Recent research from the Filene Research Institute, a thought leader in the Credit Union Movement, has revealed that “more than half of Americans revolve on their credit balances, deflating their credit scores and depleting their savings, especially when they prolong their indebtedness by making smaller monthly payments than they could.”
If you are not paying off your credit card balance each month or struggling with high-interest credit card debt, a personal loan might help you pay down balances faster. Consolidating multiple high-interest debts into a single low-rate personal loan can help streamline the repayment process and save you money on interest charges.
Personal loans typically have lower interest rates than credit cards, which can result in substantial savings over the life of the loan. They also offer fixed interest rates, fixed repayment terms, and no prepayment penalties. With a fixed monthly payment, it'll be easier to stick to a budget and manage other expenses. Furthermore, personal loans often have higher limits than credit cards, allowing you to borrow more money to cover the cost of larger expenditures.
In contrast, credit cards tend to have higher interest rates, and the monthly payments can vary depending on balances. Although minimum payments are usually low, you will be charged interest on any outstanding balance. Not to mention, late or missed payments can also negatively impact your credit score.
For instance, if you have a credit card balance of $12,000 with an APR of 17.24%, making a minimum monthly payment of $250, it will take approximately seven years to pay off that balance and you would pay $8,504 in interest. However, if you take out a personal loan for the same amount of $12,000 with an APR of 8.99%, it will take approximately five years with the same monthly payment of $250 to pay off the remaining balance. But your interest amount will be $2,928. As you can see, there is a significant amount of savings both in money and time!
It's worth noting that every situation is different, and if you do not revolve debt you also have the option to do a balance transfer. With introductory APRs for balance transfers of 3.99% - 8.99% for the first 15 months your account is open, the rate can be lower than the personal loan rate. Be sure to review your current financial situation before making a decision. Make a list of the balance, interest rate, and minimum payment for each credit card or loan you have, along with other expenses. Ensure that you can afford the monthly payments before taking out a loan. Then, compare how long it would take to pay off credit card debt with this online calculator. If you have other loans, you can use this calculator instead.
The potential reduction amount of interest paid over time can not only save you money but also lower your credit utilization ratio, which is the portion of the credit limit being used. As a result, this could improve your credit score and overall financial well-being. Once you have a personal loan, create a budget and stick to it.
Choosing a personal loan over another credit card is a smart move. Getting your personal loan from Logix is even smarter. Ready to hit restart on debt? Contact us to see how we can help!
*Please contact Logix at (800) 328-5328 or visit www.lfcu.com if you have any questions about this topic or would like to consider opening an account.