Colored boxes in rows

Saving Money with a Debt Consolidation Loan

You might be the kind of person who relishes spending money on exciting purchases, but can’t stand paying for boring things, like $8 shipping or a $25 oil change. And while it’s fair to be stingy sometimes, it doesn’t make sense to stress out about the inevitable costs of living while ignoring the far more important kind of spend: how much of your money goes toward accruing interest on debt.

The average American family has approximately $16,000 in credit card debt , and even more if you’re counting other types of consumer debt. If they’re paying the average credit card interest rate of 16.4% APR, they’re shelling out thousands of dollars per year on interest charges alone. That’s worth putting some thought and action toward. If you have credit card debt, use our Credit Card Interest Calculator to see how much interest you are paying.

With interest rates running into double digits, it’s no wonder people are seeking out ways to lessen interest payments. That’s where a debt consolidation loan comes in. Here’s how to determine if it is the right choice for you.

What are debt consolidation loans?

A debt consolidation loan is another name for a personal loan that you use to pay off other sources of debt, such as credit card debt. You’re basically just taking out a new loan out from a bank, credit union, or other non-bank lender and then using that money to pay off existing debt.

This is not the same as debt or credit relief, where a credit counselor helps you reduce interest rates or eliminate debt altogether. Credit relief programs can help you consolidate your debt, but they aren’t getting you a new loan—it’s only consolidation.

With a personal loan—also called a debt consolidation loan—you can merge multiple payments into one streamlined payment and potentially lower the combined interest rate. To put it in perspective, the average credit card interest rate is 16% APR.

Credit Card ConsolidationCredit Card Consolidation

When should you take out a personal loan for debt consolidation?

Most people considering a personal loan—also called a debt consolidation loan—feel overwhelmed by having multiple debt payments every month. A personal loan can lighten this load for two reasons. For one, you can lower the interest you pay on your debt, which means you could potentially save money on paying interest over time.

For two, it can also make it possible to opt for a shorter term, which could mean paying off your credit card debt years ahead of schedule. If it’s possible to get lower interest than you have on your current debt, or a shorter term on your debt to pay it off faster, a personal loan could be worth looking into.

On the other hand, you’ll also want to be careful about fees that might come with your new loan, separate from the interest rate you’ll pay. For example, some online lenders charge a fee just to take out a personal loan, and some don’t, so you’ll want to do your research.

How are personal loans used for debt consolidation?

Generally, people seeking debt consolidation loans have multiple sources of debt and want to accomplish two things: First, lower their interest rate—and thereby pay less each month—and reduce the amount they have to pay over the life of their loan. Second, they are trying to merge multiple loans into one, making it easier to keep track of monthly payments.

With a lower rate of interest, you are able to lower your monthly payment, shoring up money for other expenses or financial goals. You can also opt for a shorter repayment term, which shortens your payback period and gets you out of debt faster.

Who is eligible for a personal loan for debt consolidation?

If you have one or more sources of debt where the interest rate is higher than 10%, it’s worth exploring a personal loan. While there’s no guarantee that you’ll find a lower interest rate, you can’t know unless you get quotes from a few lenders. (And these days, it’s a pretty painless process. If it proves difficult, find yourself a different lender.)

Those with the best credit scores will typically qualify for the best rates on their new personal loans, but don’t let an average or even poor score keep you from requesting quotes. This is especially true if you have more than $10,000 in credit card debt and those cards charge exorbitant interest rates, which most of them do.

Also know that your credit score isn’t the only data point that’ll be considered in determining whether you qualify for a loan and at what rate. Potential lenders typically also consider employment history and salary, and other financial information they deem important in determining loan-worthiness.

A personal loan isn’t for everyone. If you’re doing it only for convenience and there isn’t a legitimate financial motive, it’s probably not worth it. Instead, focus that energy on paying back the money you owe as efficiently as possible.

While personal loans can be a great tool to reduce interest payments, it doesn’t reduce the actual debt you owe. If you’re looking to get out of debt so you can focus on other financial goals, but the interest rates on your debt are making it nearly impossible, a personal loan could be exactly what you need.

 

Considering a personal loan to consolidate your debt? Head to SoFi to see what rates you may qualify for.


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit .

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Strategies for Lowering Your Student Loan Interest Rate

When you’re in college, you don’t necessarily have a lot of control over the interest rates on your student loans.
With federal loans, the U.S. Department of Education sets the rate each year for all borrowers. And if you get private student loans, limited credit history can make it hard to score favorable terms.

But once you graduate, there are a few things you can do to try and save money. Here are a few tips that may be able to help you lower your interest rate on student loans.

Choosing the Right Repayment Plan

If you don’t choose a specific repayment path, you’re typically opted into the standard repayment plan. For a standard repayment plan, your payments are generally based off a 10-year timeline. But this one-size-fits-all repayment plan might not be best option for you.

One money-saving repayment option for federal student loans is the Public Service Loan Forgiveness program.

If you work in a qualifying public service job—for the government or for some non-profit organizations—you might be eligible to have your student loans forgiven after 10 years of service. You can confirm whether your work qualifies here. You’ll want to submit an Employment Certification as soon as possible to be sure that you’re on track to qualify.

The federal government also offers four income-driven repayment (IDR) plans, wherein the monthly payments are based off your income and family size. While choosing one of these plans may help to lower your monthly payments, it will likely not alleviate how much interest you pay over time—you might even pay significantly more, in fact.

After 20 or 25 years, depending on the plan, the remainder of your balance will be forgiven if your federal student loans aren’t fully repaid. However, the balance you’re forgiven is may be considered taxable income by the IRS, so even though your student loans will go away, you might have to prepare for a big tax bill that year.

Consolidating Your Student Loans

Have multiple student loans floating around that you’d love to smush together into one? You could consider loan consolidation, where you’ll combine all your student loans into one easy monthly payment with a single interest rate. Here’s the rub, though: Consolidation alone does not necessarily get you a better interest rate on your student loans, it just offers you one payment instead of multiple.

When consolidating federal student loans, you can use a Direct Consolidation Loan , which is specifically to consolidate your federal student loans. They simply take a weighted average of all your student loan interest rates and create a new loan.

The weighted average of your loan rates might be a touch higher than the interest rates you were paying previously. Often folks utilize consolidation to stretch out the life of their student loan, which lowers your payments now, but may increases the amount you owe over time.

Even though consolidation itself is not a direct way to get a better rate on your student loans, it could be helpful if you’re having trouble keeping track of your monthly payments. Consolidation may also be useful if you want to merge non-direct federal loans (like Perkins loans) with direct loans, in order to qualify for income-driven repayment and/or loan forgiveness programs.

Also, the term “consolidating” is often used interchangeably with “refinancing,” but they technically mean different things. When you refinance multiple student loans, you also happen to be consolidating, but it is done with the goal of achieving a more favorable interest rate on your student loans.

Setting Up Automatic Payments

Many student loan servicers—both federal and private—offer an interest rate discount if you opt to set up autopay on your account. Depending on the servicer, you could lower your student loan interest rate. SoFi, for example, offers a 0.25% autopay discount.

The reason servicers offer this discount is that by setting up automatic payments, you’re less likely to miss payments and default on the loan.

In addition to getting a lower student loan interest rate, you’ll also (hopefully!) have peace of mind knowing that you won’t accidentally miss a payment. Check with your loan servicer to see whether they offer an autopay discount.

Getting a Loyalty Discount

In addition to an autopay discount, some private student loan companies also offer a loyalty discount when you have another eligible account with them. If you’re already a member with SoFi, for instance, you receive an interest rate discount of 0.125% on all new loans.

Other lenders may require that you have an eligible checking or savings account with them to qualify for the bonus, and you may even get a bigger discount if you make your monthly payments from that account.

To get an idea of how a change in interest rate would impact your loan, take advantage of a student loan refinance calculator to see what your new payments could be.

Refinancing Your Student Loans

Scoring discounts with your current servicer can help you get a lower student loan interest rate, but there is another option you can consider trying. Depending on your financial profile, you could qualify for a lower student loan interest rate than what you’re currently paying with student loan refinancing.

By refinancing, you could potentially lower your interest rate by bundling your student loans (federal and/or private) into one new loan. And if you shorten your loan term, you may be able to pay off your student loans much faster and pay less in interest over the life of your loan.

Student Loan RefinancingStudent Loan Refinancing

Student loan refinancing is ideal for borrowers with high-interest student loans, who have good credit scores, and know they won’t use any of the federal loan benefits, like student loan forgiveness. (All federal loan benefits, including income-based repayment, will be lost if you refinance.)

To see if you qualify to save some money on your student loan(s), start by getting quotes and asking questions from a few banks. Online lenders may offer competitive rates and more flexibility than traditional banks, but it’s still worth it to compare competitive rates and more flexibility than traditional banks, but it’s still worth it to compare student loan refinancing, but it’s often based on credit score, credit history, and income to name a few. It usually takes a few minutes to get a quote.

Once you’ve decided on a bank or online lender, the process can move quickly. You’ll have to fill out paperwork and the bank will do some final checks on their end, but before long you could be all set up with your refinanced student loan at a better rate. All that’s left after that would be to enjoy having that extra cash (or speedier timeline)!

Here are a few things that may help you improve your chances of getting a lower student loan interest rate with refinancing:

•   A high credit score: Lenders typically have a minimum credit score requirement, so the higher your score, the better your chances of getting a low rate usually are.
•   A low debt-to-income ratio: Your income is also an important factor that lenders consider, especially as it relates to your overall debt burden. If a smaller portion of your monthly income goes toward debt payments, it shows you may have more income to dedicate to your new loan’s payments.
•   A co-signer: Even if your credit and income situation is in good shape, having a co-signer with great credit and a solid income might help your case.
•   A variable rate: Some student loan refinance lenders offer both variable and fixed interest rates. Variable interest rates may start out lower but increase over time in accordance with market fluctuations, unlike fixed rates, which stay the same over the life of the loan. If you’re planning on paying off your student loans quickly, a variable rate might save you money.
•   The right lender: Each lender has its own criteria for setting interest rates, so it’s important to shop around to find the best lender for your needs. Some lenders, including SoFi, even allow you to view rate offers before you officially apply.

Lowering Your Student Loan Interest Rate

There aren’t a lot of ways to get a lower student loan interest rate, but the options that are available don’t require too much up front legwork.

With the first two options, it may be just a matter of calling your servicer to find out what discounts are available.

If you’re considering refinancing your student loans with SoFi, you can check your new rate in just a few minutes. This process will let you know if you might qualify for a lower student loan interest rate. If you do, it won’t take much time beyond that to officially apply.

Depending on which refinancing options you choose, you could potentially save money on interest over the life of the loan.

Take control of your student loan debt by refinancing with SoFi. See if you qualify to secure a lower student loan interest rate in just two minutes.


SoFi does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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How to Build Credit Over Time

Building credit is a lot like being a painter. (This is a good analogy, stick with me here.) If you ask someone to judge your painting, it’s easier for them to offer an informed opinion when you show them a finished painting and not a blank canvas. Some of your brushstrokes, particularly the first few, may be messy. But over time, you can cover them up and create a masterpiece you would be proud to show anybody.

That makes lenders like art critics. They want to see more than that blank canvas. And they can tell more about your worth as a painter if you show them more of your paintings. They want to see what you’ve done, and identify areas where you can grow (in this case, as a borrower, not an artist).

Many people get their start building credit through student loans, which is an excellent way to start. To build credit successfully, you want to make every payment on time. The basic strategy for good credit is actually quite straightforward and intuitive: Be the kind of borrower you would want to lend to.

Step 1: Start by acquiring some credit.

When you’re just starting out, turning to a spouse or parent for a joint account or co-signer can be a valuable way to build credit (think joint credit cards or parents co-signing on student loans). In the long run, however, you will be in a much stronger position if you keep as much borrowing as possible in your name (and only your name).

Credit cards don’t require a co-signer in most cases, so they can be a great place to start on your own. Eventually, this can extend into an auto loan, a personal loan, or even a mortgage.

Step 2: Pay your bills consistently and on time.

Payment history makes a bigger impact on your credit score than anything else. Your credit score summarizes your health and strength as a borrower, and payment history makes up 35% of that score. So, the most important rule of credit is this: Don’t miss payments. Seriously.

Timely payments are crucial, and for the most positive impact on your credit score, you want to pay the total amount due every time. (For example, if your student loan payment is $100 per month, you don’t want to pay only $50 some months.)

However, missing the occasional due date is not the end of the world. Especially over time, your credit history will be long and deep enough to paper over the occasional late payment. Many lenders will actually allow you to customize your due dates if you find it’s easier to line them up with paychecks. Most let you set up automatic payments from a checking or savings account. Take the time to find the mix that works for you and keeps your accounts up-to-date.

Step 3: Nudge your credit limits upward, even if you’re not using them.

Speaking of raising your credit card limits, even if you don’t expect to need a higher limit, it’s a good idea to work towards one. That’s because the further away you are from hitting your credit limit, the healthier your credit score will be.

In general, credit card balances should not be over 35% of the total credit limit. That percentage is called the utilization rate. Higher utilization rates can negatively affect your credit score. So higher credit limits give you lower utilization, and a better score.

Step 4: Don’t close old credit cards.

Lenders want to see that you can maintain accounts in good standing for a long time. When you close borrowing accounts, though, that history ends, and eventually closed accounts drop off the credit report entirely. Your credit history looks better when it has a solid number of accounts in good standing that have been open for a long time.

The easiest way to get there is to keep your old credit cards open, even if you’re not using them anymore. You can keep these cards open and just automate a few bills (car insurance, Spotify premium, etc.) to make it look like they are still very much in use. Don’t forget to keep paying them off on time and in full. The only time you may want to consider closing a card you don’t use is if the annual fees are so high that it isn’t worth it to keep the card open.

Step 5: Boost your credit mix, when possible.

Lenders like to see borrowers with a diverse mix of credit products. Opening at least one credit card is a good step for most borrowers. There are a wide variety of cards aimed at people with different interests, spending habits, and credit history. Although a mix of credit helps your standing as a borrower, you don’t want to open a line of credit you don’t need.

If you’ve never had a personal loan, and want to finance a large purchase (home renovation, hospital bill) with a relatively low interest rate, it’s good to know that paying off that personal loan on time will help boost your credit. Student loan refinancing can also diversify your credit mix and potentially lower your interest rate and monthly payments.

Step 6: Check your credit report.

It’s easy to get a free annual copy of your credit report from the three major bureaus. Reviewing them on a yearly basis is a good way to understand your overall credit health.

Any time you’re turned down for credit, you can request a free credit report. That applies even to relatively minor setbacks, like being turned down for a higher limit on a credit card. Turn those minor setbacks into free peeks at your full, up-to-date credit history, and make sure that all the credit listed there is accurate. When you find errors or fraudulent accounts, you can report them, and keep your credit score in good shape.

Step 7: Pace yourself on applications.

When you’re making major life changes, like starting a job, getting married, having children, or all three at once, sometimes you need multiple lines of credit to get through it all. Financial institutions get that, but they also know that historically, people who borrow a lot of money at once from multiple sources tend to have more difficulty paying them back. That’s especially true if you’re just starting out as a borrower.

So spread out your credit applications over time whenever possible. New borrowing has a small impact on your overall credit score, but it is a factor to keep in mind.

Step 8: Enjoy your flexibility and freedom.

Once you establish good credit, use it wisely and responsibly. Good credit gives you flexibility and freedom. Installment loans like mortgages, car loans, and student loans make it easier to finance large, life-altering purchases, while credit cards for smaller purchases over time can help you build credit and eventually qualify for lower interest rates on those big purchases. Remember, you can take control of your financial future by making conscious choices about your credit now.

While you’re in the process of building credit, if you need to finance a large purchase or consolidate high interest debt, consider a personal loan as an option.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit .
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Credit Card Utilization: Everything You Need To Know

In order to fully understand credit card utilization, picture this: Imagine that you have four credit cards, each with a $5,000 limit. That means that you have access to $20,000 worth of credit total. Now, imagine you have a balance of $2,000 on Credit Card A from a trip to Panama, $1,000 on Credit Card B from when you had to unexpectedly replace all your tires, $2,000 on Credit Card C from last holiday season, and $1,000 on Credit Card D from your regular monthly bills.

In total, you owe $6,000. That means you are using $6,000 of the $20,000 in credit you’re entitled to. If we calculate that as a percentage (30%), we have your credit card utilization rate.

In this guide, we will look at calculating your credit card utilization rate, determining what percentage of available credit you should shoot for, and understanding how credit card utilization affects your credit score and overall financial wellness.

How do you calculate your credit card utilization rate?

Let’s start with the basics: How do you figure out your credit card utilization rate? In our example above, we determined that if you have $20,000 of credit available to you, and you owe $6,000, your credit utilization rate is 30%. How did we get there? Using pretty simple math. To figure out your credit card utilization rate, simply divide your total credit card balances by your total credit line, like this:

Total Credit Card Balance/Total Credit Line = Credit Card Utilization Rate

With the numbers from our example above, it looks like this:

6,000/20,000 = .3 or 30%

Simple, right? You’ve got this.

What counts as “good” credit card utilization?

As it turns out, just because you’ve been approved for a $10,000 credit card doesn’t mean it makes financial sense to charge $10,000 worth of rosé and seltzer to your credit card—even if you know you can pay it off over a couple of months. In fact, you might be shocked to learn how little of your available credit you’re supposed to use.

To maintain or boost your credit score, it is recommended the general rule is that you should not exceed a 30% credit card utilization rate. That means that in our example, you would not want to use more than $6,000 of your available $20,000 credit. Even though 30% might seem like a small percentage, keeping below that threshold can ensure that your credit score isn’t being dinged for over-utilization.

Is credit utilization affecting your credit
score? See a breakdown in the SoFi app.


How does credit card utilization affect your credit score?

The world of credit scores can make your head spin, but what we know for sure is that credit card utilization plays a big role in how companies compute your credit score. In fact, about 30% of your credit score is determined by your credit card utilization rate. That means a high credit card utilization rate can adversely affect your credit score.

How do you monitor your credit card utilization?

All of this might seem difficult to keep track of, but seeing as we live in the 21st century, it can actually be quite easy to set up account reminders that will alert you when you are approaching that 30% credit card utilization mark.

In addition to watching your credit card utilization rate, try to make payments on your credit cards on-time each month. Checking your credit score regularly will also help you keep your financial health in check.
(Though you don’t want to check your score too often, it’s good to keep tabs to make sure the reporting is accurate on your credit score.)

Overall, credit card utilization rates can be confusing, but now you’re prepared to better calculate your own credit card utilization rate and leverage that in pursuit of a great credit score.

Have high credit card utilization across multiple cards? consolidate credit card debt with a low interest personal loan and reduce your utilization rate, which can positively affect your credit score.


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Many factors affect your credit scores and the interest rates you may receive. SoFi is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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How to Plan the Ultimate Debt Payoff Strategy

Debt can often have a negative connotation, but there are plenty of good reasons to have it—for example, using student loans to increase your earning potential, funding an entrepreneurial venture with a small business loan, or going to the “Bank of Mom & Dad” to pay for a move across the country for a great job.

But even when you have debt for good reasons, actually being in debt doesn’t feel great—especially if high-interest rate credit cards are monopolizing your monthly paycheck.

So how do you use debt to your advantage without letting it get you down? The key is to be proactive about paying it off. Luckily, there are plenty of great resources and techniques to help you create your debt payoff plan—but only you will know what’s best for your unique financial situation. While none of this is meant to be financial advice, here are a few to consider:

Customizing Your Debt Payoff Plan Approach

The words ‘snowflake,’ ‘snowball’ and ‘avalanche’ might sound like an increasingly alarming day on the mountain, but these terms also apply to three popular debt payoff methods – one of which may be just right for you.

As Melissa Batai from Money Crashers explains, “Snowflaking is the process of using extra money gained here and there to pay down your debt above and beyond your planned monthly payment.” You can acquire this extra cash through things like side-gigs, selling the stuff you no longer need and renting out a room in your house.

The Snowball Method entails paying off your debts in order from smallest to largest – regardless of their respective interest rates. “The benefit . . . comes from seeing one of your debts paid off sooner,” says Darren Wu from Wisebread . “This, in turn, can provide an emotional boost.”

It is important to remember with this method that you shouldn’t ignore your other debt while you focus on your smallest one. And, of course, it’s crucial to continue making at least the minimum payment on all of the debt you owe.

But people using the debt snowball method beware – ignoring interest rates usually means paying more money in the long run. If savings is your main priority, you’ll probably want to look at the Avalanche Method, which has you putting more money toward your higher interest rate debt first. Not only does this approach save you money, it can also help you get debt-free sooner.

Tryng a Debt Detox

People often compare getting fiscally fit with getting physically fit – and with good reason. Whether you’re trying to achieve financial goals or health and fitness goals, you’re more likely to be successful if you have a good plan in place, a fair amount of willpower and a desire to change your habits.

That was the approach Anna Newell Jones of And Then We Saved took when she decided to embark on a ‘Spending Fast’, which entailed “spending money on necessities only to see what happens, how much debt I can get out of and how much I can get into savings.”

Fifteen months later, she’d eliminated nearly $24,000 in debt and inspired her readers to save over $320,000 by doing the Spending Fast (and its less austere cousin, the Spending Diet) right along with her.

Upping the Minimum

Another approach for a debt payoff plan is to pay more than the minimum balance each month. Whether you have student loans or credit card debt, paying more than the minimum can help accelerate your debt payoff journey.

It can be tempting to just stick with paying the minimum balance due rather than adding to it. But paying as much as you can each month (without stretching yourself too thin) can add up. In order to make this happen, however, you may have to make a few sacrifices.

Making coffee at home, cooking for yourself, or exercising outside instead of paying for a pricey gym membership are all small changes that can help save extra money each month to put towards your debt.

By increasing how much is allocated towards monthly payments, you could pay off your debt faster and, therefore, save on interest. And who wouldn’t want to be out of debt sooner?

See if a personal loan should be
part of your debt payoff strategy.


Trying a Balance Transfer

Balance transfer credit cards sometimes offer low or even 0% introductory annual percentage rate (APR) offer period for high-interest credit card debt transfers. Some credit cards offer up to 21 months of 0% interest, which can help keep you from accumulating even more debt via interest.

Some reasons why people apply for a balance transfer credit card include:

•   Having high-interest credit card debt
•   A desire to simplify payments on one card, rather than managing payments on multiple credit cards
•   Wanting to take advantage of a good promotional deal (for example, 21 months of 0% interest)

But it is important to remember that this debt payoff strategy is optimal if you know you can pay off your entire debt by the time the low- or no-interest period ends. Otherwise, you will go back to accruing interest on your debt after the introductory period ends.

Our Credit Card Interest Calculator can help you discover how much you are paying in interest alone on your credit card debt.

Recalibrating Your Rate

High-interest rate debt is not only expensive, it can also take forever to pay off. But just because your loan or credit card came with a high rate doesn’t necessarily mean you’re stuck with it forever.

For one thing, if you have student loans, new options for student loan refinancing have become available in the past few years. When you refinance your student loans with a private lender, you are taking out a completely new loan with a new interest rate.

You can refinance both private and federal student loans with a private lender, but understand if you refinance federal loans you will lose access to some useful federal benefits like income-driven repayment plans and public service loan forgiveness.

If you have an improved financial profile from when you took out your original loan, however, you may be able to qualify for a lower interest rate. By obtaining a lower interest rate, you could save money over the life of the loan. Or you may be able to select a shorter term with relatively higher payments, but a quicker payoff—and save money on interest payments.

And if you have high-interest rate credit cards, you can look into consolidating them with a low-interest rate personal loan. One plus of taking out a personal loan to consolidate your debt is that personal loans are typically installment loans, which means they carry a fixed repayment period. That means you’ll know exactly when your loan will be paid off.

In contrast, credit card debt is “revolving debt” which means you can continuously add to the debt even while paying it off. That’s not an option with a personal loan. By consolidating your credit card debt with a personal loan, you could also potentially qualify for a lower interest rate or a lower monthly payment, which can make your debt easier to manage.

On the flip side, a personal loan may not be right for everyone. Some personal loans come with origination fees, late fees, or prepayment penalties, which could potentially drive up the cost of your loan. When shopping around for debt payoff solutions, you may want to consider any hidden fees that could come with a personal loan.

No matter what debt payoff plan you choose, the key is to take control of your debt rather than letting it control you. Ultimately, executing a successful debt payoff strategy might help you focus on the positive outcomes that happened as a result of your debt, rather than the frustration of having to pay it back.

Need help consolidating your debt? See how a SoFi personal loan can help get you on the right track to becoming debt free!


The individuals interviewed for this article were not compensated for their participation. Their advice is educational in nature, is not individualized, and is may not be applicable to your unique situation. It is not intended to serve as the primary or sole basis for your financial decisions.
The savings and experiences of members herein may not be representative of the experiences of all members. Savings are not guaranteed and will vary based on your unique situation and other factors.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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