Starting to feel a little pressure because of your debt?
Climbing out of debt can be difficult. When most of us need to borrow money short term, we grab the old credit card. Only to discover that over time the debt has become no longer affordable.
There’s an option you may not have considered to help make that debt more manageable — a personal loan.
How Personal Loans Work
Personal loans have been around for a long time. People have used them to pay unexpected expenses like paying off high-interest consumer debt or funding a home improvement project that may bring added value to your home.
Here’s how they work:
- They’re typically for a set amount.
- They’re not secured, and that means you’re not borrowing against the value of your home for example.
SDFCU offers saving secured Personal Loans if you are interested in learning more.
- They’re typically for a set amount of time, usually about 2 to 5 years.
More Affordable Debt
The thing is, the rates on these loans have been dropping in recent months, and that’s great news if you’re trying to payoff credit card debt. It may be possible to take your high interest debt like credit cards and consolidate it into one personal loan and save some cash.
Let’s say you add up your credit card statements and find you have $10,000 in debt. On 18% credit cards you’d pay a total of more than $15,000 to get that paid off in 5 years. If instead you have a personal loan at, say, 9 percent, you would pay just $12,400 or so.
If you have a good credit score, you’ll get lower rates, and could save thousands. If your credit’s seen better days, you may not get as low an interest rate, but it could still be lower than what your credit card is charging.
If you’re not a disciplined person, consolidating credit cards to a personal loan can provide structure. Credit cards will just let you keep paying and paying… and never really reduce the balance.
With a personal loan, you’ll have a set payoff plan, and there’s a light at the end of the tunnel. But, you need to be sure you don’t just charge up those cards again and end up in the same financial situation once more.
Personal Loans can be a good way to consolidate debt or get money to fund one-time expenses like weddings, home improvement, medical expenses and more. Explore our low rate Personal Loan options today.