Savings vary per customer. 3,690 randomly selected borrowers in a survey conducted from 1/1/18 – 11/30/18 reported an average interest rate on outstanding debt or credit cards of 20.5%. Assuming 3% annual fees, based on CFPB, “The Consumer Credit Card Market,” 2015, that yields an APR of 22.74%. From 1/1/18 – 11/30/18, borrowers who received a loan via LendingClub to consolidate existing debt or pay off their credit card balance received an average APR of 19.2% and average loan size of $14,700. With a paydown period of 36 months on an initial balance of $14,700, the monthly payment for credit cards is $550.06 vs. $513.91 for a personal loan, for total savings of $1,290.88 in interest and fees.
When you combine all your debts into just one loan, you’ll only have a single loan payment to contend with each month, instead of multiple bills due to several different creditors. A debt consolidation loan should, therefore, make it much less likely that you’ll have a late payment, or miss one altogether, as you’ll only have one payment to make each month.
Debt consolidation loans were a good choice for more than 60 percent of respondents, who indicated their loan helped them lower monthly payments, improve their credit score, or lower or eliminate debt. However, 58 percent of respondents spent two hours or less researching debt consolidation loans and 59 percent of respondents didn’t compare preapprovals from two or more lenders.