Three years ago, I had a medical emergency and was rushed to the hospital. I recovered quickly, but the damage was already done. Thanks to an ambulance ride, a lengthy hospital stay, and expensive treatments, I racked up over $20,000 in medical bills.
That bill was frighteningly high, and I was determined to pay it off as quickly as possible. Thanks to a debt consolidation loan, I was able to cut years off my repayment period and save thousands. Here’s how.
Managing my health
Ending up in the hospital was scary. But the part that frightened me was when the medical bills started arriving.
I was freelancing at the time and had health insurance I purchased through Healthcare.gov, so I didn’t think to worry about hospital costs. What I didn’t know was that my insurance wouldn’t cover most of my care. I was shocked when a huge hospital bill arrived.
Because it was an emergency and I needed care right away, the ambulance took me to the nearest hospital. I was quickly admitted into the emergency room, where I was treated by several doctors.
Although the hospital was within my insurance provider’s network, I didn’t realize that the doctors taking care of me were not. For insurance purposes, the company considered those physicians to be “out-of-network” providers, so they didn’t cover any of my treatment costs.
I had no idea this was a thing that happened, but it turns out it’s very common. This issue meant that I would have to cover the majority of my care out of my own pocket.
Using a credit card to pay my bills
When I opened up the bill to find that I owed over $20,000, I nearly fell out of my chair. I had some money in savings, but not enough to cover the full cost.
The bill was due soon, so I decided to charge it all on a credit card I had. It made me slightly ill to take on that much debt, but I didn’t think I had any other options.
Applying for a debt consolidation loan
My credit card had an interest rate of 15.00%, which I knew would cause my balance to grow if I didn’t tackle it aggressively. When I sat down and did the math, the numbers were staggering.
With a $20,000 balance, a 15.00% interest rate, and a monthly payment of about $350, it would’ve taken me about eight years to pay off the card. Worse, I would pay back a total of about $35,000. Interest fees would cause me to pay back nearly double what I charged. That was unacceptable to me, so I started researching my options.
As a personal finance writer, I talk to people all the time about strategies they use to pay off their debt faster. One of the most common approaches I hear is to apply for a debt consolidation loan to get rid of credit card debt ahead of schedule. Although I almost never recommend people take out extra loans, consolidating your credit cards with a low-interest personal loan is one time I make an exception to that rule.
I got quotes from multiple consolidation loan lenders and took out a loan through SoFi. Although I didn’t qualify for its lowest advertised rates, I did qualify for an 8.00% rate. That was a dramatic improvement over my credit card, so I moved forward with a five-year loan.
If I stuck to the five-year schedule, I still would’ve saved a large amount of money. According to our credit card consolidation calculator, I would’ve paid my debt off in five years and repaid a total of $24,332, a savings of over $10,000.
But I’m an overachiever, and I hated having that debt over my head. So I came up with a plan to eliminate it as quickly as possible.
Paying off my loan early
My husband and I came up with a four-step plan to free up more money to speed up our debt repayment.
- I sold my car. Probably the most drastic step I took: I decided to sell my car. As a freelancer, I worked from home, so I could make do with Uber or Lyft. Between the money saved on gas, insurance, and what I got for selling the vehicle, I got over $7,000 to put toward my debt. Becoming a one-car family was a smart step for us.
- I did “no-spend” challenges. I have a bad habit. I fritter small amounts of money away. Whether it’s a pack of gum or a new lipstick, I can spend $6 here and there, only to be shocked at my credit card statement at the end of the month. I set “no-spend” challenges for myself where I calculated how many days I could go without spending a dime, and then tried to beat my best record. (I made it to 18, by the way. For me, that was a huge improvement!) I deposited the average amount I would’ve spent on junk toward my debt each week.
- I sold stuff. I didn’t have a ton of valuables to sell, but I did have some old childhood collectibles and clothes that didn’t fit. I sold everything I didn’t regularly use or have a purpose for on eBay.
- I hustled. Although I worked hard to bring on new freelance clients for more cash, there were times when I couldn’t get more work. So I took on side gigs such as dog walking to make extra money to pay off my debt. I was able to put another $500 a month toward my loan.
Thanks to these steps, I was able to pay off my debt in about three years, rather than five. Because I paid off the debt so quickly, I was able to save nearly $2,000. Compared to what I would have paid off if I had only made the minimum payments on the credit cards, I saved over $12,000 by consolidating my debt and making extra payments.
Finally paying off that debt is a huge relief. Without that constant need to hustle and make more money, it’s amazing how much better I feel and how much more freedom I have. It makes the sacrifice and hard work over the past three years worth it.
Tackling your debt
If you’re dealing with high-interest credit card debt, applying for a debt consolidation loan might be a smart choice for you. If you decide to move forward, compare offers from multiple consolidation loan lenders to get the lowest rates.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
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.
8 Important Disclosures for Avant.
* 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
** 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 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|5.99% – 24.99%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|