You’ve probably heard those credit counseling radio ads that start, “Do you feel like you’re swimming in credit card debt and you’re worried the high interest rates might drown you?” And you may even relate to what they’re saying because, according to Money Magazine, the average American between the ages of 18 and 65 has a whopping $4,717 in credit card debt. And that number is much higher on a household basis, plus it’s worth noting the statistic is skewed by the number of Americans who don’t even have or can’t even qualify for credit cards. I don’t want to sound too much like one of those radio ads, but Bank of the Ozarks may be able to offer you a “life raft in this high sea of fees and interest,” and it might even sound too good to be true.
It may be possible for you to consolidate all your credit card debt into one, more manageable payment, and potentially get a lower interest rate in the process. You can do this with a personal loan (subject to credit approval). Why might you want to do this? By only having to keep track of a single payment each month, you’ll be less likely to miss one and have to pay late fees. Having one payment will also make budgeting easier, and it may even provide you with the extra motivation to pay down debt faster. Speaking of which, you may qualify for a lower interest rate which could free up money you can pay toward the principal.
There is a pitfall though, and unlike those radio advertisers, I want you to know it. Once you use a personal loan to pay off credit card debt, you have to make certain you’re willing to stop using your credit cards. Cut them up, hide them, cancel them—whatever you have to do to make sure they don’t tempt you, because if your old spending habits take back over, you’ll be even deeper in those murky waters of debt than when you began. So do you feel like you could stop using your credit card? Are you ready to change your spending habits? Consider asking a lender if you qualify for a personal loan.
Please be aware that not all personal loans are unsecured like many credit cards. Interest rates, annual percentage rates, and terms are based upon collateral and applicant credit qualifications. Not all applicants will qualify.
By Adam Lucas Adam Lucas holds a Finance degree and an MBA from the University of Kentucky. His work has appeared in many major outlets including Yahoo, AARP.org, and GoBankingRates.com.
Monday on the Money is a weekly commentary from Bank of the Ozarks providing financial advice and solutions important to you and your family.