How to Pay Less Interest on Your Credit Card Debt

By Dan Rafter. Last updated 9 October 2017. 0 comments

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If you’ve got credit card debt, it may be hard to see the light at the end of the tunnel. Each month your payments go to reducing the debt, but it also goes to interest. And if you’re like most people with sky-high credit card debt, your interest rate is sky-high as well. If you can get approved, transferring your balance to a credit card with a lower interest rate or one with a 0% Intro APR on balance transfers can help. But if you can’t do that, a personal loan might be the solution. (See also: Should You Use Peer-to-Peer Lending to Pay Down Credit Card Debt?)

Using Personal Loans to Tackle Credit Card Debt

Banks and credit unions might be willing to approve you for a personal loan with a lower interest rate than those attached to your credit card debt. But there are some warnings here: It’s not always easy to qualify for a personal loan if you’re already struggling with high credit card bills.

Secondly, if you don’t change your spending habits, the odds are high that you’ll run your credit card debt up again after taking out a personal loan to pay it off. Then, you’ll be stuck with your new credit card debt and a personal loan to pay off.

Make sure that if you are getting new credit to help pay down debt, you have created a plan for spending that doesn’t include racking up new debt on your old credit cards.

Personal loans can be a good alternative. They usually come with lower interest rates than credit cards, so it costs less over the long haul to pay these back. In essence, when you take out a personal loan, you’ll be swapping credit card debt that comes with higher interest rates for the same amount of debt at more reasonable rates.

You still have to pay your debt back — it just doesn’t generate as much interest each month, which means you can get rid of your debt faster.

How to Find Personal Loans

If you think a personal loan might be a good fit for you, here are some places to start.

SoFi has some of the lowest rates available for personal loans, starting at 3.350% for fixed and 2.615% for variable (with AutoPay). There are no origination fees like many peer to peer loans and you can choose from three, five, or seven-year terms. They also provide unemployment protection which allows you to pause your payments while you’re looking for a new job. Click here to learn more about SoFi personal loans.

Upstart looks beyond your credit score and income when underwriting loans. They take into account the college you attended, area of study, academic performance, and even work history. This offers investors more information to decide to approve a loan and borrowers the opportunity to show more evidence of their ability to pay back the loan. APR starts as low as 4.66% but they only offer three-year terms.

Avant offers access to personal loans as low as $2,000 up to $35,000. Their APR starts on the high side, from 9.95%-35.99% for loans.

PersonalLoans.com provides access to potential lenders for various types of loans, such as peer to peer loans, personal installment loans, and bank personal loans. They send your loan application to their affiliates and if approved, you can review the agreement and decide whether to accept.

Prosper is the original peer to peer loan site, with APRs starting at 5.99% for loans $2,000–$35,000. Their competitor is Lending Club so it might be helpful to compare rates between the two. Keep in mind that there are often origination fees associated with these types of loans.

Lending Club is a peer to peer marketplace that matches borrowers with investors. For some people with low credit scores, this may be the best option to get a personal loan, since some investors may be willing to take on higher risk loans than traditional banks. Keep in mind there are origination fees.

CircleBack Lending offers personal loans up to $35,000 with APR as low as 5.96%. Origination fees are between 0.99%–2.99%. The investor pool is a bit different than Lending Club and Prosper. They use institutional investors.

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