Here is the average debt of Americans by type of loan
Consumer debt hit a record high in 2019, according to data from Experiential, one of the three national credit bureaus. And while the average consumer’s debt as a percentage of their income has declined since the financial crisis, balances have increased, in some cases significantly.
Here’s why you should consider using one to help you pay off your debt.
Average U.S. debt by type of loan
Among those Americans who have different forms of credit, here is the average balance for each, according to Experian:
- Mortgage: $ 203,296
- HELOC: $ 45,191
- Student loan: $ 35,620
- Personal loan: $ 16,259
- Automatic loan: $ 19,231
- Credit card: $ 6,194
- Retail card: $ 1,155
It’s no surprise that a mortgage is one of the most expensive of the seven. After all, getting a mortgage is a big financial decision that shouldn’t be taken lightly.
3 easy ways to pay off your debt
Don’t let debt ruin your life. Now is the time to get back on track and pay off your debt, and there are quick and easy ways to do it. Here are three options you should consider to reduce your debt now and improve your personal finances.
- Refinance loans
- Debt Consolidation Loans
- Balance Transfer Credit Cards
- Home equity loans or HELOC
1. Refinance loans
Fortunately, there are ways to shorten the life of your mortgage and lower your monthly payments, especially when interest rates are low. Mortgage refinancing applications are booming right now, homeowners hoping to get a better deal on their current home loans.
Based on current mortgage rates, it might also be time to refinance. To see how much you could save, calculate the numbers and compare rates and mortgage lenders using Credible’s free online tools.
Likewise, it is a good time to refinance student loans.
Multi-lender market Credible can help you compare private lenders immediately to determine if it’s time to refinance, depending on your loan type, amount, etc.
It usually makes sense to use a personal loan to consolidate high interest rate debt, and credit card debt tends to be the primary target for debt consolidation with a personal loan.
2. Debt Consolidation Loans
Personal loan options are available for all credit scores, but it can be difficult to find eligibility requirements with many lenders. Fortunately, several online personal loan companies allow you to pre-qualify before applying, so you will have a good idea of your approval ratings.
This process does not hurt your credit score and will allow you to shop around and compare several options. You can use an online marketplace like Credible go through the process with several lenders at once.
Keep in mind that while it is possible to get a personal loan at all credit levels whether your credit is average or poor, you may not be able to secure favorable terms.
If you are looking for ways to eliminate your high interest rate debt, here are some of the potential benefits you can enjoy when using a personal loan to consolidate:
- You may be eligible for a lower interest rate.
- Personal loans have fixed repayment terms, giving credit card users more structure for their debt repayment plan.
- Replacing multiple debts and their monthly payments with a single loan and a single monthly payment can simplify your repayment plan.
- Paying off credit cards lowers your credit utilization rate, which can increase your credit score.
That said, there are some potential drawbacks to using a debt consolidation loan:
- There is no guarantee that you will be able to get a lower interest rate than you currently have.
- The monthly payment for a personal loan may not be affordable for some.
- Some personal loans charge an upfront origination fee.
- This does not prevent you from adding more debt to your credit cards.
With debt consolidation it is better only borrow what you need, which is the amount you want to consolidate. Note, however, that some lenders charge an upfront origination fee – which can be as high as 8% – which is then deducted from your loan disbursement.
Therefore, you may not get enough to pay off your debt unless you factor in these charges. If the fee is 5% of the loan amount, for example, divide the amount you need by 0.95 to make sure you get the full amount you need. Additionally, it is important to keep in mind that not all lenders may offer you the amount you need, so make sure compare several options via Credible before making a decision.
3. Balance transfer credit cards
Another easy option for those who are in arrears is a credit card with balance transfer.
These cards provide an introduction 0% TAP promotion for balances transferred from another card. If you have good credit or better, this can be a great way to save money while you pay off your debt. However, some cards charge a transfer fee of up to 5%.
If this is something you are considering, head over to Credible today to see some of their best balance transfer credit card options, along with their introductory APR offers, transfer fees, and terms.
4. Home equity loans or HELOC
For larger balances, it may make more sense to borrow against the equity in your home. These loans generally offer low rates but charge high closing costs.
Like many personal loans, HELOCs are primarily used for home renovations, improvements, or to cover an emergency expense. Use Credible to Compare Personal Loan Rates From Top Lenders and see what makes sense to you.
If your credit isn’t good, debt consolidation with a personal loan may not be affordable. In this scenario, consider working with a credit counselor to establish a debt management plan. Credit counseling agencies can negotiate lower interest rates and monthly payments with your creditors and make your payments more affordable.
When considering all of your options, be sure to visit Credible and use their personal loan calculator and browse their best personal loan offers to get an idea of what this option would cost compared to others.