Pay Off Credit Card Debt and Loans

Let us imagine that this is your debt situation. Based on our previous discussions of exploring extra money making, you may have an extra $200 - $300.

Balance/Interest Rate /Minimum payments:

  • Credit Card A                - $5000 ;       12%;      $50
  • Credit Card B                - $1200 ;       8%;        $80
  • Loan A                            - $575 ;        6%;       $50
  • Loan B                           - $7700 ;       8%;        $80

Your new payment to Credit Card B should your previous minimum payment PLUS your new extra income. When you send the check you can indicate that you want the extra money to be applied to the principle balance. In addition, do not be afraid to ask for a lower interest rate. 

Exception. IF you currently have NO savings (savings of less than $1000) then instead of sending the entire amount to credit card B, send 75% to the credit card and save 25%. The savings will get you through any unexpected expenses without you having to resort to charging your credit cards again.

Once Credit Card B is paid off, your positive cash flow will increase. You can now apply the amount that you were paying to credit card B to credit card A. Continue this process until all your debts are paid off. 


If you own a house with equity, you may consider a debt consolidation loan or home refinance loan. Debt consolidation allows you to consolidate your debts through a second mortgage or home equity line of credit (HELOC).   These loans may provide a tax incentive come April 15th.