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

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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.

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Advertiser Disclosure

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. 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 to help you understand what you are buying. Be sure to consult with 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.

RATES (APR)loan amount
5.99% – 20.01%1 $5,000 to $100,000
6.14% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 20.01% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 15, 2019 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 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 4.93% 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. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
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  3. 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.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. 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 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 Opploans.

Opploans Disclosures

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Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

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3 Includes AutoPay discount. Important Disclosures for Payoff.

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  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.
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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 5.99% 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 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
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Upgrade Bank Disclosures

* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

** 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.

Published in Credit & Debt, Credit Cards, Loans, Success Stories

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