At Student Loan Hero, we’re big on helping you pay off debt. But we know your debt may not be limited to just student loan debt. And with about $880.5 billion in outstanding credit credit debt, it rivals the roughly $1 trillion of student loan debt Americans hold.
In some ways, credit card debt is worse than student loan debt. Credit card interest rates are almost always higher than student loan interest rates. You also can’t deduct credit card interest on your tax return like you often can for student loan interest.
If you’re looking to change your payments while you pay off credit card debt, there’s no guaranteed relief like there is with federal student loan debt.
For paying off credit cards, the focus is typically on interest rates. Rates can be so high (over 20% APR) that you can be stuck with debt for years. If you pay only the minimum on a card with a $1,000 balance and 18% APR interest rate, it will take you 10 years to pay it off.
To pay off credit card debt, the first step is to decrease interest rates. Here are some proven strategies to pay off credit card debt faster by finding lower interest rates.
1. 0% credit card balance transfer
Pros: Will reduce the interest rate to 0% for a defined period.
Cons: A good to excellent credit score is generally required. Still have to pay transfer fees.
When you’re paying interest on a credit card it is likely to be at a high rate. Some cards exceed a 20% APR.
However, there is one way to keep your debt on credit cards and not pay interest, and that’s with 0% APR balance transfers.
Balance transfers often let you go 12 months or longer without paying interest. In the meantime, you’ll still have to make at least the minimum payments each month. Many companies charge a fee equal to 3-4% of the balance you’re transferring, so be sure to calculate this into any savings.
Another plus: there’s likely little to no paperwork to fill out. You can just fill out balance transfer checks and send them in. Many creditors now let you complete the process online.
2. Negotiate lower interest rates
Pros: It’s low risk, high reward. Takes little time.
Cons: Requires negotiation. Your creditor may or may not lower your rate.
Some credit cards users are able to call and negotiate directly with the credit card companies to lower their rates.
This won’t be easy, so if you want the chance to succeed, you need to go in with a plan. Ramit Sethi lays out a script for the negotiation, which he gives a 50% chance of success. His talking points include:
- Asking directly to lower your APR (perhaps by 50%)
- Pointing out how long you’ve been a customer, including if you’ve always made on-time payments, etc.
- Leveraging other offers, including 0% balance transfer to other credit card companies
If this works, you can save a ton on interest with only five minutes worth of work.
3. Consolidate with peer-to-peer (P2P) lending
Pros: More people can potentially qualify.
Cons: Might not lower rate substantially.
P2P lending is a newcomer to the world of debt consolidation. The way it works is you request a loan through a P2P lending company, like Lending Club. Once you’re approved, it’s up to individual people to decide to loan you money.
Interest rates are as low as 6% APR if you have excellent credit, but can be much higher if you don’t.
This solution is much like debt consolidation from a bank, but you may have more luck qualifying if your credit isn’t so good. However, the interest rate you receive still depends on your credit rating. If you don’t have good credit, using P2P lending might not present big savings on interest compared to your current credit card interest rates.
If you have good credit and can get a lower interest rate, this could be a good deal.
4. Use a debt consolidation service
Pros: It’s simple — just repay your debt to the consolidation company
Cons: Must read and understand the fine print. Potential for scams.
Traditional debt consolidation is pretty easy concept to understand. The debt consolidation company agrees to pay off your credit card debt, and in exchange, you repay the debt consolidation company. It’s similar to student loan consolidation in the sense that you pay one bill instead of many.
However, before you sign on, you need to make sure you understand the terms. While the interest should be lower to make it a good deal, that’s not all you should look at. Make sure to check any other fees you might pay. And make sure the payments are realistic or you could have penalties if you miss payments.
No matter which option you choose, there’s no substitute for committing to paying down credit card debt rather than racking up more. Be sure to use the options above with a plan to pay off your debt instead of just enabling yourself to end up deeper in the hole.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|5.99% – 24.99%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|