4 great ways to pay off $5,000 in credit card debt

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Need help paying off $5,000 of credit card debt? Read on to understand how credit card debt grows and four good ways to pay it off. (Shutterstock)

Carrying a credit card balance can get expensive. There credit card balance are perpetual, you don’t have a definitive repayment date, which can make it difficult to create a clear debt repayment schedule. Additionally, the interest on that debt can add up, especially if you continue to roll over balances and new charges month-to-month. But that doesn’t mean you can’t find a way forward, especially if you have a manageable amount like $5,000 to pay back.

If you have $5,000 credit card debthere are four good strategies to cash out your funds.

A debt consolidation loan is a way to pay off high-interest credit card debt. Believable makes it easy View your prequalified personal loan rates from different lenders, all in one place.

Why you should pay off $5,000 in credit card debt fast

Credit cards come with high interest rates, and that high cost is the main reason you can take advantage Pay off credit card debt as quickly as possible.

It’s important to note that while $5,000 in credit card debt may not seem like a lot, it can add up. For example, if you have a $5,000 credit card balance with an 18% interest rate and make a monthly payment of $100, it will take almost eight years to amortize and you will pay $4,311 in interest – almost as much as you original balance. It’s easy to see how this debt can haunt someone for a long time and cause them financial stress if they don’t take steps to pay it off quickly.

Debt of any kind can lead to feelings of stress, anxiety, and depression. Paying off your debts in full as soon as possible will not only Save moneybut it can greatly benefit your mental health.

14 MILLION AMERICANS HAVE OVER $10,000 IN CREDIT CARD DEBT, SURVEY SAYS 3 WAYS TO PAY FAST

4 great ways to pay off $5,000 in credit card debt

There is There is no right way to pay off your credit card debtbut these four popular debt repayment methods are a good place to start.

Which method works best for you depends on your individual financial situation and which method you find most motivating.

1. Debt Snowball Method

The debt snowball method requires that you make all the required minimum payments on all sources of debt each month, but spend any extra money you can afford and put it on the credit card with the lowest balance. This allows you to make faster progress in paying out the smallest balance.

Once you’ve paid it off, you can use that card’s minimum monthly payment and any additional funds to pay off the card with the next lowest balance, and so on. This strategy won’t save you the most in interest, but it can be motivating to see balances disappear faster.

Good for: Those who want to see quick gains to stay motivated to pay off their debts

2. Debt avalanche method

With the debt avalanche method, you prioritize paying off the credit card with the highest interest rate while making minimum payments on your other balances. Once you’ve paid off that card, put the money you paid off on the card with the next higher interest rate, and so on, until you’ve paid off all your balances.

Since you’re targeting your highest-yielding balances first, this method can help you save more on interest expenses over the long term, but it may not be as motivating as the debt snowball strategy.

Good for: People who want to save more on interest costs

3. Consolidate with a debt consolidation loan

If you are feeling overwhelmed by multiple sources of debt, you can combine them into a single source of debt by taking out a debt consolidation personal loan. If you can apply for this new loan and qualify for a better interest rate than the average of all your debt sources, you can save on interest. The downside to this is that you usually need good credit to qualify for a better interest rate.

Good for: People with good credit who want a clear end date for paying off their debt

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4. Open a credit transfer card

Similar to a debt consolidation loan, you can Use a balance transfer card to consolidate multiple sources of credit card debt. The key to getting the most out of a balance transfer card is to look for a card that offers you an introductory 0% APR. During this time, you won’t have to pay any interest, which can make it easier to pay off your debt faster.

However, you usually need good credit to qualify for a balance transfer card that offers 0% APR. And if you have any remaining balance at the end of the promotional period, you will be credited with interest at the card’s regular rate, which can be high.

Good for: People who can afford to pay off the balance in full before the end of the introductory period

IS IT BETTER TO PAY OFF DEBT OR SAVE?

4 bad ways to deal with credit card debt

Some debt repayment methods are much less helpful — and in some cases harmful — for getting out of credit card debt. Here are four options to avoid if possible:

  • Tap into Home Equity — It’s generally not a good idea to use a home equity loan to pay off your credit card debt, even though that loan may come with a lower interest rate. A home equity loan is secured by your home. If you don’t pay off these debts, you could lose your home.
  • Taking out a 401(k) loan – Borrowing money from your 401(k) to pay off your credit card debt doesn’t just hurt your progress toward retirement savings. This step also results in you paying interest to borrow your own money and experiencing automatic payroll deductions until you pay back the loan.
  • strive for debt repayment – Debt settlement companies claim they can help you settle or renegotiate your debt to make repayment easier. They cannot guarantee this and often charge high fees.
  • declare bankruptcy – Filing for bankruptcy may seem like a way to get a clean slate, but the process can seriously damage your credit score. Bankruptcy stays on your credit report for seven to 10 years and can make it difficult to qualify for loan products, get good interest rates, and even rent an apartment.

How to avoid credit card debt in the future

Once you’ve paid off $5,000 in credit card debt, it’s important to keep a clean slate. Here are some ways you can avoid credit card debt in the future:

  • Understand how the debt came about in the first place. To avoid piling on debt again, think about where the debt came from. Have you overspent on unnecessary purchases? Is your rent too high? Have you lent too much money to friends? Try to get to the root of the problem so that you can avoid these problems in the future.
  • Make or balance your budget. See where you can make improvements in your budget to stop spending creeping up on you again. Many free budget management tools are available online to help you keep track of your spending.
  • Build an emergency fund. One way to avoid high-interest credit card debt in the future is to have an emergency fund ready to help when unexpected expenses like car repairs or medical bills come your way. The goal is to save three to six months of living expenses in your emergency fund.

When you’re ready to apply for a personal loan as the first step toward meeting your debt-paying goals, Credible makes it quick and easy to do so Compare personal loan rates to find one that works for your unique situation.

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