The Credit Guy

Side gig can be best debt-payoff option


Taking on a part-time job to pay down thousands of dollars in credit card debt is smart; make the best of it by carefully considering your payment options.

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Dear Credit Guy,
I’ve got $12,000 in credit card debt, and I want to erase that. What are my options? Should I maybe take out a loan – or what else can I do to get rid of this debt? The interest payments are getting too high, and I don’t want to make a mess of everything. I’m going to get a part-time job to help try to pay down this card debt. I’ve got to get out of this vicious cycle. – Erin


Dear Erin,
I am glad you understand that $12,000 in credit card debt is something you need to address sooner rather than later. I especially like that you are willing to take on a part-time job to help. I hope you also know that you cannot rely on credit to extend your income, especially while you are trying to take care of this debt. As for your options, you basically have three ways to pay off your debt:

  • Do-it-yourself plan with added income from side job.
  • Get a loan.
  • Enroll in a debt management plan.

Let’s explore each of options in greater detail:

DIY plan to pay debt with added cash from a side job
Your first option is to continue to pay your debt on your own, whether by making minimum payments or by sending more than that amount every month from extra cash you earn from a part-time job.

If you make only minimum payments, it will take you dozens of years to pay off your card debt. There is a box on your credit card statements that will show you exactly how long. Since I can’t see your statements and don’t know your exact interest rate (you said your interest rate was getting high), I used the minimum payment calculator on Based on your $12,000 debt and using an average interest rate of 17 percent, it will take you 307 months to pay off this debt if you make only minimum payments. That is more than 25 years, and it will cost you more than $16,000 in interest payments alone.

What if you can pay more than the minimum by sending extra cash from a part-time job? If you could afford to make payments of almost $600 for 24 months, you would wipe out your debt in that time and pay about $2,400 in interest over those two years, according to’s payoff calculator. That is a pretty significant savings in both money and time – more than $13,000 and 23 years! If you can afford to pay that much each month this might be an option for you to consider. This is where any additional income you can generate will be especially helpful.

You can find the calculators I used here if you’d like to plug in what you can afford to pay and how much you’ll save in time and money.

Using a loan to pay off card debt
Your next option is to do as you suggested in your question and see if you can obtain a loan to pay off the debt right away. You must understand that what this accomplishes is simply trading one debt for another. That is not necessarily a bad thing if you can get a loan for both the amount you need and at a favorable interest rate. But you must understand that qualifying for these types of unsecured loans at good interest rates requires a very good to excellent credit score.

I also want to remind you that if you get a loan, you probably won’t have to close your credit card accounts. Once you use the loan proceeds to pay off your credit card debt, don’t be tempted to continue to use the cards unless you can pay any monthly charges in full every month.

Enroll in a debt management plan
You also have the option of creating a debt management plan through a qualified nonprofit credit counseling agency. These plans are designed to get you out of debt in five years or less at lower interest rates and often lower monthly payments. Unlike a loan, you don’t need to have great credit to qualify, but you will probably have to close your credit accounts. That is not necessarily a bad thing, because that would remove any temptation to get back in debt.

Closing your accounts may cause your credit score to dip temporarily. This is because you will lose available credit, which is one factor in credit scoring. However, the most important component in credit scoring is on-time payments, and your credit counselor will help you come up with a budget that allows you to make your payments on time, every month. Doing so will help your credit score recover over time.

There are nominal fees associated with a debt management plan, but the savings from the lowered interest usually will more than offset those fees. The Federal Trade Commission has some great information to help you find a reputable credit counseling agency.

I want to encourage you to go ahead with your plan to get a part-time job to help pay down your debt. If you choose to go with a loan, make sure there are no prepayment penalties so that you can pay extra at any time. Making extra payments will only decrease the time it takes you to pay off your debt, whether you pay on your own, get a loan or enroll in a debt management plan.

Take care of your credit!

See related:  Tips, tools for setting up a side gig to get out of debt, You did WHAT to pay off your debt?When is a debt management plan a sound move?

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