When it makes sense to pay off high-interest credit cards with a personal loan

A record number of Americans — 111 million — are carrying credit card debt. According to the Achieve Center for Consumer Insights, over half (53%) of American consumers are carrying credit card balances to cover the rising cost of essential expenses. Other stats are equally depressing: No level of debt is great, but credit card debt is particularly bad.As unsecured debt, credit card debt carries interest rates significantly higher than those on other types of loans.

And the items bought with a credit card are usually not appreciating assets, like a house or ownership in a business.Some people take advantage of balance transfer credit cards to get 0% interest for a limited time, but if you don’t pay off your entire debt before the interest-free period begins, you will be charged an equally high rate.Though a personal loan doesn’t eliminate debt, it can be a useful tool to clear high-cost credit card debt and replace it with a lower-interest, fixed-rate loan if the market conditions are right and the person wanting to pay off their credit cards is ready to get serious about becoming debt-free.“If you have credit card and other high-interest debts, [a personal loan] may offer a lower rate, depending on what you can qualify for,” Austin Kilgore, with the Achieve Center for Consumer Insights, tells The Post.“The idea is that if you can qualify for a rate substantially lower than your credit cards, you can use the funds from the personal loan to pay off the high-interest debt and be left with just the personal, or debt consolidation, loan payment that has the lower rate.”Your credit card’s annual percentage rate (APR) is set by the credit card issuer and tied to a benchmark, which in the U.S.

is the Prime Rate. On top of the Prime Rate, the issuer adds their margin, which is both where their profit comes from and a reflection of your risk as a borrower.If your credit rating is fair or poor, you can expect to pay a significantly higher interest rat...