Personal loans for debt consolidation: why this might be your best option
When we look at the hard facts and statistics, it’s impossible to ignore that America is a country that runs on debt. Did you know that the average American has an average of $38,000 in personal debt, and the average household carries an average of $137,063 in debt? Compared to other countries, the United States is the 10th country with the most indebted households, followed by Portugal, Thailand, Finland, and Spain.*
So if most Americans are living well beyond their means, how can we end the debt cycle and achieve financial freedom? Personal loans might be the answer.
Why You Should Consider a Personal Loan
It may be hard to believe that taking out more debt is sometimes the best solution to pay off your existing debt, but it makes sense when you consider the three main benefits of personal loans: lowering your interest rates, lowering your monthly payments and consolidating debt. Here’s what you need to know about each one:
Lowering your interest rate
Lowering your interest rate will allow you to pay off more principal each month, speeding up the process and lowering your total debt amount in the long term. The catch? Not all personal loans will actually lower your interest rate, so make sure to shop around and find the lender that works best for you.
Lowering your monthly payments
When you add the minimum monthly payment for all the credit cards you’re trying to pay off, you’ll often find a much higher number than the minimum monthly payment you’d end up with if you take out a personal loan. In other words, with a personal loan, you’ll be able to get out of debt faster if you are paying a lower monthly payment and adding the difference towards your loan’s principal. It’s that simple!
Struggling to make payments on multiple credit cards and loans makes it hard to feel like you’re getting anywhere. Unfortunately, most Americans have felt this way before. By getting a personal loan and consolidating debt, however, it is easier to focus all your attention into just one payment, instead of feeling helpless with multiple monthly payments and stacks of bills on your coffee table that you can’t even keep track of.
Here’s what you need to consider when consolidating debt through a personal loan
When you take out a personal loan, you use this money to pay off all your current credit card debt, leaving you with only one monthly payment towards this loan. This can be extremely beneficial and help you get out of debt much quicker if you do it right. A few questions you should find the answers to before taking out a personal loan to consolidate debt are:
- Is the interest rate on my new personal loan lower than my credit card interest rate?
- What is the loan’s minimum monthly payment?
- How much money do I really need to borrow to pay off my credit card debt?
- Have I found the right lender for my current financial situation?
Additionally, it’s extremely important to keep in mind that once you pay off your credit card debt, you can’t start racking up debt again by using your credit card, or you’ll end up with twice as much as what you started with and even farther from the finish line.
LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumers are people with credit scores in the 600s. If this is you, we’d love to talk to you about how we might be able to help you meet your financial goals. We offer loans from $2,000 to $25,000, all with fixed payments and simple interest.