r/Debt • u/StainlessSteel218 • 2d ago

Seeking advice on Debt Consolidation loan

Hello all, I’ve dug myself in a hole and I would like a way out.

A couple months ago, I (M20) was basically forced to move out of my parents house with very little to no money, I had to use a credit card to pay for all expenses for a bit over a month until I was able to stabilize a little bit. All in all, it was about $3000 that is now my current balance because interest fees are almost canceling the amount of money I’m able to put in. The card I have is a shared secured card that I opened when I was like, 18-19, and the way it worked is that I was able to be latently approved to a “credit” card with the condition that I put a cash deposit down to be my credit limit. I gave them $3000 in cash and that’s what I ended up living off of for a while. When I zero out my balance and decide to cut my card, I’m going to be given whatever deposit I put in back. I was wondering if it was a smart or stupid idea to get a debt consolidation loan to zero out my balance, and then cut the card, get my deposit back, and then use it to pay off the loan?

I was (and am) way too young to realize just how bad things were going to be and now I want a way out so I can move on with my life. Any advice is appreciated. Thank you in advance

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u/Significant_Flan8057 2d ago

You said it’s a ‘shared’ secured card, so that’s the first question — is there anyone else on this account or is it only under your name? If it’s just under your name, that’s much easier to deal with. Couple questions:

  1. How long has the account been open? You said since you were 18-19 but can you be a bit more specific — has it been 3 months or closer to 2 years?

  2. What was the balance on the card before you had to move out and use it to cover expenses on an emergency basis?

  3. Did you make payments on time every month previously or did you have any late or missed payments before now?

  4. What’s your current income vs monthly expenses (rent etc) and what’s the monthly payment on that card?

You can almost certainly negotiate a payment plan or a lower interest rate or some sort of deal with the credit card company to get it paid off. What is not a good idea is trying to get a loan to pay off the credit card debt bec that’s just trading one high interest debt for another.

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u/StainlessSteel218 2d ago
  1. Share Secured is just what the card is called, it’s just under my name and is a regular secured card
  2. It was in November, so that makes 10 months ago now I think?
  3. Before I had moved out, my balance was 0. I had relatively good credit, about 748 or so I think.

  4. Until I moved out, I had made every payment on time in full to clear out my balance. 4 I get paid biweekly, around $1200 or so every paycheck, so I guess $2400-3600/mo depending on month (some months I get 3 pay periods, most I only get 2). As for expenses, maybe like $1600? I’m still actively in a point where I’m trying to get more comfortable in living, apartment still isn’t fully furnished, car needs maintenance, etc. so there are some added expenses here and there but I only do that when I feel I have extra money to.

  5. The minimum payment required is only $58 or so a month, though I’m getting charges of $48 or so a month on interest.

Once I pay off my balance in full and I decide to close the account or upgrade to a different card, I get the deposit I put in ($3000) paid back to me in cash. What my thought process was, was that I could get the loan and zero my account, and then use the $3000 I get from closing/upgrading to immediately pay off the loan in full, effectively leaving me with $0 debt. I’m just not sure if that’s like, a stupid idea or not

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u/Significant_Flan8057 2d ago

Thanks for the extra info that’s super helpful! This is totally manageable for you to get this paid off on your own with the current income vs expenses. You are in really great shape because you were super responsible about paying on time and not carrying a balance before now.

The minimum payments set by the banks are always designed to keep you in debt to them forever so just don’t pay any attention to that. What you want to do is pour everything you can into paying off that card as fast as possible in the next few months. That means don’t buy anything you don’t absolutely need and don’t spend any money on any non-essential expenses. The best thing you can do to get out from under this debt and protect your credit rating is to not trade one debt for another one that you will still have to pay off every month.

Instead of paying one monthly payment, pay a set amount of money out of every paycheck you get. It’s easier to pay in smaller chunks of money than one big lump sum all at once. Plus by paying bi-weekly every time you get paid, at the end of the year you’ve made 26 payments instead of 12. Not only does that boost your credit score (bec more frequent payments makes your score go up) but it also is the equivalent of an entire extra month’s worth of payments.

For example, if you’re bringing home $2400/month and your living expenses are $1600/month, that’s $800 you could be putting into that debt and twice a year you get 3 paychecks a month so that’s an extra $1200. That’s probably happening in October, I’m guessing? It’s usually September or October when that happens. So if you were able to do that (barring any emergency expenses coming up) that might look like:

9 paychecks left in 2025 8 regular ones and one bonus check for October Regular checks (8) x $400 to credit card = $2400 Bonus 3rd check goes entirely to the credit card = $1200 Total $3600

That’s more than enough to pay the entire balance off by the end of this year including any interest charges and then some, since they won’t charge you $600 in interest in only 4 months.

Does that make sense? You can take it a bit slower and pay $300/paycheck and put some money in the savings for an emergency fund. But it’s not at all a long term or impossible situation if you want to get it paid off fast and get your cash back from what you put down last year. Then you have credit established and no debt to worry about and can get a loan or credit card without having to put money down to secure it next time.

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u/StainlessSteel218 2d ago

I really appreciate the response and the clear effort you put in to helping me out. I guess I didn’t really think about how beneficial it would’ve been to drag it out for a while and make more frequent payments. I eventually want to get a loan for a vehicle, I think if I put in $300 every paycheck, I should be able to maybe get it paid by the end of December, and still have some money so I’m not living paycheck to paycheck worrying about my credit card bills. I guess it’s smarter to do it that way so I can build some credit, and then once I pay off all the debt, I’d get that deposit back and have better credit to boot. I’ve been so desperate to get myself out of this hole that it didn’t occur to me that getting out of it faster probably wasn’t/isn’t the best option. Thank you for the advice, I think I might end up doing that instead of consolidating my loan and then paying it off

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u/Significant_Flan8057 1d ago

Notifications show that you replied to my last comment but can’t see anything in the post itself. One of the weird glitches that Reddit has once in a while, I guess? Anyway, if you had any other questions, feel free to reply to this one and see if it comes through. Otherwise, I’m sure you have got this handled!

You are not in a bad spot at all payoff wise. Also, I’m very impressed with how well you’ve handled a tough situation and managed to get yourself quickly into a solid place and focused on the right path. Good for you! Keep that up and you’ll do great.