Having credit card debt of any amount can feel overwhelming, but this is especially true with a steep amount like $20,000. Not sure how to pay off $20,000 in credit card debt? There are a number of options to consider to get your credit card debt under control and paid off.
For one, you might consolidate the debt using a balance transfer credit card or debt consolidation loan. Or, it might come down to adjusting your monthly budget or simply choosing the repayment method that works for you. Another option is pursuing a debt management program. Really, once you understand the potential solutions at your fingertips, paying off $20,000 in credit card debt can start to sound more doable.
Tips on Paying Off $20,000 in Credit Card Debt
Having $20,000 in credit card debt does present a challenge to the borrower working to pay that amount off, but it is possible to make progress and become debt-free. Let’s look at some ways you can make progress on paying off your debt.
Open a Balance Transfer Credit Card
Paying off credit card debt can be more difficult when you’re juggling multiple credit card balances. To help simplify the debt repayment process, you might consider opening a balance transfer card.
It’s possible to transfer just one credit card balance or multiple to a balance transfer card. This can be a good move to make if you can qualify for a balance transfer card with an introductory annual percentage rate (APR) of 0%.
While this 0% APR period is temporary, it can last at least six months and sometimes longer than a year. Not having to pay interest during that time period means all payments go toward the principal balance. This makes it a lot easier to pay down credit card debt faster, and it can save a lot of money in the process.
The trick here though is to pay off the entire balance before that introductory period ends and the interest rate shoots up.
Use a Debt Consolidation Loan
If someone has multiple sources of credit card debt, they might also consider consolidating that debt using a debt consolidation loan. This will lead to taking out a $20,000 loan, but it can help streamline the debt repayment process. In fact, debt consolidation is one of the common uses for personal loans.
After you apply for and get your personal loan approved, the way a debt consolidation loan works is that you’ll then use the loan funds to pay off your other sources of debt. This could be multiple credit cards or other types of debt, like personal loans mixed with credit cards.
Ideally, when someone applies for this new loan, they’ll be able to qualify for a lower interest rate than they’re currently paying on their other sources of debt. That way, they’ll spend less on interest and can afford to put more money each month toward repaying their debt. This can make it easier to pay the debt off faster and save on interest (you can even determine your exact savings with a personal loan calculator).
Another benefit of a debt consolidation loan is that it takes multiple sources of debt and turns them into just one source, with a single interest rate, minimum monthly payment, and payment due date.
Choose the Right Repayment Method
Paying down debt takes a lot of work and discipline, and sometimes you need the right type of motivation to stay on track with debt repayment. This is where the debt snowball and debt avalanche repayment methods can come into play, with some consumers finding one method helps them make more progress than the other.
• Debt snowball. With this method, the borrower makes the minimum payments on all credit cards each month, but focuses on making extra payments on the card with the lowest balance. Once they pay that one off (it will be the fastest to pay off), they’ll move onto focusing on the card with the next lowest balance. Making progress quickly like this can be really motivating for some people.
• Debt avalanche. Again, the borrower will continue to make all minimum debt payments each month. With this strategy though, any extra payments go toward the debt with the highest interest rate first. This method saves the most money, which can free up room in someone’s budget to make more debt payments each month.
Debt Management Program
Another option consumers have for getting help paying down their $20,000 credit card debt is to join a debt management program. This can be a good path forward for consumers who can’t afford to make extra debt payments each month or whose credit score doesn’t make it possible for them to qualify for a balance transfer card or a personal loan for debt consolidation.
Debt management plans are offered by credit counseling agencies. During the course of these programs, the credit counselor will alert the borrower’s creditors that they’re working with a debt management plan. From there, the counselor will attempt to negotiate a lower interest rate or lower monthly payments.
These plans tend to last three to five years, but they can help consumers make progress on their debt and avoid bankruptcy.
Credit Card Debt Forgiveness
Unfortunately, it can be very difficult to negotiate credit card debt forgiveness and it rarely happens. When someone opens a credit card, they agree to repay the money they borrow.
It can, however, be possible to negotiate a new payment plan that is easier on the borrower’s budget, especially if some kind of hardship occurred that’s making repayment challenging.
Additional Options for Paying Off Debt
One of the best ways to make progress on paying off debt is simply to make repayment a priority. To stay on track, consumers need to make their minimum required debt payments a fixed part of their monthly budget. By budgeting for debt payments and prioritizing them over other spending temptations, it’s more likely to make faster progress.
Another way to make progress on paying off $20,000 in credit card debt is to work on making additional room in your budget for extra credit card payments. Finding ways to lower expenses and other bills can leave more money each month to pay off debt. Remember — the faster you pay off your debt, the less you’ll spend on interest.
It may be necessary to make some spending sacrifices until you’re debt free, but once you are, you’ll have a lot more room in your monthly budget to add fun spending back in. Cutting back on dining out, shopping, traveling, and entertainment now can really pay off in the future.
The Takeaway
It is possible to pay off $20,000 worth of credit card debt, but it will take time. Patience is key here, as is assessing which approach for tackling $20,000 in credit card debt will be right for you. For some, a debt consolidation loan (one of the types of personal loans) may make sense, while others may opt for the debt snowball or avalanche method. Spending time focusing on paying off credit card debt can really help improve your financial outlook though, and it’s very much worth the effort.
If someone decides that consolidating their debt would really help them streamline repayment and possibly even save them money on interest, they may want to research their personal loan options. SoFi makes personal loans easy — it’s possible to check your rates in 60 seconds, and you can borrow up to $100,000.
Photo credit: iStock/filadendron
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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