Feel like you are stuck in a never ending cycle of making minimum monthly payments on your credit card debt? Don’t despair, debt consolidation loans may be able to help. It isn’t just your feeling stuck though. When running the actual numbers for making the minimum monthly payment on credit card debt, you are literally stuck in a cycle that will take decades to get out of! Using Bankrate.com’s Minimum Payment Calculator, we can determine how long it will take to pay off your credit card debt and how much it will cost you.
True Cost of Making Minimum Monthly Payments
Let’s say you have $5,000 in credit card debt and the interest rate on your credit card is 22% (which is about the average for a non-prime credit card at the time of this publication). By only making the minimum monthly payment on that credit card, it will end up taking you 281 months to payoff the balance. By the way, 281 months is 23 YEARS! Further, you will end up paying $8,527 in interest on the loan. Let’s all agree, this is crazy.
How Debt Consolidation Loans Work
So, what are your choices? For many, debt consolidation loans may be the answer. The difference in debt consolidation loans from credit card debt is that the debt consolidation loan attaches a fixed term for the repayment of the debt. For instance, you may agree to a 24-month term, 36-month term, or even 48-month term to repay the amount owed.
Let’s go back to the same hypothetical $5,000 in credit card debt. Using a 36-month term on a personal loan from Patriot, you would end up paying $3,040 in interest and being debt free in 3 years. Compared to making the minimum monthly payment on your credit card, you save $5,507 in interest and are debt free 20 years sooner. Enter into the loan today and be paid off in 2018 verse 2038. How does that sound?