The story of how my debt doubled due to the bizarre logic of borrowing from a consumer finance company to pay off revolving credit

A wandering journey from revolving credit hell
A 32-year-old who borrowed from a consumer finance company to pay off revolving credit, and the reason his debt doubled was insane

📌 Key points of this article

• Using consumer finance for revolving credit repayment is counterproductive

• The biggest trap is reusing the credit limit after paying it off

• Refinancing is only effective if the interest rate is lower

It's only recently that I've been able to talk about this as a funny story. But at the time, I was dead serious, and I truly believed I was executing a "smart solution" in my own way. Truly, from the bottom of my heart.

The day my revolving credit balance hit 800,000 yen

When I was 32, the revolving credit balance on my main credit card exceeded 800,000 yen. I had set my monthly payments to 15,000 yen, so I thought, "This is easy," but every time I looked at the statement, the balance was slowly creeping up. Well, obviously, since I kept using it.

The interest rate for revolving credit is 15% per year. That means about 10,000 yen of the 800,000 yen balance was being taken as interest every month. In other words, even if I paid 15,000 yen, the principal only decreased by 5,000 yen. When I realized how many years it would take to pay it off at this pace... I started to panic, thinking, "This is bad."

The mysterious discovery that "consumer finance has lower interest rates"

So, I did some research. I searched online for terms like "revolving credit interest rate high countermeasures." Then, an article somewhere said, "If you borrow from a loan with a lower interest rate than revolving credit and pay it off in a lump sum, your total payment amount will decrease."

That in itself wasn't wrong. It's correct knowledge. The problem was my reading comprehension.

...Yeah, it makes no sense, right? Someone stop me from deciding it was a "good deal" to borrow at a higher interest rate to pay off a lower one, a calculation that was completely running in reverse.

The night I borrowed 800,000 yen from a consumer finance company

I did it. The screening passed easily, and 800,000 yen was deposited into my account. I immediately paid off the credit card revolving balance in one go. The moment the balance hit zero, I felt a huge sense of accomplishment. I seriously thought, Am I not smart?.

However. The credit card I had paid off now had its "limit restored." And for some reason, I started using that card again. Because I had this mysterious confidence that "I'm paying the revolving credit in a lump sum, so it's fine." But after a while, the lump-sum payment requests piled up and it became tough, so I changed it back to revolving payments...

The situation 3 months later: Consumer finance balance 800,000 yen + credit card revolving balance 400,000 yen = total 1.2 million yen. Wait, it's increased. Why has it increased?

"Wait, what did I do?" the realization

When I proudly told a colleague at work about it over drinks, they pointed it out in a second.

……It was so spot on that I couldn't say anything. I thought I was doing a "smart refinancing," but I had just increased the total amount of my debt. With the added bonus that the consumer finance company had a higher interest rate.

When I said, "But somehow... it felt good to pay it off in one lump sum," my colleague said with a straight face, "That's the most dangerous part." They were absolutely right.

How I cleared my 1.2 million yen debt from there

I realized it was serious and faced it head-on. The first thing I did was take my credit card out of my wallet and hide it deep in my dresser. I decided that making it physically unusable was the priority. Next, I negotiated with the consumer finance company to increase my repayment amount. I decided to pay down the principal faster to reduce wasted interest.

Even so, it took over two years, and life during that time was quite tough. I almost never ate out and kept turning down invitations to drink. But I had a strong will to "never go back to that mysterious calculation again." If the balance had grown any larger, I think I would have consulted a lawyer and considered debt consolidation. That would have been a perfectly valid option, too.

Three lessons I learned from this story

1. "Refinancing" only makes sense when the interest rate goes down

It is only effective when moving from a higher interest rate to a lower one. The opposite is absolutely forbidden. It's obvious, but when you're desperate, you lose sight of this.

2. Don't think that a paid-off credit limit is "available to use again"

Once I paid off my credit card revolving debt in one lump sum, I should have immediately canceled or sealed away that card. The most dangerous thing is the illusion that you have "more breathing room" the moment your credit limit is restored.

3. Don't be fooled by the "good feeling" of debt

The sense of accomplishment when paying off a lump sum, the peace of mind when your credit limit is restored—I can now state with certainty that this is the gateway to debt hell. Look only at the numbers. Do not judge based on emotions.

I can laugh at that 32-year-old version of myself now. But at the time, I genuinely thought I was being "smart." When you're in debt and desperate, your judgment gets skewed. If you're currently trying to act on some mysterious logic like I was, I want you to stop for a moment and talk to someone. Whether it's a colleague or a professional. Before you increase your debt by 400,000 yen like I did.

*This article is a summary of general information using generative AI. For individual consultations regarding legal, tax, or financial matters, please be sure to check with a professional such as a lawyer, judicial scrivener, or tax accountant. Please enjoy the personal experiences and rumors in this article as reading material.

Spider Thread's Comment

When my card loans grew to three companies, I made a similar "smart repayment plan" and failed miserably. When you're desperate, interest rate calculations just don't sink in. This story about the 32-year-old is funny, but I don't think it's someone else's problem at all. Anyone who has experienced it knows that the moment you feel the sense of accomplishment of "I paid it off in one go!" is the most dangerous time. If you're lost, consulting a professional early is ultimately the shortest path.