How This Woman Tackled $12,000 of Credit Card Debt

credit card consolidation

As a young professional living in San Francisco, Katherine O. first got her airlines reward card to earn points for flights back to her hometown in Southern California.

But she got more than she bargained for: Before long, she was deep in debt. “I didn’t understand what a credit card meant until it was too late.”

Spending “here and there” adds up to $12,000

Katherine figured if she tried to limit her credit card spending and paid her monthly minimum (or more) each month, she was handling her credit card well. She justified the money she spent with the savings she was getting on airfare through her credit card rewards.

“With the amount of stuff that San Francisco has to offer, I just got in the habit of spending and rang it up,” she says. “It was little things here and there.”

“Before I knew it, it had added up and I was at a drowning point,” Katherine says. A little over a year ago, her credit card balance peaked at $12,000. Her minimum payments of $250 were straining her budget, already spread thin by living in a high-cost city.

Over $150 of her payments went straight to interest alone, thanks to a 23.40% APR.  “I was on a treadmill of debt that had no destination,” she says.

Katherine’s turning point: “I started hyperventilating”

It was a stressful move to a new apartment that made Katherine realize the seriousness of the sizable debt she’d accrued.

While purchasing things for her apartment at Target, she opted to open a new card to get a 15 percent discount. She intended to pay for her items with a debit card, but there was a mixup and her purchase was instead charged to the new Target card.

“I came home and started hyperventilating,” Katherine says. With another credit card to pay off in her wallet, the $12,000-plus she owed was starting to feel like more than she could handle.

“The stress of it was horrible,” she adds. “I didn’t want to wake up and think about this anymore.”

Debt consolidation: “Why wouldn’t I do this?”

By chance, Katherine’s new roommate happened to work for online lender SoFi. Her roommate sat her down, “talked to me about consolidating my debt, and helped me calm down.”

The roommate didn’t ask for many details. She simply said, as Katherine recalls: “If it’s bad, you need to come to terms with how bad it is. You need to accept it. And then you need to come up with a solution to tackle it.”

Her roommate directed Katherine to research loan options on SoFi’s site. After looking at success stories and playing with a loan calculator, Katherine felt like this could be her solution. The numbers made sense, so “I figured, why wouldn’t I do this?”

Katherine applied for a loan and was approved within a couple of days. Her funds to pay off her credit card balances arrived in her account just 24 hours after approval.

A personal loan to replace credit card debt

Katherine opted to replace her credit card debt with a 7-year personal loan. There was no origination fee, and with 10.24% APR (less than half of her credit card rate), she’s saving big-time on interest.

“I paid so much money to that card and wasn’t even making a dent in this card’s balance,” Katherine recalls. Having it gone was a huge relief.

On top of a much lower interest rate, Katherine has a $201 monthly payment that’s lower than her previous $250 monthly minimum. “I’m not stressed about paying $150 in interest, and I’m getting this debt down,” she adds.

Facing her debts wasn’t easy, Katherine admits. “It’s definitely hard to sit down and be like, ‘You’ve failed and done wrong in this world!’” she says. But she owned up to “how much I was hurting myself,” and found a way to tackle her $12,000 credit card debt.

Earning a pay raise

Around the time that Katherine consolidated her credit card debt with SoFi, she also had a win at work. “When it comes down to being an adult and living in such an expensive city, that entry-level pay is just not enough,” Katherine says. “I was barely floating.”

An account manager at a tech security startup, Katherine fell in love with the job and “worked my ass off.” Her biggest financial goal was working hard enough to earn a pay raise. She capitalized on opportunities for growth, and got results.

“People noticed and recognized it,” she says. It led to an offer for a new role with a substantial pay raise. After scraping by for a while on entry-level salaries, it was a huge boost for Katherine’s finances.

Next up: emergency savings

Now that Katherine has her credit card debt under control and is earning more, her monthly cash flow is in a much better place. “I’m more cautious about where my money is going,” she says. “I know how much I have each month and where it’s going.”

She’s also building a savings habit. Katherine plans out big future purchases, like trips, and saves for them so she can pay in cash.

But her ultimate goal is to have a healthy emergency fund in place. She’s working to put away “enough savings that if I lose my job or something happens health-wise, I’m taken care of and not calling my parents to bail me out,” she says.

She’s starting small, socking away $20 to $50 a month. “I don’t have the savings account with five zeros in it right now, but that’s the goal — someday!” Once that’s in place, she hopes to start paying extra on her personal loan and getting the balance down faster.

Interested in a personal loan?

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI 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 Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 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. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% 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.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown 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 Citizens Bank 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, Citizens Bank 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 Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. 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. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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