Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.
But for many of us, the holidays linger in fresh debt that paid for holiday gifts and celebrations, with bills that will start hitting mailboxes in the coming weeks.
In 2015, MagnifyMoney surveyed a national sample of 403 Americans who reported they added debt during the holidays via Survata and found:
Americans with holiday debt added $986 in debt on average.
Between gifts, hosting parties, family emergencies, and for some, fewer work hours, it’s easy for debt to add up if you don’t have savings on hand. While the $986 those surveyed added to their debt on average is a manageable amount, it can easily snowball.
At a 15% rate on a credit card making just the minimum $25 payment it would take 10 years to pay off, including nearly $400 in interest paid, almost doubling the cost of the holidays.
44% of debt holders report they are stressed out about it.
Credit cards were the most common form of debt.
52% of debt holders used a bank or credit union credit card to finance their holiday debt, while another 30% used store cards to finance, which often carry rates of 20% or more. 8% took a specific personal loan, which could yield a lower rate, while 6% relied on the worst of all – payday and title loans. Less than 5% used home equity lines of credit to finance purchases.
The payoff may take until next Christmas and beyond
Less than half of those surveyed think they can pay off their holiday debt in less than 5 months. 55% plan to take more than 5 months or just make the minimum payments, which could extend the debt to 10 years or more.
Rates being paid are high
One third of respondents say they’re paying a rate of over 10% on their debt, with 20% of them paying more than 15%. And 14% of respondents don’t even know what rate they’re paying.
But most won’t bother to get a lower rate
Despite 28% of respondents expecting to take 5 months or more to pay off the debt, just 22% plan to shop around to find a better rate with a different bank or loan.
Yet, 47% report a good credit score above 650 that may qualify for better rates than most existing credit cards and store cards offer.
The most cited reason for not wanting to shop around is not wanting to deal with another bank, noted by 28% of respondents.
A consumer with $1,000 in debt at a 15% rate making minimum payments would shave over a year off debt repayment by taking advantage of the longest 0% balance transfer deal on the market and save over $300 in interest payments.
What can be done?
MagnifyMoney has prepared a free 45 page Debt Free Forever Guide that you can download to prepare your action plan, tailored to whether your situation needs a quick transfer, or more significant repair and dealing with collections.
You’ll learn no-nonsense ways to get your rate lower, negotiate hard with creditors, and tackle your budget to find the fastest way to get debt free.
Survey results
Average new holiday debt $986
Holiday debt funded by a….
Credit card 52%
Store card 30%
Personal loan 8%
Payday / title loan 6%
Home equity 4%
When will you pay the debt off?
1 month 15%
2 months 11%
3 months 12%
4 months 6%
5 months+ 28%
Only making minimum payments 27%
What is your credit score?
Above 700 27%
650-700 20%
550-649 20%
Below 550 10%
Don’t know 25%
Will you shop around for a better rate with a different bank or loan?
Yes 22%
No- Don’t want to deal with another bank 28%
No – Too many traps 17%
No – Rate is already low 10%
No – Don’t know enough about it 10%
No – Wouldn’t qualify 14%
How stressed are you about your holiday debt?
Not stressed 56%
Stressed 44%
What rate are you paying on your debt?
Less than 5% 35%
5-9% 18%
10-14% 13%
15-19% 11%
20% or more 9%
Don’t know 14%
Methodology
MagnifyMoney surveyed 403 Americans who answered yes to the screening question “Did you add debt for holiday spending this year?”
The survey was conducted online January 2 – 4 2015 via Survata, using a nationally representative sample age 25-65.
Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.
By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.
The Fastest Way to Pay Off $10,000 in Credit Card Debt
Monday, March 25, 2019
Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.
Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.
Digging out of credit card debt can feel frustrating, intimidating and ultimately impossible. Fortunately, it doesn’t have to be any of those things if you learn how to take control.
Paying down debt is not only about finding the right financial tools, but also the right psychological ones. You need to understand why you racked up credit card debt in the first place. Perhaps it was a medical emergency or a home repair that needed to be taken care of immediately. Maybe you’d already drained your emergency fund on one piece of bad luck when misfortune struck again. Or maybe you’re struggling with a compulsive shopping problem, so paying down debt will likely result in you accumulating more until the addiction is addressed.
You also need to understand what motivates you to succeed. Do you want to pay down your credit card debt in the absolute fastest amount of time possible that will save more money or do you want to take some little wins along the way to keep yourself motivated?
Here’s a couple strategies consider as you learn the best way to handle credit card debt — and pay it off quickly.
2 common credit card debt repayment strategies
These repayment strategies can help you pay off credit card debt quickly. Keep in mind, you can use these strategies even for non-credit-card debt:
Debt avalanche: Focus on paying off the credit card with the highest interest rate first. Then, work your way down. This strategy can save you money on interest and get you out of debt sooner.
Debt snowball: Pay off your smallest debts first. Doing so can motivate you to continue making payments as you climb out of debt.
You don’t necessarily need to pick the repayment strategy that gets you out of debt the fastest. After all, if your repayment strategy doesn’t keep you motivated, you may not stick to it.
Using a personal loan or balance transfer credit card
As you seek to repay your debt, you could consider a personal loan or balance transfer credit card with a lower interest rate than on your existing debt. Transferring your debt to one of these financial products could help you reduce long-term interest costs.
But you’ll first need to learn whether or not you’re eligible. Your credit score will play a big role in determining your eligibility for a personal loan or balance transfer card. Use our widget below to figure out if a personal loan or a balance transfer is the best option for you!
What’s the best option for me?
Please enter information below and we’ll provide the best option to consolidate your credit card debt!
Based on your selections, a personal loan would be a good choice. Personal loans allow higher borrowing amounts and longer repayment terms than balance transfer credit cards.
Based on your selections, a balance transfer would be a good choice. Balance Transfer are great for consolidating debt if you can pay it off during the 0% APR intro period
If you have a credit score above 640, you have a good chance of qualifying for a personal loan at a much lower interest rate than your credit card debt. With new internet-only personal loan companies, you can shop for loans without hurting your score. In just a few minutes, with a simple online form, you can get matched with multiple lenders. People with excellent credit can see APRs below 10%. But even if your credit isn’t perfect, you might be able to find a good loan to fit your needs.
Not sure what your credit score is? Click here to learn how and where to find out. If you know your credit score needs some work but not sure of what can be done, click here.
If you have a score above 700, you could also qualify for 0% balance transfer offers. We will talk more about balance transfers below but this option is the best way to pay off credit card debt if you’re able to qualify for a 0% APR balance transfer credit card.
A credit score of less than 600 will make it difficult for you to qualify for either option. If you have a credit score less than 640, struggling to make monthly debt payments and would like to explore your options to reduce your debt by up to 50%, then please click our option below to customize a personal debt relief plan.
Now let’s talk about the financial tools to add to your debt repayment strategy in order to dig out of the hole.
Let’s say you have $10,000 in credit card debt, and are stuck paying 18% interest on it.
You already know that putting as much spare cash as you can toward paying down your debt is the most important thing to do. But once you’ve done that, so what’s next?
Use your good credit to make banks compete and cut your rates
You could save $1,800 a year in interest and lower your monthly payments based on several of the rates available today. That means you could pay it off almost 20% faster.
Here’s how it works.
Option One: Use a Balance Transfer (or Multiple Balance Transfers)
If you trust yourself to open a new credit card but not spend on it, consider a balance transfer. You may be able to cut your rate with a long 0% intro APR. You need to have a good credit score, and you might not get approved for the full amount that you want to transfer.
Your own bank might not give you a lower rate (or only drop it by a few percent), but there are lots of competing banks that may want to steal the business and give you a better rate.
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate, 1% unlimited cash back on all other purchases - automatically.
0% intro APR for 15 months on balance transfers made within 45 days of account opening. After that, a variable 14.24% APR will apply.
Balance Transfer Fee
Balance Transfers that post to the account within 45 days of account opening: Either $5 or 2% of the amount of each transfer, whichever is greater. Balance Transfers that post to the account after 45 days of account opening: $0
Credit required
good-credit
Excellent/Good
MagnifyMoney regularly surveys the market to find the best balance transfer credit cards. If you would like to see what other options exist, beyond Chase and Discover, you can start there.
It also has tips to make sure you do a balance transfer safely. If you follow them you’ll save thousands on your debt by remaining disciplined.
You might be scared of a balance transfer, but there is no faster way to cut your interest payments than taking advantage of the best 0% or low interest deals banks are offering.
Thanks to recent laws, balance transfers aren’t as sneaky as they used to be, and friendlier for helping you cut your debt.
Sometimes the first bank you deal with won’t give you a big enough credit line to handle all your credit card debt. Maybe you’ll get a $5,000 credit line for a 0% deal, but have $10,000 in debt. That’s okay. In that case, apply for the next best balance transfer deal you see. MagnifyMoney’s list of deals makes it easy to sort them.
Banks are okay with you shopping around for more than one deal.
Option Two: Personal Loan
If you never want to see another credit card again, you should consider a personal loan. You can get prequalified at multiple lenders without hurting your credit score, and find the best deal to pay off your debt faster.
Personal loan interest rates are often about 10-20%, but can sometimes be as low as 5-6% if you have very good credit.
Moving from 18% interest on a credit card to 10% on a personal loan is a good deal for you. You’ll also get one set monthly payment, and pay off the whole thing in 3 to 5 years.
Sometimes this may mean a higher monthly payment than you’re used to, but you’re better off putting your cash toward a higher payment with a lower rate.
And you’ll get out of debt months or years faster by leaving more money to pay down the debt itself. If you want to shop for a personal loan, we recommend starting at LendingTree. With a single online form, dozens of lenders will compete for your business. Only a soft credit pull is completed, so your credit score will not be harmed. People with excellent scores can see low APRs (sometimes below 6%). And people with less than perfect scores still have a good chance of finding a lender to approve them.
Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.
By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.
Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report
Wednesday, March 20, 2019
Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.
If you’ve pulled your credit report recently and discovered that there’s been a late payment reported on your student loans, you might be wondering what you can do to recover. Late payments can damage your credit, especially if you stop paying your loans for an extended period of time.
We’ve already gone over the repercussions of delinquency and default, but now let’s take a look at another method of repairing your credit report — sending a goodwill letter to your creditor.
What is a goodwill letter?
A “goodwill letter” is a simple way to repair your credit report, and it can be used for both federal and private loans. The purpose of a goodwill letter is to restore your credit to good standing by having a lender or servicer erase a lateness on your credit report.
Typically, those who have experienced financial hardship due to unexpected circumstances have the most success with goodwill letters. They allow you to ask if your student loan servicer can empathize with the situation that caused the lateness and erase it from your report.
It can also be used when you think the late payment is an error — for example, if you were in deferment or forbearance during the time of the late payment and weren’t required to make any payments, or if you know you’ve never been late on a payment before.
What makes a convincing goodwill letter?
If you’ve been looking for a goodwill letter that will work well, we have some tips on what you should include in your letter:
1. An appreciative tone
It’s important that the entire tone of your letter comes off as thankful and conscientious. If you were actually late on your payments due to extenuating circumstances, taking an angry tone probably won’t help your case.
2. Take responsibility
You want to be convincing and honest. Take responsibility for the late payment, and explain why it happened. They need to sympathize with you. Saying you just forgot isn’t going to win you any points.
3. A good recent payment history
Besides sympathy, you want to gain their trust that you will continue to make payments. If your lender sees payments being made on time before and after the period of financial hardship, it might be more willing to give you a break. When you have a pattern of late payments, on the other hand, it’s more difficult to convince them that you’re taking this seriously.
4. Proof of any errors and relevant documents
If you’re writing about a mistake that occurred, still be friendly in tone, but back up the errors with documentation. You’ll need proof that what you’re saying is true. Unfortunately, errors are often made on credit reports, and it may have been a clerical error on behalf of your servicer. If you have any written correspondence with them, you’ll want to include it.
5. Simple and to the point
The last thing to keep in mind is to craft a short and simple letter. Get straight to the point while telling your story. The people reviewing your letter don’t want to read an essay, and the easier you make their lives, the better.
Sample goodwill letter No. 1
Below is a sample goodwill letter for student loans to give you an idea of how to structure your own:
To whom It may concern:
Thank you for taking the time out of your day to read this letter. I just pulled my credit report, and discovered that a late payment was reported on [date] for my account [loan account number].
During that time, my mother fell terminally ill, and I was the only one left to care for her. As such, I had to leave my job, and my savings went toward her health care expenses. I fell on very rough times after she passed away, and was unable to make my student loan payments.
I realize I made a mistake in falling behind, but up until that point, my payment history with you had been spotless. When I was able to gain employment once again, I quickly resumed paying my student loans, making them a priority.
I’m not proud of this black mark on my record, but it’s the only one I have, and I would be extremely grateful if you could honor this request to remove the lateness from my credit report. It would help me immensely in securing other lines of credit so that I can further improve my credit score.
If the lateness cannot be removed entirely, I would still be appreciative if you could make a goodwill adjustment.
Thank you.
Sample goodwill letter No. 2
If you’re writing a letter because the lateness on your credit report is inaccurate, then try something similar to this:
To whom it may concern:
Thank you for taking the time to read this letter. I recently pulled my credit report and found that [Loan servicer] reported a late payment regarding my account [loan account number].
I am requesting that this late payment be assessed for accuracy.
I believe this reporting is incorrect because [list the supporting facts you have]. I have included the documentation to prove that [I made payments during this time / that my loans were in forbearance/deferment and didn’t require any payments].
Please investigate this matter, and if it is found to be inaccurate, remove the lateness from my credit report.
Thank you.
Make sure you provide as many personal details as possible — without making the letter too long, of course. You should also include your name, address and phone number at the top of the letter in case your loan servicer needs to reach you immediately.
Where to send your goodwill letter
Now that your letter is written, it’s time to send it. This can be done either by fax or by mail. Most student loan servicers have their contact information on their website, but you can also look on your billing statements to see if they specify a different address.
Additionally, you can try calling the credit bureau where the lateness was reported to see if they can give you the contact information you need.
It’s important to mention that goodwill letters are not a means to immediate success. Unfortunately, it often takes several attempts to correspond with servicers and lenders to get them to acknowledge that they received a letter from you.
Your best bet is to get a personal contact at the company who has the power to erase the late payment from your credit report.
If all else fails, try as many different communication methods as possible. Phone, mail, fax, live chat (if your servicer offers it) and email them. Several people who have tried this report that it’s possible to wear your servicer down with a decent amount of requests.
Addresses and fax numbers to try
Here are some addresses and fax numbers for several of the larger servicers, as listed on their websites. Again, it may also be worth phoning your servicer to get the name of someone there that can help you. If you have federal student loans, you can also check this Federal Student Aid page for more contact information.
Nelnet
Documents related to deferment, forbearance, repayment plans or enrollment status changes:
Don’t let your efforts go to waste by forgetting to send documentation with your letter. Here’s a quick checklist of what you should include:
The account number for your loan
Your name, address, phone number and email
Statements showing proof that you paid (if you’re disputing a late payment)
Documentation showing that you’ve paid on time at all other points aside from when you experienced financial hardship (if that’s the case)
Identifying documentation so your servicer knows you sent the request
Also note that if you’re mailing anything, you should send it by certified mail with a receipt requested. This way you’ll know whether your letter made it to the servicer.
What to expect after submitting your goodwill letter
Once you submit your goodwill letter, you should hear back from your creditor with a decision in a few weeks. If two to three weeks have passed without word, follow up via email or phone call.
As you know, there’s no guarantee that your goodwill letter will work. The decision to remove a negative mark from your credit report is entirely in the hands of your creditor.
If your creditor rejects your petition, you’ll have to accept the ding on your credit report and take other steps to boost your credit. But if they agree to repair your credit, you should see the delinquency removed from your report and your credit score increase as a result.
A higher credit score can make life a lot easier, whether you want to take out a loan, open a credit card or, in some cases, even rent an apartment. For student loan borrowers, a strong credit score also opens the door to student loan refinancing, a savvy strategy that lets you restructure your debt, possibly changing your monthly payment and potentially saving money on interest.
If your credit score rebounds and you want to take proactive steps to conquer your student debt, refinancing could be the answer you’ve been looking for, so long as you no longer need the protections that come with federal loans.
Either way, though, make sure to keep up with student loan payments so you don’t end up with a delinquent account dragging down your newly repaired credit score.
Resources
If you’re interested in exploring goodwill letters further — and the results that others have had — check out these websites:
Ed.gov: They cover disputes, what to do about them and how to go about rectifying them here.
ConsumerFinance.gov: If you have loans with a private lender, and your lender had reported you as late when you weren’t, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) to see if they can help you.
myFico Forums: The forums on myFico are populated with helpful individuals that might be able to give you contact information for certain servicers. There are some people reporting success with goodwill letters, and they may be willing to share their letters with others upon request.
It’s worth the time to write a goodwill letter
If you’ve discovered that a late payment has been reported on your credit, and it’s because you fell on hard times or is inaccurate, it’s worth trying to get it erased. These dings on your credit are there to stay for seven to 10 years. That’s a long time, especially if you’re young and hoping to buy a house or a car in the near future. It’s a battle worth fighting.
Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.
