If you’re like millions of Americans, your budget may have gotten away from you over the holidays. According to a survey by Magnify Money1, families added an average of $986 to their credit card balances due to gifts, décor, and travel. With interest charges, that amount can balloon, making it difficult to pay down the principal.
Many people struggle to pay off their debt for months after the holidays. It’s not uncommon for some families to still be making payments in the summer for presents they purchased months before. As the interest builds, you can end up paying several times more than the original items cost and feel remorseful and guilty for overspending.
But if you’re looking at a pile of debt, don’t panic or get overwhelmed. There are ways to make your credit card balance more manageable. One way to take control of your debt is to consolidate it with a personal loan.
Consolidating holiday debt
Consolidating can help you begin to repair the damage quickly by combining the balances from all your credit cards into one easy payment. Depending on your current credit cards’ interest rates and your personal credit, you may even qualify for a lower interest rate. By paying less interest, more of your payment goes against the principal, helping you pay off your debt faster.
Using a personal loan to consolidate your debt may be a wise decision, depending on your circumstances. Personal loans often have lower interest rates than credit cards and more favorable repayment terms, so you can take charge of your debt.
In fact, borrowers who used a personal loan via Lending Club to consolidate debt or pay off high-interest credit cards reported that their new interest rate was an average of 30%2 lower than what they were paying previously on their outstanding debt or credit cards.
Additionally, consolidating your debt can even increase your credit score. 75%3 of Lending Club customers reported an increase in their FICO scores within three months of taking out a personal loan for debt consolidation. An improved credit score can go a long way in helping you manage your finances and improve your outlook.
Keep in mind
However, consolidation is not for everyone. When you use a personal loan to pay off your debt, your debt is still there; it’s just been combined into one loan with a potentially more competitive rate. Eliminating credit card debt and having just one loan can give some people a false sense of security. It’s important to keep yourself focused on repaying your debt and making all of your payments on time.
If you are struggling to manage your credit card debt from the holidays, consolidating your debt with a personal loan may be a good option for you. By consolidating, you can potentially save yourself hundreds of dollars in interest, and help set yourself up for a strong 2017.
If you have decided that consolidating your holiday debt is right for you, check your rate today with no impact to your credit score!
1 Source: http://www.magnifymoney.com/blog/pay-down-my-debt/holiday-debt-survey
2 Based on responses from 14,827 borrowers in a survey of 76,365 randomly selected borrowers conducted from 1/1/16 – 10/1/16. Borrowers who received a loan to consolidate existing debt or pay off their credit card balance reported that the interest rate on outstanding debt or credit cards was 21% and average interest rate on loans via Lending Club is 14.6%. The origination fee ranges from 1% to 6% and the average origination fee is 5.47% based on origination volumes from 7/1/2016 to 9/30/16. Best APR is available to borrowers with excellent credit.
3 Average credit score change of all borrowers who took out a loan via Lending Club between January 1, 2013 and May 31, 2016 with a stated loan purpose of debt consolidation or pay off credit cards.
The post Why Consolidating Holiday Credit Card Debt Can Help You appeared first on Lending Club Blog.
from Lending Club Blog http://blog.lendingclub.com/consolidating-holiday-credit-card-debt/