How I paid off 5-figure credit card debt in 18 months


  • In early 2020, I decided to buy a house, but to do so, I had to improve my finances.
  • I took out a personal loan to consolidate my debt, but had no intention of paying it off years earlier.
  • But as I searched for a house in vain, I realized that paying off my debt was what I really needed to do.
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I entered 2020 with five-figure credit card debt. A little less than 18 months later, in mid-June 2021, I paid it off in full.

However, this was not my initial intention when I embarked on the project to improve my financial situation. My goal was, without doubt, to put myself in the best possible position to get even more debt – six figures instead of five: I had decided, in early 2020, to finally buy a house.

I had then lived in Philadelphia for almost nine years and worked there for over seven years; I had a strong community of friends and neighbors around me, I was in a city that I was mostly quite happy with, and I couldn’t see myself going anywhere anytime soon.

So it made both monetary and personal sense to start converting my rent payments into mortgage payments. I would be both building tangible roots in Philadelphia and investing in my long-term financial future at the same time, and if the time ever came for me and Philadelphia to go our separate ways, I would still have a home. where to return if I wanted to. .

I Consolidated My Credit Card Debt With A Personal Loan

The first thing I knew I needed to do was change the nature of my debt so that I could increase my credit rating and reduce the burden of my credit card payments on my paycheck each month. So I took out a personal loan from my bank for five years to consolidate my debt at a lower interest rate than any of my credit cards.

This converted my debt into a permanent installment loan rather than revolving debt – which was better for my credit rating – instantly reduced my debt-to-income ratio to a fraction of what it had been and reduced my monthly debt payments to a low enough level. point that I had a lot more at the end of each month to put in my savings. I also applied for a loan that was slightly more than the amount needed to consolidate my credit card debt so that I could put some money aside for the down payment on my house.

From there, I decided to stack as much as I could in the bank from as many corners as I could handle. And I did – between the extra writing and teaching work I undertook, the stimulus payments I left untouched, and a possibly embarrassing amount of money saved through the cessation of my usual social and travel activities due to the pandemic shutdown, I have accumulated significantly more down payment than I anticipated when I started my home search.

This was “helped”, as such, by the fact that the home search ended up taking a lot longer than expected – almost a year rather than a few months, so long that I ended up taking a break in research. , especially since the market started to warm up towards the end of 2020 and more and more homes started to move out of my price bracket quickly.

I realized that I could repay my personal loan long before the term expired

My hiatus from late 2020 continued through early 2021 and then solidly into the spring. My savings continued to accumulate at a solid rate, and by mid-spring I realized that I was able to pay off my five-year loan and still have the minimum initial down payment I had. had expected in early 2020.

I had specifically requested a personal loan product with no prepayment penalty in order to keep this option open at no additional cost – but I did not expect this possibility to arise so soon. Honestly, it upset me a bit, like hitting any goal sooner than I expected – this debt had been a part of my life for so long that I hardly knew how to conceive of my life without it. my neck.

But as the year progressed, as the unsettling realities of the pandemic continued to erode my understanding of what it meant to even move forward in my life, I realized that I wanted – in fact, I had. need – to successfully erase my credit card debt and be free of that weight for the first time in my adult life. Also, as the housing market continued its rapid rise, I wondered if I really wanted a house right now – or at least a house at the prices and terms currently being presented – and realized that, just now at least I didn’t.

And so, in early June, I went to my online banking portal, nervously grabbed the total loan amount as my next payment, and hit send. The letter informing me of the completion of my debt arrived the day before my birthday. My 2020 self was elated to have managed to completely transform my financial life – it happened in a way I never imagined when I started this journey, and although I did not make it to the original goal of a home, I’m happier for it having turned out that way.


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