Credit card debt is a total bummer. Not only do you have to pay back the principle, each month the credit card companies charge interest, sometimes as high as 20% or 30%, on your outstanding balance. As long as the terms are right, a debt consolidation loan can make a lot of sense. Here are times when it makes sense to consolidate credit card debt through a new loan.
Consolidate Credit Card Debt to Save Money
If you are paying high interest each month on outstanding credit card balances, you are in the best position to save money if you consolidate credit card debt. When I worked in a bank, I helped people save thousands of dollars each month through a smart debt consolidation plan.
According to data compiled by personal finance site NerdWallet, the average family with credit card debt is carrying more than $15,000 on their cards. According to CreditCards.com, the average interest rate is just over 15%. That means the average household with credit card debt is paying nearly $200 per month in interest alone!
Without including any principle repayment, families are paying $2,250 on their credit cards without getting out of debt. If you can find another loan at a lower interest rate, you can save big on your interest expense.
If you have a family member willing to help you pay off your credit cards and pay them 5% interest on the loan instead of the 15% to the credit card companies, you can save $1,500 per year on interest. And, the remaining $750 goes to someone you care about instead of a big corporation. And, rather than making a bunch of small credit card payments, you only make one payment, which is the biggest convenience when you consolidate credit card debt.
Consolidate Credit Card Debt to Get Debt Free
Of course, being debt free is even better than saving on interest. Credit cards are a type of revolving credit. This means that you can carry debt forever and never completely pay it off. This is a great thing for credit card companies making lots of money, but bad for consumers like us.
If you can convert your revolving debt into an installment loan, you will have a fixed payment each month that ends with a zero balance. That is a real road to debt freedom.
If your household is an average American home carrying credit card debt, paying off $15,000 is a big hurdle, but something you can certainly do. At a 5% interest rate, you can pay off $15,000 in 5 years with a monthly payment around $350 per month. You can get debt free in 3 years at about $500 per month.
While that payment each month may be higher than what you are paying now, it is a road to being completely debt free. Don’t live with high interest forever, get your debts paid off and get on the path to personal finance success.
If you are struggling getting out from a mountain of debt, we can help. People have looked to family and friends for support long before banks existed, and we help you utilize your support network to ensure a win for everyone.
At Money Mola, you can borrow money from friends and family and pay them back each month with automatic payments. We offer the same tools that banks use to help you manage your loans, and your payments go right to the family member or friend who lent you the get out of debt funds.
We can help you get on the path to financial freedom. Join Money Mola and consolidate credit card debt today!