Dear Penny: What’s The Best Way to Pay Off My Debt After a Breakup?

Dear Solvent,

I’m sorry to hear about your circumstances. Financial battles only exacerbate and extend the pain of a break up, and I hope you find relief with the end of that process.

Eliminating debt you’ve accrued in a past relationship or because of a breakup can be an important way to heal and let go of a painful chapter of your life, so your eagerness to pay off the debt as quickly as possible is understandable.

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The first way to make your debt more manageable is to consolidate it. Use a new loan to pay off your existing balances, so you only owe money on one account instead of three.

You could do that through:

• A debt consolidation loan that pays off your credit cards and line of credit.
• A balance-transfer card, a credit card that lets you port an existing balance and offers a promotional period with low or no interest to help you pay it off.
• A 401(k) loan to pull money from your 401(k) without interest or the usual penalties as long as you repay the loan within five years and don’t leave your job before the loan is paid off.
• Your line of credit. If you have access to more credit through your existing line of credit, use that to pay off your credit card balances so you only owe money to the bank (and, likely, at a lower interest rate).
• A debt management program through a nonprofit credit counseling company. If you go this route, vet companies carefully, because plenty of for-profit companies take your money for debt management services and offer you basically nothing in return.

Look for a consolidation option that comes with a lower interest rate than your existing credit and make sure it doesn’t come with prepayment penalties, a rare fee charged for early repayment.

If you don’t qualify for these options, contact your creditors to move payment due dates to something manageable. You might move all three payments to the same monthly due date so you can knock them out in one sitting, or spread them out to comfortably align with cash flow from your paychecks.

When you’re making multiple debt payments, the fastest way to payoff is the debt avalanche method. Make minimum payments on all your accounts, and put the remainder of your $3,000-plus monthly allotment toward the card with the highest interest rate until that’s paid off. Then put the extra toward the other card until that’s paid off, and finally use your full $3,000-plus each month to pay off the line of credit (assuming the LOC has the lowest interest rate).

To keep your payoff clean and easy, avoid using more credit in the meantime. Or — if you want to accrue rewards — move day-to-day spending to its own card, and repay the balance every month. This’ll let you clearly see the debt you’re working on, mark progress and estimate a payoff date.

A credit card payoff calculator shows you how long it’ll be before your debt is behind you. For example, Bankrate’s calculator tells me you could pay off $50,000 with an average of 14% interest in 19 months. Plug in your numbers to get your target debt-free date — and plan a special celebration to mark the closure you’re looking for.

Dana Miranda is a Certified Educator in Personal Finance®, author, speaker and personal finance journalist. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.