Hey everyone: this is lauren mack with hack in the rat race. Today, i'm going to share with you the only way to pay off your debt, especially your credit card debt when you're broke. I know the pressure of having more debt than you make in one year and feeling like it will never get paid off and also like you'll never get ahead. However, i was able to pay off my debt in less than three years, and i know you can pay off your debt very quickly as well. This strategy or shortcut i'm going to share with you today, will cut years off the time it takes to repair debt and also save you thousands of dollars.

So, let's jump right in, i have a bonus for you today in addition to giving you a shortcut to paying off your debt so much faster, i'm going to give you a bonus tip at the end that is going to show you how this can also repair. Your credit score first, let's start by looking at an example, credit card balance, so i can show you how the strategy works. For example, let's just start out with someone who owes five thousand dollars and you may be thinking. Oh my gosh. I owe way less than that, or i owe way more than that it doesn't matter.

The math and logic is still the same. In this example, someone owes five thousand dollars on a credit card with an interest rate of 20, which is about the average interest rate in 2022. The minimum payment in this example would be two hundred dollars per month. If you were just paying the minimum amount. That would take 11.

years to pay off and the total interest that would have been paid would be 3417.57. This is, if you only pay the minimum payment on the five thousand dollars you owe now and you're, not adding any more money to that card. At a 20 interest rate, now the best way to pay off your debt, especially your credit card debt when you're broke, is by rolling all your debt into a personal loan. I'Ll show you the details of how to do this and the numbers in just a second, but before i do, if you're going to get a personal loan, i want you to consider some things.

If you decide to go down this route and get a personal loan and pay off your debt, there are some things that you need to consider. First thing you want to consider: are the fees number one you don't want to pay an origination fee? They can be anywhere from one to eight percent. Again, this is going to add to the amount of money you have to pay back, and i would also look at other fees that they would be charging. This could be insufficient fund fees, late fees, all kinds of fees just make sure it has little to no fees if it has late fees.

That'S fine just make sure you pay it on time, which you should be doing anyways to keep your credit score up. I'M going to break all this down for you right now. Why should you get a personal loan to pay off your debt, especially when you're broke? We already have our example: credit card with a 20 interest rate with a minimum payment of 200, which will take 11.8 years to pay off.

Now, let's look at a personal loan example. The personal loan is five thousand dollars with an interest rate of 11. The payment would be 163.69 that would take three years to pay it off, and the amount of interest you would have paid is only 892 97, if you compare this to the credit card monthly payment, how long it will take to pay it off and the amount of interest paid right there, you can see a massive savings, you're saving over two thousand dollars in interest, you're, literally paying it off eight years. Earlier, if you're broke or have a very tight budget, you'd be able to add an additional thirty six dollars and thirty one cents back into your budget to use that money to pay off this debt faster before we go to the next example, don't forget to poke The like button: let's look at the same personal loan example, but if you were to pay off in two years again, you owe five thousand dollars.

The interest rate is the same. Eleven percent. The payment would be two hundred and thirty three dollars and four cents in this example, you would have paid off in two years, and the interest you would have paid would only be 592 if you compare it to your credit card payment, it's only thirty three dollars And four cents more and you're, paying it off in two years and you're saving thousands of dollars in interest. Now what if you got a personal loan for only seven percent interest? And you still have a five thousand dollar balance?

Your payment would be two hundred and twenty three dollars and eighty six cents at this payment rate. You had paid off in two years and you would only pay three hundred and seventy two dollars and seventy one cents in interest. In this example, you can really tell how the interest rate makes a huge difference, because in two years the payment is ten dollars less. Between a 7 and 11 interest rate, you can definitely see the power of the strategy and how it works. However, i want to give you a bad example and a trap that people often fall into when they get into a personal loan to pay off debt.

Again, you owe 5 000 with 11 interest rate, and now your monthly payment is only 65.46. However, in this example you're paying this one off in 11 years, like your original credit card, okay, great, you might be thinking that is wonderful, a 65.46 payment. I mean that's an 11 interest rate.

It'S almost half. This is great, except for the interest that you would have paid over. Those 11 years is 3640.95. Now, comparing that to your original credit card, it was only three thousand four hundred seventeen dollars and fifty seven cents, which means you'll, actually be paying two hundred and twenty three dollars and thirty eight cents more in interest, often times when people get personal loans, they put Them out for a long period of time, but then they end up paying a lot more money in the long run.

I would highly recommend not doing this because in the short term, you're thinking wow such a lower interest rate, my payment is so much lower. This is amazing, but really you're paying way more money. So whatever you do, don't do this, i'm about to give you another option or shortcut if you're not interested in taking out a personal loan, but before i do, i want to bring up one other trap. People often fall into which is even worse than the one i just mentioned. You might be watching this and thinking what if, instead of a personal loan, i just take out a home equity loan, it would work in a similar way, lower interest rate, etc.

I definitely do not recommend this over any other options or shortcuts, because if you default on a home equity loan, they can foreclose on your house if you're struggling to pay off your debt, do not add your house as something you could potentially lose. There are plenty of debt remedies out there without putting your house on the line to pay off your debt. Maybe thinking i'm not broke, i could totally pay it down again. I can't repeat this enough: you don't know when the perfect storm of financial problems could hit, it could change the situation and you end up losing your house. I have seen this happen so many times and it is really sad.

Okay, if you don't want to get a personal loan and you're not going to use the home equity loan, then another option is to transfer your balance to a zero percent interest credit card for 12 to 18 months. Let'S look at that example here and what that would look like with your original five thousand dollars, but with a zero interest rate. If you can pay it off in the 18 months, your payment would be 278 dollars a month for only an additional 78 dollars per month, you're literally paying it off in one and a half years and you're not paying any extra money. The only caveat to this is there usually is a fee to transfer the money over. It'S normally around a three percent fee, more or less it could be one percent, two percent, five percent, whatever it is generally about three percent fee to transfer the balance.

If it were three percent, then the fee would be a hundred and fifty dollars. If you compare that to all the interest rate options, even the lowest one, which was 372.71, this is still a much better deal. If you can do that, and you can afford the 278 a month payment, then i would highly recommend this as well. There are two things to consider: if you decide to go this route, the first is if you're able to pay the balance off in the allotted amount of time.

Let'S say you transfer the balance over 18 months to pay it off, but you're not able to pay it off that amount of time. Then, once those introductory offers are over, it normally shoots up again to a really high interest rate, possibly higher rate than you are already currently paying on your card. So keep that in mind. You can also transfer it over and pay as much as you can. In 18 months and then transfer that to another zero percent interest card or then use a personal loan to pay off the remainder.

The other thing to keep in mind here is that credit utilization is the second largest part of your credit score, which totals 30 credit utilization. Is the amount of your available credit you're actually using, and it only applies to revolving debt. You should only use 30 or less of your actual credit limit. Let'S just say you have a credit card and the limits 10. 000.

Then you should never put more than 3 000 on that card. This is your credit utilization. Let'S say you put nine thousand dollars on that card: that's alerting the credit bureaus that you're not able to keep a good credit utilization, so in the example of five thousand dollars. If you are gon na transfer the credit card with the five thousand dollar balance, then you want to make sure you get a credit card with a limit of fifteen thousand dollars or more so when you transfer the five thousand dollars over, it is thirty percent or Lower of your available limit that way, it doesn't hurt your credit score and again, if you do that, and let's say you transfer five thousand dollars over and you only have a fifteen thousand dollar credit limit, then whatever you do do not put more money on that Credit card only pay it down. If you decide to do this, then make sure you can pay it off in the allotted amount of time and make sure you can get a high enough credit limit to transfer it so that your credit utilization is low enough again, you don't want to get a 5 000 credit limit and move a five thousand dollar balance over so definitely consider these options before taking this route.

Before i give you a bonus tip, i wan na hear from you in the comments below. Are you gon na get a personal loan? Are you considering getting a credit card with a zero percent interest, as i promised in the beginning of this video, i'm going to give you a bonus credit score repair tip if you decide to use a personal loan to pay off your credit card debt, this can Really help your credit score for one most likely will help your credit utilization, because people that normally have a lot of credit card debt, their credit utilization, is high. Like i said a second ago that is 30 of your credit score. However, credit utilization is only on revolving debt, like credit cards, so you put all your credit card debt in a personal loan.

Then it's converted to an installment loan, which is not revolving debt. This takes your credit utilization to zero, which is obviously way below 30 percent of your available credit limit. Additionally, you fall into the category of people who just paid off their credit card debts. You will also be adding to your mix of credit, because you just added an installment loan you'll also be adding new credit. All these factors can make your credit score shoot up, because you're positively impacting all areas of your credit score.

So, in addition to saving so much interest allowing you to pay it off so much faster you'll also have your credit cards paid in full on your credit report as well as your credit utilization will go way down and that can boost your credit score. So much now, after seeing the power of a personal loan to pay off your credit card debt, especially when you're broke and the amazing things it can do for your credit, you might be wondering which company do i use? How do i know which companies are good? Like i said earlier in the video, you don't want to have a company that has origination fees or a whole bunch of other fees. You don't want to pay more money to pay off your money.

If you want to check out the five best personal loan companies. No origination fees then check out this video right here.