How To Pay Off $10,000 in Credit Card Debt
12 MIN READ
Published June 27, 2023 | Updated December 10, 2023
Having a large amount of debt on a credit card can be overwhelming. Carrying $10,000 in debt can take years to clear if you're making minimum payments. However, strategies like creating a budget, debt consolidation, and debt settlement can make debt repayment easier, more cost-effective, and faster.
Consistently overspending on credit cards can rack up your balances fast. If you face an unexpected emergency or job loss, you can easily run up a tab of $10,000 or more on your credit cards. With the average interest rate on credit cards at 24.14% in the U.S., that balance can quickly double again if you fail to repay your debt.
If you're wondering how to pay off $10,000 of credit card debt, taking specific actions to address the debt can help you before things spiral out of control. Fortunately, there are several debt relief strategies that can help.
How To Pay Off $10,000 in Credit Card Debt
1. Assess Your Debt
The first thing you’ll need to do is to assess your credit card debt. Make a list of all the credit cards you own. Determine how much you owe on each card and if you have any overdue payments. Compare the interest rates and fees on each card so you can prioritize which debt to tackle first. Assessing your debt will help you choose the right debt repayment strategy based on your situation.
Calculate Your Debt-to-Income Ratio
Debt-to-income ratio (DTI) refers to monthly debt payments made in comparison to monthly income. Credit card issuers and lenders use this ratio to determine a borrower’s ability to manage their monthly debt payments.
Calculating your DTI is fairly easy. Divide your total debt payments each month by your monthly gross income. Next, multiply that number by 100 to get your DTI. Knowing your DTI is a good way to understand how much credit card debt is too much for you. Your DTI should be lower than 36% to comfortably pay your debt.
Review Your Credit Report
Next, obtain a copy of your credit report. You can request a free copy of your credit report from all three credit bureaus. Check your credit score to see whether you will be able to qualify for a debt consolidation loan or a balance transfer credit card at a lower APR.
2. Create a Budget
Without having a clear idea about your income and total expenses, it will be challenging for you to come up with a debt repayment plan. While there are many effective strategies to pay off $10,000 in credit card debt, you’ll first need to create a budget to figure out how much you can pay towards your debt each month.
“Doing a budget and sticking to it is key to paying off debts," suggests Teresa Dodson, a debt expert and CEO of Greenbacks Consulting. "You would be surprised after doing a budget how much money you’ll find!”
There are several budgeting strategies to choose from, such as the 50/30/20 budgeting technique and zero-based budgeting. All you need to do to create a budget is to keep track of all your monthly expenses, variable and fixed. Compare that with your net income each month.
Track Your Expenses
Tracking your expenses each month can help you stick to your budget and avoid overspending. You can choose to use a notebook to write down your daily expenses or use online apps to track your expenses digitally.
Some of the most common expenses include groceries, rent/mortgage, and utilities. Also include your monthly debt payments, such as:
- Personal loans
- Credit cards
- Medical bills
- Student loans
- Home equity loans
Split expenses into different categories to determine where you're spending the most. Review your expenses at the end of each month.
Cut Unnecessary Expenses
Once you start tracking your expenses, you’ll be able to spot opportunities to save. The best way to pay off $10,000 in credit card debt is to stop getting yourself in further debt. Cut unnecessary spending, such as eating out in restaurants, shopping, vacations, and anything else that is not strictly necessary. Trimming down your expenses will free up money that you can pay towards your high-interest credit cards each month.
3. Explore Debt Repayment Options
The following methods can help you pay off $10,000 in credit card debt:
Arrange a Debt Settlement
One of the fastest and most cost-effective ways to tackle large sums of credit card debt is through a debt settlement. If you're finding it challenging to make more than the minimum payment each month, or you've been missing payments for a few months, consider enrolling in a debt settlement program.
A debt settlement organization can negotiate with your credit card company on your behalf to accept a lump sum amount and close your account. Typically, you can save up to 50% of your original debt before fees through debt settlement.
For example, if you have $10,000 in credit card debt and enroll in a debt settlement program, the credit card company may accept a lump sum amount of $5,000 to settle your account. This will allow you to clear your debt faster and save a considerable amount of money in the process.
Use Debt Consolidation
Credit card debt consolidation involves rolling all your high-interest credit cards into a single consolidation loan at a lower interest rate. If you have good credit, you may qualify for a significantly lower annual percentage rate compared to what you may be paying on your credit cards. This can help you save thousands of dollars in interest charges.
Let’s say you have two credit cards with a total balance of $10,000 and an APR of 18%. If you get a $10,000 consolidation with a real APR of 12.53% and a loan term of 36 months, you can end up saving $2,738.18 in interest charges.
Complete a Balance Transfer
With a balance transfer credit card, you can move the balance from your high-interest credit card to one that offers a 0% APR introductory offer. Typically, the introductory offer lasts for 12 to 21 months. If you clear off your balance within this period, all your payments will go to the principal balance. There's usually a balance transfer fee of up to 5% on the transferred amount, but you may be able to find a no-fee card, especially if you have excellent credit.
Let’s say you're currently paying $350 towards your credit card each month at 18% APR. If you get a no-fee balance transfer card with a 0% introductory period of 21 months, you can save $3,156 in interest charges by paying off your balance within that introductory period.
|Balance Transfer Card
Negotiate with Creditors
Credit card companies are interested in getting paid, so they may be willing to negotiate with you. You can negotiate credit card debt to waive late fees, reduce interest rates, or even get some of your debt written off if they agree to a settlement.
Start by taking a look at your credit score, your credit card bill payment history, any charge-offs, and the length of time you've been a client. Assess your overall debt and come up with a strategy to negotiate.
You can either negotiate with your credit card company to accept a payment plan or a debt settlement. If you need help with credit card debt over $10,000 and have no feasible way to pay off that amount, most credit card issuers will be ready to negotiate a payment plan and a reduced amount of what you owe.
Begin saving this lump sum amount in your bank account because it can be easier to negotiate if you have that amount available with you to pay toward your debt settlement. If you're not comfortable negotiating on your own, work with debt settlement companies. Negotiating on your own can be time-consuming, stressful, and may not be as effective. Debt settlement companies have a lot of experience and a good track record of helping clients manage large debts.
4. Increase Your Income
Even with budgeting and cutting down your expenses, sometimes the only way to pay off debt successfully is by increasing your income. If you consistently find yourself with next to no amount left over at the end of each month, it may be time for you to consider ways to add to your income.
Get a Side Hustle
Look for ways to earn extra cash through a side business by starting a part-time or freelance job. Another great option is to start your own business. If you have a skill that you can monetize, like making handmade goods, dedicate some time each day to building your business so you can start earning from it. Any extra money you earn and pay towards your credit card debt will help you get out of debt faster.
Ask for a Raise
Another way to increase your income is by asking for a raise at work. If you've been working at the same place for over a year and have a good performance track record, you may be able to negotiate a promotion or a pay raise.
Before you ask for a raise, prepare a record of your achievements at work. Provide your managers with concrete examples and reasons why you deserve a raise. This will make it easier for you to negotiate.
5. Seek Professional Help
Sometimes, even with your best efforts, you may not be able to become debt-free. You may need expert advice to pay down $10,000 in credit card debt or professional help to figure out why you got into debt in the first place.
Find a Reputable Advisor or Counselor
Credit counseling can help you manage your debt. There are several non-profit credit counseling agencies that can assist you in getting a handle on your finances. Certified counselors can help you with budgeting, credit building, and money management. They can also offer you a free consultation during which they can take a look at your finances and help you come up with a debt payoff plan, such as the debt avalanche method or debt snowball method.
Credit counseling can help you in a number of ways, such as enrolling you into a debt management plan to tackle your unsecured debts like personal loans and credit cards. If you're on a tight budget, the agency can negotiate with your creditors to lower your monthly payments, reduce the amount of interest, or waive late fees. You can even work with a personal finance expert to achieve your financial goals if credit counseling is not right for you.
Understand the Consequences of Not Paying Off Debt
Paying off your credit card debt is important because it will continue to accumulate and spiral out of control if you ignore it. Once it becomes unmanageable, you may end up missing credit card payments, adding late fees to your balance, and contributing to your growing debt.
Failing to pay your credit cards for several months in a row can also damage your credit scores. This can make it difficult for you to get new credit. Your account may go into debt collections, and in some cases, the credit card company may take legal action against you for non-payment.
You Can Pay Off $10,000 in Credit Card Debt
If you need help paying off $10,000 in credit card debt, there are several strategies and resources available. This includes options like balance transfer credit cards, debt consolidation, and debt settlement. You can even get expert advice from credit counselors to create a budget and a plan to pay off your debt.
TurboDebt can help you settle overwhelming credit card debt. Our experts can help you find the right debt relief option based on your financial situation. Connect with us today for a free consultation. Read our reviews to see how our debt relief services have helped thousands of clients!