Why Borrowing Your Way Out of Debt May Be Your Best Bet

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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.”

Get a Personal Loan With Upstart

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!

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Credit Card Consolidation Calculator

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By consolidating your credit cards with a total balance of at a weighted average interest rate of with a new loan at a interest rate, your new monthly payment would be . Your lifetime savings with your new loan would be compared to the total balance you’d pay on your credit cards.

Consolidate and pay off debt with personal loan rates as low as
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Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 7.08% APR to 15.37% APR (with AutoPay). Variable rates from 5.81% APR to 14.11% APR (with AutoPay). SoFi rate ranges are current as of August 10, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.81% APR assumes current 1-month LIBOR rate of 2.07% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions ApplySOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS #1121636.
    (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

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 6.16% to 35.89%. 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 time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. 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 or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
5.81% – 15.37%1$5,000 - $100,000Visit SoFi
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
5.49% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.