One thing to always remember is that no two people are in the same financial situation. What works for one person, may not work for you. It’s important to research all of your options. Opening a personal loan is a commitment, so we’ll help you find out if it’s right for you.
To know for sure, you have to run the numbers (there are many free online financial calculators you can use). Only you know your monthly income, expenses, and spending habits. We’ll show you what works for the average U.S. household.
The average U.S. household has $132,529 of debt1 — that includes credit cards, mortgages, auto loans, and student loans. If you are a part of that average, it may seem like opening another loan just puts you further in debt. The trick is to know when you should and should not use a personal loan.
3 Common Uses for a Personal Loan
Paying Off Credit Card Debt
The Key: Know the interest rate of your credit card — the national average is 15.18% APR2.
When a Personal Loan Is Best: If your credit card debt is piling up and you can only afford to make the minimum monthly payment or your balance never goes down. The average U.S. household has $5,700 of credit card debt3. With a $5,700 balance, an interest rate of 15.18% APR2, and monthly minimum payments of 3% of the balance, it will take you 182 months and $3,945 in interest to pay off2. A $5,700 Personal Loan with an interest rate of 5.88% APR4 and monthly payments of $110 will take you 60 months and only $893 in interest to pay off4.
Though there are several ways to pay off credit card debt, a personal loan could save you the most time and money.
The Key: Know how much combined interest you’re paying each month.
When a Personal Loan is Best: If you’re paying off several streams of debt (credit card, auto loan, other loans), you’re making several high-interest payments each month. Instead, you can open a personal loan to pay off all your other loans and make one payment each month instead of three. Just make sure you can afford that one payment and that you’re actually saving on interest in the long run.
Making a Large Purchase
The Key: Make sure it’s a large, yet necessary purchase you aren’t able to pay in full right away.
When a Personal Loan Is Best: Let’s say you move to a new apartment and need furniture. You go out to buy a four-piece living room set, but you don’t have $3,500 to spend. Instead of putting it all on your high-interest credit card, you could open a low-interest personal loan to pay for it. One thing to remember is that there are minimum amounts for Personal Loans — Connexus’ start at $2,500. You typically don’t want to make a large purchase unless you have the money to pay for it, but in life that’s not always possible.
If you fall into any of those three situations, a Personal Loan may be your best option. If you’re still unsure, you can check out our Personal Loan page, or you can call us anytime at 800.845.5025. Our lending experts would be happy to help you determine your best options.
1 Average American household debt number based on the “2016 American Household Credit Card Debt Study” done by NerdWallet on www.NerdWallet.com (https://www.nerdwallet.com/blog/average-credit-card-debt-household/).
2 APR = Annual Percentage Rate. The national average credit card rate was 15.18% APR on 12/7/16 according to www.creditcards.com. Based on monthly payments of 3% of the $5,700 in debt or a minimum of $15.
3 Average credit card debt numbers based on “Average Credit Card Debt in America: 2016 Facts & Figures” article on www.ValuePenguin.com (https://www.valuepenguin.com/average-credit-card-debt).
4 APR = Annual Percentage Rate. 5.88% APR is our lowest available rate as of 1/1/2017 for 60 months. 60 monthly payments of $19.28 per $1,000 borrowed. Minimum loan amount is $2,500. Other loan rates and terms available. Your loan is subject to approval and the rate may vary based on your individual credit, term and relationship level. Rate includes all available discounts. All loans are subject to approval and qualifications. Certain restrictions may apply. Offer not valid on tuition expenses and interest is not tax deductible. Offer subject to underwriting. Rates are subject to change and may vary based on your individual credit and relationship level. Offer does not apply to loans or credit cards currently financed at Connexus Credit Union. Offer subject to change or termination. Offer valid from 1/3/2017 to 2/25/2017.