Lower Interest Rate
In general, personal loans tend to have lower interest rates than credit cards. According to the latest Federal Reserve data from August 2024, credit cards have an average interest rate of 23.37% compared with the average 12.33% for 24-month personal loans.
Millions of Americans are affected by the burden of student loan debt. In the United States, student loan debt is nearing $2 trillion, and Californians carry approximately $150 billion of the debt. Student loan debt is now the second highest consumer market after mortgages.
About half of students at four-year public universities finished their bachelor's degree* without any debt and 78 percent graduated with less than $30,000 in debt. Only 4 percent of public university graduates left with more than $60,000.
Let's say you have $200,000 in student loans at 6% interest on a 10-year repayment term. Your monthly payments would be $2,220. If you can manage an additional $200 a month, you could save a total of $7,796 while trimming a year off your repayment plan.
You're not alone if you are still paying off your student loans from your college education years ago. In fact, many Americans are paying their student loans well into middle age. A 2019 study from New York Life found that the average age when people finally pay off their student loans for good is 45.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
The lower your debt-to-income ratio the better. But typically, staying below 36% can better your chances of getting approved for a loan with favorable terms. Conversely, research suggests that people with DTIs above 43% are more likely to struggle with monthly payments.
Some auto loans may carry a high interest rate, depending on factors including your credit scores and the type and amount of the loan. However, an auto loan can also be good debt, as owning a car can put you in a better position to get or keep a job, which results in earning potential.
Credit cards typically carry higher interest rates than student loans, and can often exceed 20%. Federal student loan interest usually falls below 10%. Some students may qualify for federal subsidized loans, where the loan is interest-free while the student is in school.
Credit card debt is a common problem that can empty your wallet, drag down your credit scores and even strain your mental health.
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.
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year. Paying off that bill?
U.S. consumers carry $6,501 in credit card debt on average, according to Experian data, but if your balance is much higher—say, $20,000 or beyond—you may feel hopeless. Paying off a high credit card balance can be a daunting task, but it is possible.
On average, Americans carried $6,501 in credit card debt in 2023, according to Experian data. However, some credit card users have much more than that—in rare cases, $50,000 or more. Getting rid of $50,000 or more in credit card debt can feel like an insurmountable task.
Roughly 42.7 million Americans have outstanding federal student loan debt — that's about 12.5% of the U.S. population, per census data.
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.
If you racked up $30,000 in student loan debt, you're right in line with typical numbers: the average student loan balance per borrower is $33,654. Compared to others who have six-figures worth of debt, that loan balance isn't too bad. However, your student loans can still be a significant burden.
The time it takes to repay student loans typically ranges from 20 to 30 years, depending on factors such as the degree attained, the chosen repayment plan, and the borrower's financial situation. Standard repayment plans usually take about 10-30 years, while income-driven repayment plans can extend up to 25 years.
When you take out a mortgage, you agree to repay the loan over a set timeframe, typically 15 or 30 years. Paying off your mortgage ahead of time can have a lot of benefits for homeowners — including paying less interest, earning equity in your home faster and dropping mortgage insurance earlier.
If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the national credit bureaus, which can negatively impact your credit rating. If you continue to be delinquent, you risk your loan going into default.