While working toward his goal of being debt-free, Shawn Abramowitz of Palms Spring, Calif. had some setbacks — as well as wins. But one of his smartest moves, he says, was actually to borrow his way out of debt.
Shawn recently used a personal loan from Upstart to consolidate credit card debts, and it’s made a huge difference in his finances. Here’s how Shawn decided to consolidate nearly $20,000 in credit card debt — and how it’s paying off.
A college credit card habit gone awry
While he was a college student, Shawn always had some new cost to cover, from car payments to insurance or cell phone bills.
During one semester he says, “The cost of books came up, and I had the credit card, so I used that to pay for books.” After that, he charged more and more incidentals to his card.
“School got me into the habit of borrowing,” he says. “I fell into the trap of credit card debt.” One time he even used his credit card to pay for a semester of college.
By the time he turned 23, Shawn had racked up $5,000 in credit card debts. But he kept up with his monthly payments and figured that was enough to keep his balance under control.
Crossing the $20,000 credit card debt threshold
A theater major who graduated from California State University, San Bernadino, Shawn moved to Los Angeles to give acting a go.
He worked two jobs and attended auditions, but struggled to cover the high living costs of LA. And thanks to his habit of charging everything to his card, his credit card balance kept creeping up.
Shawn decided to move back to the much more affordable San Bernadino Valley, where he had a higher-paying job and cheaper living expenses. By that time his credit card balance was over $10,000.
Still, Shawn felt like his debt was under control. However, looking back he says he didn’t realize that “all of my minimums were going toward interest and I wasn’t getting ahead of my debts.”
Then Shawn hit some rough financial patches, including losing his car in a flash flood. He used his credit cards to cover emergency costs and stay afloat, but his balances ballooned to $20,000 in the process.
Coming clean about his credit card debt
The reality of how much Shawn owed was starting to weigh on him. He also had a serious girlfriend, Francinni, to whom he hoped to get engaged and to build a future together.
But Francinni didn’t know about his credit card debt, and he hadn’t found a way to tell her.
“Having this much credit card debt made me feel like I was a failure,” Shawn remembers. “Like I wasn’t good enough. Even though I had a good credit score and hadn’t missed a payment.”
It came to a head when Francinni proposed the idea of taking a vacation together. Every time she brought it up, Shawn says, “I felt this huge pressure, like I couldn’t afford it. I was freaking out because I knew I couldn’t pay for it.”
Shawn knew he had to come clean to his girlfriend. So he sat her down and had an honest, transparent discussion about his finances and his debts.
Shawn worried it would go wrong. “It was nerve-wracking talking to her about it,” Shawn said. “There’s such a big taboo around talking about money.”
Instead, it was an important turning point.
“She made me feel comfortable about discussing finances,” Shawn explains. Instead of being upset as he’d feared, Shawn says Francinni “approached it just as numbers [which] helped me wrap my head around it.”
Setbacks after setting a credit card payoff goal
With his girlfriend’s help, Shawn set a goal to pay off his credit card within a year. He started making changes and working on paying down the credit card balance.
But Shawn’s monthly minimums were already pretty high at $550. And most of that $550 a month went to credit card interest, thanks to credit card rates as high as 24.00% APR. Plus, new expenses kept popping up.
“I felt like there was no way I could cover my expenses, pay credit card interest and pay enough to actually get out of debt,” he says.
After six months of making almost no progress, Shawn knew he needed a different approach. Fortunately, thanks to his honest conversation with his girlfriend, he had someone to bounce ideas off of.
“Let’s look into some sort of debt consolidation and put some credit cards away so we can get spending under control,” Shawn remembers Francinni said.
Higher minimums but lower interest rates
Shawn took some credit cards out of his wallet and put them away, making it easier to resist the temptation to add more to his balance.
Additionally, Shawn did the math on his debt and found out that at $550 a month, it would take him 10 years to pay off his $20,000 balance. And the debt will also cost him thousands of dollars in interest at that rate.
But Shawn was determined to find a better way — and soon, since he planned to get engaged and marry Francinni within the next few years.
“I don’t want this to burden her, just because of the choices I made,” he says. “I don’t want her to have to take on my debt.”
Shawn looked into debt consolidation and decided to replace $19,353 of his credit card debts with a three-year personal loan through online lender UpStart. All it took was a short application and a one-time loan fee equal to his monthly payments.
“Consolidation took a huge lift off my shoulders,” Shawn says. His new loan had a rate of just 6.00% APR, a fourth of his highest credit card rates.
“I’m paying only $100 more a month to Upstart,” explains Shawn. His monthly $550 credit card minimums went up to $647. “But I know it will be gone in three years, max.”
From chipping away at debt to taking out chunks
“I pay that $647 and it’s not chipping away at my debt, it’s taking chunks out,” Shawn said. Plus, since it’s an installment loan, he can’t add to his debts the way he could with a credit card.
And with no prepayment penalty, Shawn’s free to pay off his personal loan sooner with no penalties.
With his debts under control, Shawn felt more prepared to take some big life steps. He consolidated with Upstart in October 2016. And just a month later, he proposed to Francinni (and she said yes!).
Shawn says he’s now thinking of “my future with my fiance and our goals to pay for our wedding, buy a house, invest.”
“I’m more confident that I can pull my fair share,” adds Shawn. Additionally, he says he now feels more in control of his money after learning the hard way that “it’s just a number.”
“It doesn’t dictate the kind of person you are to get into a situation where you have debt and it’s hard to get out of that hole,” he states. Now, he views debt as “simple addition and subtraction, not college algebra.”
At the end of the day, Shawn says, “You can start making little changes, identify options, take advantage of tools, and get your way out.”
Curious about how much money you could save by consolidating your credit card debt? Use our Student Loan Hero Credit Card Consolidation Calculator below to find out!
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|Lender||APR Range||Loan Amount|
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4 Important Disclosures for Citizens Bank.
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All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
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