You may have heard interest rates are at all-time lows — so 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 charges of 24.99% or even higher than that.
If you hope to benefit from lower rates, you should consider refinancing your credit card debt with a personal loan. Fiona can help you just how low your rates can be.
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.
How does credit card debt refinancing work?
Imagine you currently owe $19,000 in credit card debt with an APR of 18%. If you paid $350 per month toward your debt, it would take you 114 months to become debt-free and you would pay a whopping $20,576 in interest payments along the way!
Try Fiona to see how low of a rate you can get today!
As an alternative, you could take out a 60-month personal loan for $19,000, and if you qualified to receive an APR of 5.99% you would pay just $3,304 in interest with a monthly payment of $367. That's a savings of almost $17,000 (minus any other associated fees) and you cut your debt repayment timeline by almost half.
Refinancing your credit card debt is easy with these simple steps:
Step 1: Determine the debt you want to refinance, and what the APR is for the account.
Step 2: Use the tool below to get matched with personalized loan offers, featuring competitive APRs and flexible terms based on your creditworthiness and other factors.
Step 3: After finding the right offer for you, proceed to the lender website of your choosing to complete the formal application.
Step 4: Pay off your credit card debt with your new loan, with a potentially lower interest rate and monthly payment, and remember to pay it off according to the loan terms.
Why is Credit Card Interest So High?
The average credit card APR is currently just over 18%, but why? There are several reasons credit cards can become costly to manage, including the fact many people don't pay their bills in full, pay their bills late, or never pay their cards off at all, resulting in compounding interest charges and penalties.
Credit card debt is typically unsecured, meaning there is no collateral for banks to repossess if you stop making your payment. As a result credit card interest rates are higher compared to other forms of secured debt, as a way for issuers to better protect themselves against risk.
How Does Refinancing Lower Your Costs?
While the average credit card APR is just over 18%, with many consumers paying more than that, personal loan rates can be as low as 4.99%, depending on the applicant’s creditworthiness. When it comes to paying off credit card debt, this disparity in rates is where the savings comes from, as it pertains to refinancing through a personal loan.
By refinancing with a lower APR, less of your monthly payment goes toward interest, while more goes toward paying down the principal balance. The result is paying down debt faster and potentially saving thousands along the way.
How to Pick a Personal Loan
Here are the factors you'll want to consider as you browse personal loan options:
Monthly Payment: Make sure your new loan's monthly payment is one you can comfortably fit in your budget. If the payment seems high, consider a personal loan with a longer repayment period (i.e.,the loan term).
Interest Rate: Look at personal loan offers with the lowest APR you can qualify for based on your credit score and other factors.
Repayment Period: Compare different loan terms, typically from 24 to 84 months. While longer terms will result in a smaller monthly payment, you will end up paying more in total interest.
Fees: Some (but not all) personal loans charge an origination fee, so make sure to check. In addition to avoiding origination fees when you can, you should look for personal loans with no prepayment penalties. (All loan fees are baked into a personal loan’s APR, which combines the interest rate and fees to produce an annual percentage rate applied to your loan).
Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.