Credit Card Debt

How a Personal Loan Could Lead You to Financial Freedom

Carla Nichiata / Shutterstock

It’s no secret that credit card debt is on the rise. The average American is carrying $5,700 in credit card debt, and each month that balance grows higher with interest charges. Fortunately, there’s a way you could find freedom from this debt. You could consolidate your debt at a lower, more manageable interest rate with a personal loan.

A personal loan could be the key to achieving financial freedom. With a potentially lower interest rate than credit cards and the ability to consolidate your debt easily, a personal loan could help you begin making progress towards paying off your debt. And you can see if you qualify in minutes online.

If you’re considering a personal loan, here’s what you need to know to decide if it’s the right choice for you.

What is a Personal Loan?

A personal loan is money that is loaned via a bank, credit union, or online lender and repaid over the course of two to seven years. These loans don’t require a specific use, which gives borrowers more flexibility. Typically, you can use the money from a personal loan any way you’d like.

Personal loans are usually unsecured, which means you don’t need any collateral in order to get approved for the loan. The interest rate can be either fixed or variable, depending on the lender and your financial situation.

Commonly, personal loans are used for debt consolidation – and they’re particularly popular for consolidating credit card debt. But they can also be used to pay medical bills, repair or renovate your home, or fund a big expense like a vacation, small business, or wedding.

How a Personal Loan Can Help With Your Debt

Personal loans are popular with those looking for debt consolidation, and for good reason. A personal loan can help you take control of your credit card debt, and it can simplify the repayment process. 

If you’re wondering why a personal loan is often a good choice, the following are some of the ways this type of loan can help those in debt.

Consolidate Credit Cards

If you have one or more credit cards that are maxed out or carrying high balances, a personal loan could help you consolidate and simplify your debt. Credit cards have high interest rates and different payment due dates – but with a personal loan, you can pay off all of your balances. Then, you can repay that loan at a potentially lower interest rate on a set monthly schedule. With a personal loan, you could pay down your debt faster and save money in the long run on interest.

Refinance Student Loans

If your student loans have high interest rates, you might want to refinance them – but in some cases, you may not be able to do so. That’s where a personal loan can help. You can take out a personal loan with a lower interest, pay off your high-interest student loans, and then repay your personal loan instead. Like with credit card debt, a personal loan might be able to save you significantly when it comes to interest.

Improve Your Credit

Taking out a personal loan could result in a better credit score. It can help in a few ways. If you’re carrying credit card debt, getting a personal loan can add a new type of credit – which typically increases your score, as having different types of loans is viewed favorably. Additionally, a personal loan can lower your credit utilization ratio because it increases your available credit. And lastly, if you pay off your biggest debts and continue to make consistent, on-time payments on your personal loan, you’ll see your score improve.

The Best Personal Loan Lenders for Debt Consolidation

If a personal loan is the right choice for consolidating your debt, you need to do your research. You need to find a lender who offers favorable loan terms, a good interest rate, and can approve you. And in order to achieve this, you’ll need to search for the best personal loan lenders.

The following are a few of the best personal loan lenders to consider.

Credible

Credible allows you to search for available personal loans in just two minutes. You can use the site to search for and compare personal loans all in one place. It’s free to use, and you can take out a loan totaling $1,000 up to $10,000. It’s easy to prequalify in mere minutes, and you can use your personal loan for debt consolidation, credit card refinancing, and much more. With interest rates starting at 4.99 percent and Credible’s Best Rate Guarantee, you’ll be sure you’re getting the best interest rate possible on your personal loan.

Marcus by Goldman Sachs

If you’re searching for a personal loan specifically for debt consolidation, you need to consider Marcus by Goldman Sachs. With interest rates starting as low as 6.99 percent, you can borrow as much as $3,500 or up to $40,000 in a personal loan to pay off your outstanding debt. Marcus by Goldman Sachs also offers borrowers some flexibility – you can change your monthly due date over the lifetime of your loan, and you won’t need a cosigner.

Avant

Avant is a great lender for anyone with less-than-perfect credit. The company actually specializes in personal loans for those with fair or poor credit, which gives anyone the opportunity to borrow. You can borrow anywhere from $2,000 to $35,000, and interest rates start at 9.95 percent. You can choose to repay your loan in a few months or over a period as long as five years. It’s an especially great choice if you’re looking for low monthly payments to ensure you stay consistent during repayment.

SoFi

SoFi is an excellent all around lender. You can fund your personal loan with SoFi and reap plenty of benefits, including an autopay discount, personalized financial planning, and unemployment protection. Personal loans come with no fees, range from $5,000 to $100,000 in total, and come with interest rates ranging from 5.99 percent to 18.64 percent. You can choose to repay your SoFi personal loan over the course of two to seven years, depending on your financial situation.

If a personal loan could help you begin paying off your debt, it’s time to do your research. You can find out if you qualify for a personal loan and look into current interest rates right now. In just seconds, you can start comparing different personal loans online. Search for available personal loans, compare their rates, and see if it’s the right choice for you and your debt. A personal loan could be the key to working towards financial freedom.

Carla Nichiata / Shutterstock

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