Are you tired of making multiple credit card payments throughout the month, always worrying that you might forget one and incur late fees? With a personal loan you can pay off multiple credit cards at once and get yourself out of expensive credit card debt. Just make one convenient monthly payment on the personal loan and forget about different credit card company interest rates and timetables.
Personal Loans Are Often Less Expensive Than Credit Cards
The average credit card interest rate today is 20.21% according to data collected by The Balance¹. Compare that to good rates on personal loans, which can be 4.5% to 5.5%, and you see why paying off credit cards is a great use of a personal loan.
Get Free QuotesBefore you write another check to a credit card company or tap Make Payment in another credit card app, consider how much further your money would go if you were paying down a personal loan instead.
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Paying $655/month on a $35,000 balance |
LOAN TYPE | RATE | MONTHS TO PAY OFF | INTEREST PAID |
|---|---|---|---|
| Credit card | 20.21% | 138 (11.5 yrs) | $55,279 |
| Personal loan | 5.5% | 62 (~5 yrs) | $5,238 |
| Personal loan | 4.5% | 60 (5 yrs) | $4,132 |
As you can see, making payments to credit card companies keeps you in debt longer and racks up staggering amounts of interest. Make the same monthly payment to a personal loan instead, and you might clear your debt twice as fast and save over $50,000 in interest!
Lower Credit Card Debt Leads to Higher Credit Score
A personal loan isn't just about giving you single-payment convenience but payment power too. Paying down a substantial credit card debt via a personal loan can raise your credit score.
Experts say your credit card balance should not exceed 30% of your available credit limit. If you are "maxed out" or nearly so on several credit cards, paying them off with a personal loan can raise your credit score. As you can see in the table above, you can pay off a personal loan twice as fast as credit card debt, while never paying one penny more per month.
When you replace multiple credit card payments with one personal loan, your payments work harder for you and lift you out of debt faster.
What Exactly Is a Personal Loan?
A personal loan lets you borrow a fixed amount of money over a fixed term. Most personal loans last one to five years, though in some cases you may be able to stretch the loan to 10 years.
The loan application process is fast and easy, with 98% of it happening conveniently online. Usually one verification phone call is all it takes to finalize the loan.
Personal loans are known as unsecured loans because you do not have to put up an asset as collateral. Thus, personal loans are lower risk because you are in no danger of losing your home if you do not keep up with the payments.
Am I eligible for a personal loan?
Some lenders offer an eligibility checker that will tell you how likely you are to be accepted for a particular loan. This kind of soft check does not hurt your credit score.
You can spend the cash on anything
Using a low-interest personal loan to pay off high-interest credit cards is a no-brainer, but you can spend the cash wherever you want. Maybe you do not have a lot of credit card debt, but a wedding is approaching. A personal loan can be a good choice if you want to:
- Fund home improvements
- Consolidate debts
- Pay for a wedding
- Pay for a once-in-a-lifetime vacation
Before taking out a personal loan, compare interest rates and terms. The APR you see advertised might not be the one you get. Also check to see if there are any fees. Some loans come with initiation fees, and there may also be a fee for paying off your loan early. Naturally, you can expect late payment fees as with most any kind of loan.
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