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What is the Best Way to Pay Off Our Debt? – MG

“Dear Steve,

2 adults in household – 52 and 53 yrs old. Annual income: ~$170,000. Everything is great except our credit card debt. 6 credit cards with debt totaling ~$70,000.

Only other long-term debt is mortgage at 5.0% so it’s no problem whatsoever.

We are paying $2,000+ every month on credit cards and still no relief. Credit card companies have arbitrarily done some mean-spirited things the past 8 to 12 months, like shrinking our credit lines or jacking up interest rates to 35% (at which point we had to close account and just keep paying on them, to keep a 17% or 18% interest rate.)

We always pay at least minimum and, over past year or so, have paid sometimes $200+ over minimum but nothing helps. We just want these card balances paid off ASAP!

Should we pay off highest interest cards first? Or, highest balance? Or cards that have open accounts still? Any advice will help! Thanks!


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Dear MG,

I was shocked to read about how you got rate jacked. Ouch!

It seems like a two stage effort is in order. This plan assume your credit scores are good and above 660.

The likelihood that you will be able to do a balance transfer to pay off the debt is not realistic. So outside of placing another mortgage against your house to get funds to pay off the debt, which seems unlikely, the best course of action would be the following:

  1. Take a look at It is a peer-to-peer lending network where people like you and me, lend to people like you and me, thus cutting the banks out of the loop. An unsecured loan will go up to $25,000 and if approved, that will allow you to pay off your highest interest rate debt.
  2. Next, if you have several lower balance cards you could pay off quickly, do that. There is nothing like the personal satisfaction of seeing some creditors eliminated. Once you know off the lowest balance creditors you can then apply the money you were sending to them towards the remaining debts on your cards. In addition, the LendingClub loan should have lowered your payment due on those debts so you’ll have more cash to apply towards the remaining debts.
  3. This strategy can actually improve your credit since the loan is reported to the credit bureaus and your other accounts will have been paid off without going into default.

How does that sound?

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

1 Comment

  • First, I would call each of the six card issuers. In this economy, the rate they are charging is criminal. Ask for a lower rate. The worst they can say is ‘no’.

    I don’t know how those cards are spread out, but I am a big fan of “line up by rate, and pay higher one first.” Of course make the minimum payments on the other 5.

    Refinancing (via Lending Club or other peer to peer) is a great idea. But – on $170K, how did you get in to this mess? The key thing is to live beneath your means, pretend you are poor and only make $120K/yr. You’ll be debt free in no time.

    (I know $120K is not ‘poor.’ it was meant ironically)

    .-= JoeTaxpayer´s last blog ..More on Estate Planning =-.

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