If you have a lot of miscellaneous credit card debt floating around, chances are you’re paying interest rates between 15% and 30%, making it very difficult to ever get out of debt. With the recent passage of the Credit CARD act, banks have raised interest rates on credit cards to make up for lost revenue elsewhere. If you’ve found yourself in a situation where you are paying more than a 18% interest rate on your credit card and want to get out of debt, there might be a better way that you can reduce the amount of interest you’re paying so that you can get out of debt faster. Many have successfully taken out loans through peer to peer lending websites such as Prosper.com or Lending Club to consolidate their debt into fixed rate loans which pay off quickly.
If you’re not familiar with the idea of debt consolidation, you are basically taking all of your high interest debts and taking out a loan at a lower interest rate to pay them off. Let say that you had $20,000 in credit card debt and the average interest rate was 19.99% APR. You would be paying $4,000 in just interest in each year on that debt. If you took out a peer to peer loan from Lending Club and received a loan at 9% (that’s the average rate that borrowers are getting), you would be savings $2,200 per year or $183.33 per month in interest that could be going to pay down your principal balance which will help you get out of debt much faster. Every month that you pay down the principal balance, you are reducing your monthly interest charge, accelerating the process.
The other main benefit of taking your high interest credit card debt and consolidating it into a peer to peer loan through Lending Club or Prosper.com is that the term and interest rate are fixed. Instead of paying an interest rate which could skyrocket at any minute, you’re guaranteed the rate that’s quoted to you for the like of the loan. Lending Club and Prosper both offer fixed payment terms, meaning that once you have made all 36 or 60 payments (depending on what type of loan you choose), you are completely out of debt. There’s no getting stuck in minimum-balance hell from a credit card which will leave you in debt for more than 20 years.
Both Prosper.com and Lending Club offer these loans with interest rates starting at about 7%. For high risk borrowers, the interest rate can be as high as 20%, but the average interest rate that borrowers pay is about 9%, so you can expect to get an interest rate at about that rate. Loans from Prosper.com and Lending Club are available in most states, and you can get either a 36 month or a 60 month repayment term, depending on what works best for you. With these two websites, you can take out a signature loan for any reason as long as you have a credit score of 660 or above.
In order to apply for a peer to peer loan, you can visit Prosper.com’s website and Lending Club’s website. It might be worth it for you to apply on both sites and see which company will offer you better terms on your loan.
