It will take 32 months to pay off $5,000 with payments of $200 per month, assuming the average credit card APR of around 18%.
Bonepath also advised keeping total household debts below 36% of income, with no more than around 10% to 15% of this allocated to credit card debt. Any more than this amount and you'd likely find it challenging to meet today's needs and save for tomorrow.
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year.
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt.
In a recent NerdWallet survey, 57% of Americans said they were living paycheck to paycheck.
Credit scores of 580 or under are considered "poor." A low credit score can significantly limit your chances of getting approved for a $5,000 loan. Most lenders require a minimum score around 670, which is considered a "fair" score.
Debt consolidation can be a useful financial tool for anyone with multiple debts. It can help you simplify your finances and reduce your interest costs and monthly payments.
It's a red flag for budgets. Though incomes are up, Americans are putting more on plastic and stretching to pay on time, reinforcing the precarious nature of cash flow.
If you're using more than 30% of your available credit, it could be a sign that you are overreliant on credit cards and could be headed for trouble. A high utilization ratio not only indicates potential financial stress but also negatively impacts your credit score.
At the close of 2019, the average household had a credit card debt of $7,499. During the first quarter of 2021, it dropped to $6,209. In 2022, credit card debt rose again to $7,951 and has increased linearly. In 2023, it reached $8,599 — $75 shy of the 2024 average.
But ideally you should never spend more than 10% of your take-home pay towards credit card debt. So, for example, if you take home $2,500 a month, you should never pay more than $250 a month towards your credit card bills.
How much is 26.99 APR on $5,000? An APR of 26.99% on a $5,000 balance would cost $112.11 in monthly interest charges.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Requirements for a $5,000 Personal Loan
Requirements for a $5,000 loan vary by lender. But in general, you should have at least Fair credit, which is a score of 580 or above. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.
Hardship personal loans are a type of personal loan intended to help borrowers overcome financial difficulties such as job loss, medical emergencies, or home repairs. Hardship personal loan programs are often offered by small banks and credit unions.
Assessing loan and credit costs
The Rule of 72 is also helpful in evaluating the impact of compounding interest on debt. A credit card debt with an 18% annual interest rate will double in just four years (72 ÷ 18 = 4).
If your result is less than 36%, your debt load is affordable, according to NerdWallet. If it's between 36% and 50%, consider taking action, such as consulting a nonprofit credit counseling service, to reduce your debt. 50% or more is “high risk,” NerdWallet says and suggests getting advice from a bankruptcy attorney.
Only 18% of individual Americans make more than $100,000 a year, according to 2023 data from careers website Zippia. About 34% of U.S. households earn more than $100,000 a year, according to Zippia.
Households are defined as living paycheck to paycheck if in the quarter their necessity spending exceeds 95% of their income.