As long as the Federal Reserve rate stays at record levels, we will continue to see interest rates at all-time lows, but this won’t last forever.
If interest rates are at all-time lows, why is the average APR on a new credit card account just over 18%? In some cases, American consumers are getting hit with credit card interest charges of 24.99%, or even higher than that.
If you hope to benefit from lower rates, you should consider consolidating your credit card debt into a personal loan. Doing so can help you craft a concrete debt repayment plan, in addition to securing a potentially lower interest rate, to become debt-free faster and easier.
If you decide to lower you bills with a debt consolidation loan, in our experience with the tool below you can borrow up to $100,000, at rates as low as 4.99%*, from a marketplace of top tier online lenders.
There are numerous ways that debt consolidation can save you time and money, and even helps improve your credit score.
How Consolidating Debt Can Ease Your Finances
- Lower interest rates - Personal loan rates can be considerably lower than credit card APRs, which means potentially less money paid on interest. Consolidating debt may save you thousands of dollars as you work to become debt free.
- Lower monthly payments - By potentially lowering your interest rate or extending your repayment term, you can reduce your monthly payment on your new loan.
- Paying off earlier - Paying less in interest means more of your payment can go toward the principal of your balance, and that can result in paying off debt faster.
- Streamlines finances - When you consolidate debt, your clutter of bills will be simplified into one simple monthly payment. This will prevent you from missing due dates, eliminating hassle and stress to help you stay on top of your debt.
How Debt Consolidation Can Improve Credit Score
- Lowers your debt utilization ratio - In general, it's best to have a debt utilization ratio (which calculates your total revolving debt balance) of 30 percent or below. Since a personal loan** is not considered revolving debt, while a credit card is, consolidating to a personal loan can significantly reduce this key ratio in determining credit scores.
- Reduces your chance of missing a payment - When you consolidate your debt, you’ve reduced the number of accounts you have with outstanding balances, which can also help to improve your credit score via timely, in-full payments.
- Improves payment history - By making consistent monthly payments on your new loan, you will develop a stronger credit history, which also helps in improving your credit score over time.
Steps To Consolidating Your Debt
Consolidating debt is easier than you think — you can even handle the entire process online. The following steps will help you get started:
Step 1: Make a list of your current credit card debts, the amounts you owe, and their current APRs.
Step 2: Use the tool above to enter some information, including the amount you want to borrow and your current credit rating.
Step 3: Browse loan offers personalized for you, and calculate how much you could save based on loan rates and terms.
Step 4: After selecting one of your matched offers, proceed to the lender website and fill out the loan application.
Step 5: If you are ultimately approved by the lender of your choosing, you can consolidate your credit card debt into a new personal loan, then pay it off according to the terms of the plan.
* Based on the user's creditworthiness and other lender criteria.
** In addition to personal loans, the tool above can also match users with offers for line of credit products, which are a form of revolving debt. Make sure to read all terms and conditions for product offers in the marketplace.
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About Holly Johnson
Holly D. Johnson is a nationally recognized expert and award-winning insurance writer who covers life insurance, health insurance, and various other insurance-related topics for corporations and well-known magazines with millions of readers. Johnson also covers personal finance, credit, credit cards, and loyalty programs for a variety of publications including CNN Underscored, Bankrate, CreditCards.com and Forbes Advisor.
The author is also the founder of Club Thrifty and the co-author of "Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love." She and her husband Greg live in Central Indiana with their two daughters where they enjoy a debt-free lifestyle and travel up to 20 weeks of the year.