Borrowers Who Consolidated Credit Card Debt Saved Over $ 2,000 On Average, Data Shows


It’s easy to get into debt on a credit card, but paying off the debt can seem a lot harder. With the right financial products, however, getting rid of your credit card balances can be completely manageable. (iStock)

Credit card debt is a drain on your budget and can prevent you from saving for important milestones in your life, like a down payment for a house or your child’s school fees. And given that credit use jumped 8.8% in the second quarter of 2021, you may be one of the many Americans looking for ways to get out of debt.

A common way to reduce an out of control credit card balance is to take out a debt consolidation loan. This is a type of personal loan that you take out at a lower interest rate than what you are currently paying on your credit cards in order to pay off your debts faster and save money while on the go. doing.

In fact, you may be able to save thousands of dollars by taking out a personal loan to pay off your credit cards. Borrowers who took out a personal debt consolidation loan from Credible’s online marketplace in May 2020 saw potential savings of $ 2,374.

Make sure you’re getting the lowest possible interest rate on a personal loan by comparing offers from multiple lenders. You can compare personal loan offers in Credible’s online loan market, all without impacting your credit score.

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How a Credit Card Consolidation Loan Saved Borrowers Over $ 2,000

Personal loans are a popular option for debt consolidation because they have a low fixed interest rate and a consistent repayment schedule. An unsecured personal loan does not require the borrower to post collateral, allowing quick access to funds. Often the loan amount can be paid into your bank account as early as the next business day after it is approved.

These benefits are important, but the real reason personal loans are such a popular debt repayment strategy is the potential for cost savings. Credit card issuers offer some of the highest interest rates in the market, while personal loans may offer a lower rate for borrowers with good to excellent credit. In fact, well-qualified consumers who have taken out a personal loan for debt consolidation in Credible’s online loan market have realized a potential savings of almost $ 2,400.

Credible analyzed a sample of borrowers with a credit score of 720 to 779 who took out a 3-year personal loan for debt consolidation during the month of May 2020. Borrowers consolidated $ 18,000 on average, with a median personal loan rate of 8.99%. Based on the average credit card interest rate of 16.61% at that time, borrowers could save $ 2,374 on total interest payments and even reduce their monthly payments by $ 66.

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The amount you can save depends on the personal loan rate you can get. Interest rates on personal loans depend on the borrower’s FICO score and debt-to-income ratio, as well as the loan amount and repayment term.

Since personal loan interest rates can vary from lender to lender, it’s important to shop around for the best possible rate for your financial situation. You can view your estimated personal loan rates on multiple lenders by filling out just one form on Credible.

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View your estimated monthly payments using a personal loan calculator

While credit cards have a minimum payment requirement, personal loans have fixed monthly payments. This way you will always know how much you owe and when it is due. Plus, many personal lenders offer a reduced annual percentage rate (APR) if you sign up for automatic payment withdrawals, giving you an added advantage of making your payments on time.

Often, borrowers are able to get a lower monthly payment by refinancing their credit card debt with a personal loan thanks to the lower interest rates offered by personal loans. Here’s how to find out your monthly payment using Credible’s personal loan calculator:

  • Total your credit card debt. With personal loans, you can combine balances from multiple credit cards or just pay off one. You will put the total in the “loan amount” box.
  • Find your personal loan rate. You can be prequalified for a personal loan on Credible to estimate your potential interest rate without affecting your credit score.
  • Select the length of your loan. Longer-term personal loans may offer lower monthly payments, but you’ll likely get a higher rate and pay more interest over time.

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This calculator will help you determine your personal loan payment as well as your total interest paid over the life of the loan. This way you can see if paying off your credit card debt with a loan is the best option for your financial situation.

Still not sure if credit card consolidation is right for you? Contact an expert credit officer at Credible to explore your options for paying off high interest credit card debt.

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Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.


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