How to Pay Less Interest

Here's a question we get often:

"I just looked at my debt statements and realized I'm paying a crazy amount in interest. My interest rates range from 6%-25% across student loans, credit cards, and personal loans. How can I bring my interest rates down?"

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First of all, you shouldn't be paying 25-30% interest on your credit cards if you have moderately ok credit and can do a balance transfer or refinance. Consolidating into a single loan can help you keep your debt in one place, but there are other options to help you bring down your average APR.

Balance Transfer

Balance transfers usually offer 0% APR teaser promos, but also often come with a balance transfer fee. Fees usually range from 2-3% of the amount transferred and often have caps on the amount you can transfer. This is a great option if you can transfer most if not all of your debt, and the fees are much lower than paying interest on the loan.

Debt Consolidation

Personal loans are a good alternative if you cannot transfer the full amount or if you feel you will be paying off for longer than the teaser period (usually 1 year). They generally offer rates from 5-15% APR, however, there are pitfalls when consolidating / refinancing credit card debt with a personal loan. Around 50% of people who take out a personal loan for debt consolidation rebound to the same level of credit card debt within less than a year. To avoid this fate, make sure you: 1. stop spending on your credit cards, 2. Start putting some money aside in an emergency fund in case an unexpected expense comes up.

Personal loans aren't bad in and of themselves, just like credit cards, but can put you in a worse situation if you don't manage them properly. Before you can continue using your credit card, you should get to a place where you are able to pay off the full balance each month.

Some providers that can help you consolidate and refi your debt include:

• Marcus by Goldman Sachs
• Sofi
• Payoff by Happy Money
• Upstart
• Tally

Pro tip: do a price comparison through Credit Karma, you will always get better rates there, because people who check their credit score are seen as less risky.

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