Posted on September 21st, 2012
I got my first full time job in April 2010 as a Social Media Coordinator. Before that, I had been a broke college student surviving off credit cards, especially after I quit my part-time receptionist job to take care of my mom when she got sick.
When I moved into my own place with my boyfriend (now husband), we were both making good money, but I was just paying the minimums on my cards month to month. It’s not that it wasn’t manageable, but I would’ve preferred to get out of debt sooner than later, and see some sort of light at the end of the tunnel.
So I started checking out my options. I heard of debt consolidation, since I knew a few personal finance bloggers, and did a bit of research. Debt consolidation is when you take out a loan, pay off your other debt, and have one monthly payment to pay off. This is a great option for people who have multiple creditors to pay and too many due dates to juggle. I had a couple options to get a debt consolidation loan, but I tried a relatively new route.
Peer-to-peer lending, abbreviated as P2P lending, is a process where everyday people can contribute to your loan without dealing with a bank. People invest in your loan and when you pay it back, they receive interest. You still have to undergo credit checking, but it was an alternative that appealed to me. I went to LendingClub.com and filled out the form for a $7,000 loan. My loan was to pay off my credit cards and to have enough left over to start my first term of school.
Slowly, but surely, lenders began to fund my loan. Some people contributed $25 while others contributed a couple hundred. During this funding process, I had to confirm my bank account where the money would be deposited, and provide proof of employment, which was easy. A little more than a week later, my loan had been 100% funded and approved!
Debt consolidation helped my credit, because I was able to completely pay off my credit cards without missing any payments, had a lower debt utilization percentage, and had only one payment due date to worry about rather than multiple. There was also a light at the end of the tunnel, as the loan would take 3 years to pay off, and get me out of debt. It was one of the best financial decisions I made.
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Posted on September 18th, 2012
Are you like me? Have you had credit card debt? What about a lot of credit card debt? Exactly one year ago I had $3,000 on my credit card and wasn’t sure how I’d pay it off. I realize $3,000 may or may not sound like a lot to you, based on your own experience with credit cards. But for me it felt like more than I could deal with, and that qualifies as “a lot” in my book.
The reason I racked up credit card debt was that I left my stable 9-5 job and gave myself 3-6 months to make a transition to a new career. While I was looking for new jobs, I used up all of my savings and eventually started putting expenses on my credit card. The job search paid off (more on that in a moment) but when I looked at my credit card balance I felt discouraged and insecure.
Which brings me to an important question: does having credit card debt change how you feel about yourself?
I don’t think it should. After all, you are who you are, and financial difficulties come and go. I agree with Bethy that you are not your credit score, and similarly, I believe you are not your debt. Just because you have debt doesn’t mean you’re less of a person.
But of course you want to pay off that debt. Because, while it doesn’t change who you are, it changes what you can do. There’s a certain degree of freedom that comes from being debt free. It allows you more flexibility to pursue things you want – whether it be traveling, moving to another city, or just going out to dinner every once in a while.
So how do you get there? How do you pay it off? If you are currently in the position I was in – with debt that you want to get rid of, then there are a few tips I learned that I think will help you accomplish your goal.
First, imagine yourself as a downhill skier preparing for an Olympic race. The course lies in front of you, and you’re poised at the top of the mountain, ready to tackle this huge challenge. Four things will ensure your success:
Just like a good skier, you must work to have a foundation in place before you begin your journey. You’ll need to have a basic understanding of things like how to improve your credit score and what happens if you’re late on a payment. You should also read this great article that explains the specific steps necessary to get started.
Okay, now you’re prepared, which means you’re ready to stand at the top of the mountain. But there’s still the problem of inertia to overcome. That’s why the world-class skiers give themselves a big push. And you’ll need to do the same. Sometimes, you might have a friend or family member who can help you out by giving you a friendly shove in the right direction. But more often, you have to be the one to give yourself a push. No matter how scared or nervous you might be about the journey ahead, take the leap and commit to giving your all to this challenge. Tell yourself: “I will do it!”
Fortunately, you won’t be skiing haphazardly (which can be dangerous!). You’ll be following your plan. Your plan is separate from your preparation; it requires looking ahead and committing to a specific course of action. When I started paying off my credit card, I decided to aim for paying $480 per month, every month, for as long as it took to become debt free. Having that kind of specific number in mind proved to be crucial, because it made me focus on meeting that goal every month.
This part might be the most important of all. Even though you have your specific goal ($480 per month or whatever your own number is), there will be times where you fall short because of unexpected circumstances or when you slip up and buy something that prevents you from making your monthly goal. My advice is don’t ever get down on yourself. It’s okay to be frustrated, but you’ve got to move beyond the frustration quickly or turn it into added motivation. Why? Because optimism is motivating. Pessimism induces apathy. If you lose faith in yourself, you’ll be cooked. So don’t let that happen to you. Keep your head up and keep pushing forward no matter what bumps you hit along the way!
At the beginning of this post, I mentioned how I quit my job and gave myself 3-6 months to start a new career – as a writer/blogger. Well, after 3 months of searching, I had not found a new job yet. I was admittedly a bit nervous about my finances. But fortunately, I stayed positive and kept moving forward, and by the time the 6th month rolled around, I was working for ReadyForZero, a company dedicated to helping people get out of debt (go figure!).
Wherever your own journey takes you, I believe if you follow the tips above you will be able to reach your goal of becoming debt free. And, in honor of Self-Improvement Month, I urge you to continue reading about how to optimize your finances here on the Credit Karma Blog (and on the ReadyForZero Blog).
Good luck, and remember to avoid the trees and rocks as you fly down the mountain!
Benjamin Feldman is a writer and personal finance expert at ReadyForZero, a site dedicated to helping Americans manage and pay off their debt – for free.
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