foot by continuing to accumulate additional debt,” says Farrer.
Unfortunately, that temptation to continue using credit cards can work against people trying to make progress on a debt repayment plan. But Farrer encourages others like her to stay strong: “It’s a vicious cycle but it’s so worth it to break that cycle and be free!”
Farrer was on track to pay off her two personal loans in three years. Luckily, due to an unexpected signing bonus at work, Farrer was able to pay her loans off in full earlier than planned.
Using credit cards and later consolidating to personal loans worked for Farrer, but it’s also possible to take out personal loans with the purpose of paying for unexpected divorce-specific expenses. But as with any new debt, whether credit cards or a loan, it’s a good idea to have a plan to pay it back.
The Silver Lining
While neither debt nor divorce are typically seen as positives, it may be possible to use these setbacks as motivation to turn things around in a big way.
That’s what Farrer did: “Thankfully, once I got my divorce, I was able to get a handle on my spending, saving, and debt reduction. My quality of life greatly improved!”
How does Farrer handle her finances now that her loans are paid off? “I’m much more careful about my spending these days and while I still utilize my credit cards (for the points), I can pay the balance in full every single month.”
With her extra savings, she’s also been able to accumulate a healthy nest egg and emergency fund. For Farrer, the feeling of financial stability is incomparable, and was so worth the work.
Best of all, she’s been able to treat herself with travel without putting those trips on credit cards that she can’t pay off right away. As a celebration for paying back her loans, Farrer took a trip to Colorado to hike and explore.
But that’s not the only vacation she’s been on: “I was able to take an eight-day family cruise vacation to the Caribbean. It felt great to be able to pay for the vacation in full without any additional debt.”
A Caribbean vacation free from financial stress? That’s a pretty great outcome, considering where Farrer started three years prior.
Putting Your Financial Health First
If you’re considering taking out a personal loan to get you through a tough financial time (or to consolidate old debts, like Farrer), shop around for a lender that offers great rates and excellent customer service.
Farrer loved working with SoFi because the process was all online and completely easy. In fact, she has since refinanced her mortgage with SoFi because her experience was such a positive one.
Getting through a divorce is never easy. But with some careful planning and research into the different options, you can get through it.
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Member Testimonials: The savings and experiences of members herein may not be representative of the experiences of all members. Savings are not guaranteed and will vary based on your unique situation and other factors.
Guest Participation: The individuals interviewed for this article were not compensated for their participation. Their advice is educational in nature, is not individualized, and may not be applicable to your unique situation. It is not intended to serve as the primary or sole basis for your financial decisions.
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