How to Pay Less Interest on Your Credit Card Debt
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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 a fixed rate of 8.99-25.81% APR (with all discounts). There are no origination fees and 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. Choose between 3 or 5 year terms.
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 for loans $2,000–$40,000. 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.
*Personal Loan Disclaimer: The following payment example depicts the APR, monthly payment and total payments made during the life of a personal loan with a single disbursement. All loan rates below are shown with the autopay discount (0.25%) and direct deposit discount (0.25%). The monthly payment for a $30,000 loan with a 60-month term and a fixed annual percentage rate (APR) between 12.95% – 25.03% would be $681.82 – $881.07 in monthly payments, with total payments between $40,909.47 – $52,864.05. Your actual interest rate may be different than the loan interest rates in these examples and will be based on term of loan, your financial history, and other factors, including your cosigner’s (if any) financial history. Lowest rates reserved for the most creditworthy borrowers. See SoFi.com/eligibility for details.
Fixed rates from 8.99% APR to 25.81% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 05/19/23 and are subject to change without notice. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.
Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-6%, which will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.
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