3 Great Reasons to Consolidate Your Holiday Debt Into a Personal Loan
Carrying leftover debt from the holidays on multiple credit cards? Read on to see why a personal loan could make sense for consolidation.
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The holidays are a popular time to rack up debt. And so if you're juggling credit card balances from holiday purchases made in late 2023, you're no doubt in good company.
Personal finance company Achieve found that 50% of U.S. consumers expected to take on debt to pay for their holiday purchases last year. But the longer that debt lingers, the more stressful and costly it has the potential to be.
It could pay to consider consolidating your various credit card balances into a personal loan. Here are a few ways you might benefit.
1. You'll only have one monthly payment to make
If you owe money on four or five different credit cards right now, well, that's four or five monthly payments you'll need to make. Having multiple payments could increase your chances of forgetting at least one and having your credit score get dinged accordingly.
With a personal loan, you're making a single payment each month. You can set a reminder on your calendar so you don't miss your payment's due date. You may even be able to set up an automatic payment so your loan is taken care of without you having to do anything.
2. Your interest rate will be fixed
When you carry balances on credit cards, there's the potential for your various interest rates to rise. That could make it much harder to fit your payments into your budget.
With a personal loan, you get a fixed interest rate put in place at the time you sign your loan. As such, the monthly payment you start out with is the same monthly payment you'll owe until your loan is paid off in full.
3. Your interest rate might drop substantially
The average credit card interest rate as of this writing is 27.91%, according to Forbes Advisor. Now, the interest rate you get on a personal loan will hinge heavily on your credit score. And the higher that number is, the more favorable your interest rate is likely to be.
But all told, you may be looking at a significantly lower rate on a personal loan than what even your least expensive credit card is charging you today. So consolidating into a personal loan could save you a bundle of money.
Make sure to shop around
There's no need to juggle multiple credit card balances when you could instead make your life easier by consolidating those debts into a single personal loan. But don't just rush to take the first loan offer you get. Instead, shop around so you can compare rates across different lenders.
Also, if your credit score isn't so great, before you apply for a personal loan, at the very least, check your credit report and see if you spot any errors. Correcting a mistake that paints you in a bad light (such as an erroneously listed delinquent debt) could result in a fairly quick credit score boost. And from there, you may find it much easier to snag a good interest rate on a personal loan.
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