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Ideally, you would never carry credit card debt, and you’d pay off your statement balance in full every billing cycle, by the due date. Unfortunately, that doesn’t always happen. Emergencies come up. Budgets get derailed.
If you’re having trouble paying off your credit cards, know that you’re not alone.

According to the New York Fed, as reported by NerdWallet, Americans carried an average revolving credit card debt of $6,849 at the end of 2019.

It’s not necessarily a problem to have a balance on your credit card—as long as you pay it off every billing cycle. In fact, using credit cards for rewards or to build credit can be a financially healthy choice. And getting into the habit of paying off your statement balance in full by the due date is important.

But if you start to carry a credit card balance, you’re not just paying for your purchases, you’re paying hefty interest charges on top of what you’ve spent. In fact, the average household with credit card debt paid $1,162 in interest in 2019 .

The problem is when you don’t completely pay off your credit card balance each cycle, the debt can quickly pile up, even if you’re making the required minimum payments. Understanding how credit card interest and penalties compound can help you understand how to reduce your credit card debt.

How Credit Card Interest, APR, Works

When you applied for a credit card, you likely read about the fees, terms, and annual percentage rate. The APR, which for credit cards is usually stated as a yearly rate, is the approximate interest percentage you will pay on balances not paid in full by the statement due date. APRs vary across credit cards and depend on your credit history, but on average, credit card APRs range from around 13% to 23% .

Most credit cards charge compounding interest, which means that you end up paying interest on the interest you accrue. Essentially, if you don’t pay your statement in full each billing cycle, interest is calculated continually and added onto your balance, which you then also pay interest on (in other words, it compounds).

For example, if you owe $100 and your interest is compounded monthly at 10%, then after the first month you’d owe $110. And after the second month, you’d owe $121.

Most credit card interest is compounded daily, so every day you owe money after the due date, the interest climbs. It’s easy to see how compounding interest can add up.

Interest compounds even if you make the minimum payments. That’s because if you just pay the minimum amount due on your monthly credit card bill, then the remainder of the debt still accrues interest, and it compounds until you pay the balance off completely.

If you are wondering how much interest you could pay on your debt, you can take a look at SoFi’s Credit Card Interest Calculator to find out.

What Happens When You Stop Paying Your Credit Card?

Unfortunately, you can’t just ignore credit card bills until they go away. If you stop paying your credit card, your balance can inflate quickly.

If you miss a payment or don’t make the minimum payment due on a bill, you will typically face a late fee or penalty. In addition, the amount you still owe on the credit card—whatever you haven’t paid—continues to accrue interest, and that gets added onto future bills.

If you miss more than two payments, then your interest rate will likely increase to a higher penalty interest rate . And once your credit card interest rate goes up to the penalty rate, it usually stays there until you make at least six on-time payments. Those details are laid out in your credit card contract, even if you didn’t read all the fine print.

If something does come up and you know you’re going to be late on a credit card payment, you should consider contacting your credit card company. Some credit card companies may offer plans to allow you to pay off just the interest or a portion of the payment due.

These options aren’t ideal, since the remaining debt still accumulates interest, but it may allow you to avoid having a delinquency on your credit report. After 30 days of being delinquent on credit card payments, you’ll be reported to all three major credit bureaus—and will be again, every 30 days thereafter, if you still haven’t paid.

As accounts become more and more past due, more fees can rack up and/or the credit card company could offer a settlement, or they could attempt to get a judgment against you for the total amount owed. They could also sell your debt to a collection agency as you get closer to the 120 days late mark.

To sum up: even if you always make the minimum payment due, if you’re not paying off the full credit card debt, then the remainder will accrue compounding interest. That can still add up, and the debt can start to feel insurmountable. But there are ways to lower your interest rate and get rid of your credit card debt before it ever spirals totally out of control.

Getting Ahead of Credit Card Debt

While it can seem like a steep, uphill climb, getting out of credit card debt is possible. It might take some serious planning and commitment, but with the right tools, it’s an achievable goal.

Sometimes it can help to break it down into smaller steps so the process doesn’t seem as overwhelming. Here are some ideas for getting ahead of credit card debt:

Limiting the Use of Credit Cards

If you’re carrying credit card debt, you can try to avoid using the card while you’re getting the balance under control. Eliminating the use of your credit cards can be challenging.

Using credit cards means you’re still adding to your overall debt total, which can make it feel like you’re constantly treading water to stay afloat, instead of making progress toward eliminating your debt. One way to avoid this is to limit the use of your credit card while you take control of your debt.

Budgeting for Debt Repayment

To get serious about repaying your credit card debt, create a plan that will help you get there. One place to consider starting is revamping your budget. If you don’t have one, you may want to think about making one.

If you do have a budget, but it’s currently gathering digital dust in a spreadsheet or going unchecked in an app, it may be time to update it. Tallying up your monthly expenses and your monthly income is a good first place to start.

If you’re budgeting with a partner, including their information as well may help your budget realistically reflect your household finances. Then comes the hard part. What patterns do you see when you look at your spending habits?

To eliminate your credit card debt you may have to make some changes to your regular spending. Identifying areas where you can cut back may help you see those trouble spots. Are impulse orders on Amazon dragging you down? Overspending on new clothes? Food? Whatever it is, understanding your spending vices can help you get them under control.

As a part of this improved (or new) budget, detail your plan for reducing your debt. There are a few strategies, including the “debt avalanche” and the “debt snowball” methods.

In order to accelerate the debt repayment process, both methods encourage debt holders to overpay on certain debts each month, while making the minimum payments on all other debts.

The main difference is how each strategy organizes the debts. In the debt avalanche method, the debts are organized by interest rate. The idea here is to focus on the debt with the highest interest rate. When that debt is paid off, you’d roll the payment previously allocated to it into the payment for the debt with the next highest interest rate. You’d do this until the debts are repaid completely.

In the debt snowball method, the debts are organized by balance amount. Here, efforts are focused on the debt with the smallest balance. When that is paid off fully, payments previously allocated to that debt are rolled into the debt with the next smallest amount. Continue until all the debts are paid in full.

Both strategies have pros and cons, so consider which method you’ll be most able to stick with and create a strategy that will work for you.

Finding Help (If You Need It)

If you’re still struggling with credit card debt, consider getting help from a qualified professional. A debt or credit counselor may offer resources to put you in a better position to repay your debt. They may be able to offer personalized advice or help you create a plan to achieve your goal.

How Do You Lower Your Credit Card Interest?

In addition to crafting a debt repayment plan, if you’ve accumulated a large amount of credit card debt, then it might make sense to consolidate it all with a lower-interest loan or credit card.

Balance transfer credit cards allow you to transfer your credit card debt onto a lower-interest or no-interest card, usually for a promotional period of six to 12 months, and then pay off that card.

However, these cards often come with fees and a much higher interest rate that kicks in after the promotional period has ended. So essentially, you may be setting yourself up to face the same problem all over again unless you can pay off your debt within the promotional period.

Another option is to take out an unsecured personal loan with (ideally) a lower interest rate. Essentially, you’d use the personal loan to consolidate and/or pay off your credit card(s) balances, and then you’d pay off the personal loan.

You could choose a fixed interest rate on most personal loans, which means the interest won’t compound and the rate won’t change over the life of the loan. Personal loans just require you to make one simple monthly payment, over a set period of time (no revolving debt here); you can typically work with the lender to find a repayment timeline that works for you.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

PL18145

Imagine this: Your friends text you, let’s go skiing! And you want to say yes. Who wouldn’t want to glide down a mountain and enjoy an apres ski in a cozy lodge? And no worries, you say, I’ll just put it on the card! Or this: Your best friend plans a destination wedding to France.

Of course you’re going to RSVP yes—you couldn’t miss out on witnessing such a momentous day. And hey, when you use your credit card you’ll earn a few rewards.

Or even this: Your little sister needs a dress for prom, and asks if you’ll cover the cost. It’s a once-in-a-lifetime experience, you think as you hand over your card.

It’s easy to say yes in the moment, offer up your credit card, and think about the cost later. But the shock and stress of looking at your credit card statement after a month of spending can be overwhelming. And when your spending goes unchecked or your balance doesn’t diminish, credit card debt can rack up quickly.

When used responsibly, credit cards can provide the opportunity to do things like build credit and earn rewards points or cash back that can be used for other purchases. When used with abandon, however, careless spending on credit cards can lead to debt—which may feel insurmountable.

It’s no secret that credit card debt is a problem that plagues many Americans. According to the Federal Reserve, consumer debt in 2019 exceeded $4 trillion , over $1 trillion of which is credit card debt.

Nearly 55% of Americans who have a credit card are in credit card debt. The average credit card balance during the first quarter of 2019 was $6,028 , according to Experian. That balance can grow quickly, considering that annual percentage rates (APRs) for credit cards can be quite high (the average APR has hovered around 17% for some time).

Common Ways to Deal with Credit Card Debt

If you’re currently dealing with or have dealt with credit card debt in the past, you know how hard it can be to dig yourself out of the hole. While it can feel like an impossible problem to solve, there are strategies and resources available which may put you on a path toward eliminating your credit card debt once and for all.

When taking action on your credit card debt, it is generally recommended to put a plan in place. There are plenty of strategies that are touted for their ability to help you crush debt. Creating a debt reduction plan might provide the structure you need to meet your goal of debt repayment.

For some, the avalanche method, which organizes debts based on interest rate so the debt with the highest interest rate is targeted first, may make the most sense. For others, the built in reward of the snowball method, which targets debts with the smallest amount first may be preferred.

Regardless of the method you choose, it’s considered best practice when using these programs to try and stick with the debt repayment plan you’ve developed unless you see a compelling reason to switch. It can also be an opportunity to check in with your spending to determine what habits have gotten you into debt. You may find you’ll need to make a few changes to your spending habits to truly eliminate credit card debt from your life.

Beyond aggressively making payments on your debt, there may be other strategies worth considering. For some, it may be helpful to find a way to consolidate your credit card debt into better repayment terms.

One option for this is to use a balance transfer credit card. In concept, these are pretty straightforward. Basically, you open a new no- or low-interest credit card and transfer the balance of your existing credit card to it. You’re then able to pay off your debt with a lower interest rate as long as the balance is repaid within the given timeframe.

This, in theory, could put you on the path to pay off your credit cards in a more timely manner because you may not face high interest payments. But the low interest rate on balance transfer credit cards is usually only offered for an introductory period, commonly anywhere between six and 18 months. After that period expires, the rates usually increase.

If you can pay off the balance transfer card before the low initial rate expires, it could be an avenue worth pursuing. However, balance transfers often come with a fee—usually 3% to 5% of the total amount you’re transferring.

If it’s a large debt, you may end up paying a hefty fee, which may make this option a less attractive method. Another option is borrowing a personal loan for credit card debt consolidation. While it may seem counterintuitive to take out a new debt to help get out of an old debt, it could be worth considering.

FAQs: Paying Off Credit Card Debt with an installment Loan

For some, paying off credit card debt with a personal loan (which is an installment loan) might be a helpful strategy for getting out of credit card debt. Here are some commonly asked questions about debt consolidation loans:

Why use a personal loan to pay off credit cards?

If you have a lot of high-interest credit cards, you can rack up debt much more quickly if you don’t pay off the entire monthly balance, which ultimately might hold you back from building a solid financial future.

Carrying a balance from month to month means you’re not only paying for the upfront cost of your purchases, you may also be paying a hefty fee in interest. On average, households with a revolving balance of credit card debt paid $1,141 in interest.

If you’re in this situation, using an unsecured personal loan to pay off credit card debt can be an avenue worth exploring.

Ways to use a loan to pay off credit card debt

Instead of owing money on multiple credit cards, some people take the total amount owed among all their cards, consolidate that debt into a single loan amount to pay off the credit cards. That is what’s known as an installment loan known as a personal loan.

By doing this, you would then start making payments toward one single personal loan instead of payments to multiple cards. The hope would be that the interest rate on the personal loans would be lower than any combined interest rates on any credit cards you might have.

Is using a personal loan to pay off credit cards the right option for you?

Whether consolidating your credit card debt through a personal loan is right for you is based on different factors.

For instance, what are the balances and terms on your current credit card debt vs the terms you could obtain on a new debt consolidation loan? Try utilizing a debt calculator to help you gather some estimated numbers. If you qualify for a lower interest rate, paying off credit debt with a personal loan has a number of potential advantages. For one thing, consolidating or refinancing debt can help simplify your payment plan, turning multiple bills into one.

Taking out a personal loan to pay off debt can be one way to take advantage of better financing terms such as lower interest rates, which could help save you money in the long run.

Benefits of Taking Out a Personal Loan to Pay Off Credit Cards

Debt consolidation loans can be particularly useful for consolidating debt on multiple credit cards that may have less than favorable terms, and it’s easy to see why. Debt consolidation loans can potentially help you streamline your finances. Making a lower fixed payment on a single loan every month may also help reduce the chances of missing payments.

It is worth noting that some credit card interest rates can vary based on factors such as the type of transaction, purchase, or cash advance, whether the rate is fixed or variable, qualifying criteria, and more.

According to Bankrate.com the average interest rate on a variable credit card is running around 17% and sometimes reaching as high as 29.9% APR if you miss payments. One tool to help you understand how much interest you might be paying is our Credit Card Interest Calculator.

Personal loans, on the other hand, can typically be found at a lower interest rate. A lower interest rate could potentially reduce the amount of interest the borrower is required to repay over the life of the loan.

Depending on your circumstances, a percentage point or two off could make enough of an impact on your interest payments to place you on the path to paying off your credit cards in a more timely manner.

When you take out a personal loan it can be used for almost anything that’s a personal expense, such as general consumer/household purpose, home renovations, and debt consolidation; theoretically, you could use a personal loan to pay for anything from a wedding to an elephant (although good luck finding a low APR on that one).

Potential Considerations Before Taking Out a Loan to Consolidate Credit Card Debt

When considering a personal loan, one way to start could be by making a chart of your debts and their respective interest rates, and calculate how long it could take you to become debt-free.

Also, consider whether you have explored all options in determining how best to position your outstanding debt into better financing terms.

Once you’ve done the initial legwork, a good next step is to compare that credit card repayment plan with a personal loan, and see which is better for your budget.

Check the math and review the loan terms and interest rate to confirm you’d actually end up with a preferable repayment plan. For instance, a lower monthly payment might seem great, but if it ultimately extends the length of your repayment, depending on the rate and term, you might end up paying more in interest than you realize.

Consider your current and future financing terms: whether it’s simply peace of mind in the form of one monthly bill, or saving the maximum amount of money, what works best for one person may not be great for you. If you’re still in doubt about how to best get ahead of your debt, consider asking for help from a professional.

Those professionals could offer some valuable insight to help you create a personalized plan that can help you find the best path toward your financial goals, like living in a debt-free future.

Taking an intentional step toward tackling your debt can be challenging, but with a little creativity and discipline, you can work on managing your debt without letting it slow your financial plans for the future.

With SoFi, you may qualify to consolidate your high interest debt into one single unsecured personal loan, with loan amounts up to $100,000 and fixed interest rates with no origination fees or prepayment penalties.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

PL17107

Getting an education, driving your new car off the lot, buying a home—it can sometimes feel like every big life step comes with a little thing called debt.

And while it’s often accumulated while making investments and purchases that can help you reach your personal and professional goals and build the future you want, it’s no secret that debt also has the potential to have negative consequences.

Though your initial purchase may bring with it an initial rush of excitement and adrenaline, eventually reality sets in: You will eventually have to pay off your debt over a period of time, perhaps with variable interest, often with an added mix of financial anxiety and chest pains.

But debt repayment doesn’t have to be so stressful—sometimes it can even be empowering. It all depends on how you think about it and how you plan ahead.

Many folks may have a combination of shorter-term debts, like credit cards, and longer-term debts, like student loans and a mortgage.

Just making all the different monthly payments can become a chore that takes hours off your life, not to mention a big chunk of your paycheck. And if you’re just making the minimum monthly payments, it might seem like you’ll be repaying your debts forever.

Choosing a debt payoff strategy can ease your mind—and maybe even your wallet. A successful debt payoff strategy is typically one that helps you feel empowered and in control of your finances, while keeping you motivated to get out of debt as soon as possible.

Ahead, we’ll take a look at some popular payoff methods, including the snowball, avalanche, and snowflake strategies. We will also explore the loan consolidation strategy.

Keep in mind that each option has its benefits and drawbacks; choosing the right strategy will ultimately come down to your specific financial situation and what will most effectively inspire you to get debt-free.

The Debt Snowball Method by Dave Ramsey

The first of these snow-themed repayment methods is called the snowball method. Popularized by financial self-help guru Dave Ramsey , the concept behind this strategy is that paying off your smallest debt first (regardless of the interest rate) will give you a feeling of accomplishment that will increase your motivation to pay off your next biggest debt and, eventually, tackle all of your existing debt.

Though this method may offer a valuable morale boost that can potentially help you feel more empowered in getting your finances back on track, this method probably won’t save you as much money as paying off your debts with higher interest rates first.

Even so, it’s worth noting that a 2016 study published in the Harvard Business Review found that people using this method paid off credit card debt faster than those using other methods, for the simple reason that it’s typically easier to stay motivated when you see progress in your pursuits.

How it works: Make a list or spreadsheet of your debts (list the debt with the smallest principal balance first) along with the minimum payment amount for each of them. While making the monthly minimum payments on all debts, the strategy has you start throwing as much extra money as you can afford to spare towards the smallest of your debts.

Once you have paid this portion of your debt off, this strategy suggests you take the minimum payment you were paying on that debt and reallocate it to the minimum payment of your next-smallest debt (there’s the snowball).

The idea is that, by paying off your smallest debt and increasing the amount you’re able to put towards your next smallest debt, you’ll be able to keep your momentum going and continue repeating the process until you are debt-free.

The Debt Avalanche Method

This next method is also known as the “ladder” or “debt-stacking” method. Unlike the snowball method, which is structured around behavior and motivation, the avalanche method is about streamlining your debt repayment so that you can save the most money on interest.

The avalanche strategy can sometimes require more discipline, and the initial results may sometimes seem a bit less tangible. Even so, keeping track of how much you are saving in interest can be a great motivator for many people dealing with debt.

How it works: Make a list of all your debts by order of interest rate, from the highest percentage to the lowest. While continuing to make all your minimum monthly payments on your existing debts, the avalanche method suggests that you also “attack” the highest interest rate loan with as many extra payments as you can.

In other words, send an avalanche of extra money towards the debt that’s costing you the most.

For extra motivation, you can use an extra payment loan calculator like this one to keep track of how much you’re saving in interest.

The Debt Snowflake Method

Taking the snow metaphor even further, the “snowflake” method can be used on its own or in conjunction with another method, such as the snowball or avalanche. The snowflake method involves finding extra income on top of your usual income to help pay down your debt faster.

Side gigs and extra work are often seen as ways to afford extra purchases or make a bit of extra cash to spend on the finer things in life. But instead of using this extra money on pleasure expenses, the snowflake strategy encourages individuals to find an additional income stream that can be dedicated specifically to paying off debts more quickly.

How it works: Scrape together extra micro-payments by any means possible: using credit card rewards cash, taking those cans of spare change to the bank, selling old textbooks or collectibles online, or even taking on a few side gigs. From there, the method suggests putting the extra cash from these projects toward extra debt payments.

Consolidating Debt Under a Single Loan

One final strategy for paying down debt is converting all your various debts into a single loan, commonly referred to as loan consolidation (no snow metaphor here).

This method has the potential to dramatically simplify your loan repayment process. Instead of multiple loans and multiple interest rates, you’d have one loan and one interest rate. And ideally, this new interest rate will be close to the average of all your interest rates combined—or maybe even lower.

How it works: Start by shopping around for the best loan consolidation or personal loan offer you can find. Once you find one and are accepted, your lender will grant you a personal loan that you can use to pay off your existing qualifying loans or debts in full. Then you’d pay back the personal loan, which is just a single monthly payment.

One potential downside to consolidating your loans is that your overall repayment period may get extended, meaning you could pay more in interest over time if you only make minimum payments on your personal loan.

This said, when you take out a personal loan, you can make sure to choose a loan term that doesn’t extend your repayment period and find an option that works for you, your debt, and your financial situation.

Remember, even if you decide to consolidate some of your debt with a personal loan, you can always use the snowflake method or other strategies on the remainder of your debt.

Whatever plan you end up choosing, making consistent extra payments on your personal loan whenever possible can help you get out of debt even faster (just watch out for prepayment penalties—that’s why it’s so key to always do your research before you sign on the dotted line).

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Guest Participation: The individuals interviewed for this article were not compensated for their participation. Their advice is educational in nature, is not individualized, and may not be applicable to your unique situation. It is not intended to serve as the primary or sole basis for your financial decisions.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

PL18142

Illness and injury are an unfortunate (and scary!) fact of life, but once you’re patched up after surgery or a lengthy hospital stay, you want to focus on your recovery, not worrying about how on Earth you’re going to pay off any medical debt.

Medical debt can be overwhelming, and according to a 2018 study published by Health Affairs, it’s not just older Americans who are managing debt from medical bills.

It is actually Millennials who are racking up the most medical debt—11% of all people who had a medical bill go to collections in 2016 were just 27 years old. So how can you pay off medical bill debt and hopefully stay out of collections? There are several different options available that may help you manage your medical debt with minimal pain, so you can focus on feeling better.

Before we dive in, we should mention we realize the nature of medical debt is often very sensitive. These strategies are merely a collection of tips and commonplace ideas found through our research on the internet.

This article shouldn’t be considered advice in any sense; every person’s situation is unique, which means it’s always a good idea to check in with a professional before taking action yourself. With that said, let’s dive into what we found.

Medical Debt Payment Plans

Medical care can be expensive, especially if you’re facing a chronic condition with ongoing costs or a major surgery or hospital stay. One plan of action you might consider is contacting your medical provider to see if they offer payment plans.

Some providers offer payment plans that allow you to make payments on your medical bill over time, paying it off in installments. Talking to your healthcare provider or a hospital billing department can be a great first step to figuring out if there is a payment plan you can take advantage of when it comes to medical bill debt.

Of course, one major downside to payment plans is that not all medical providers or medical offices offer payment plans and may require full payment when services are rendered.

Likewise, some medical providers may only let you set up a payment plan in advance, which means that a payment plan might not be a solution for any medical debt you’ve already accrued. And of course, some payment plans may still be too prohibitively expensive to pay every month, even if you’re paying over time.

Using A Medical Credit Card

If you’re looking at a medical bill that you can’t pay out of pocket, you may be tempted to reach for a credit card. Before you hand over whatever card is in your wallet, you might want to consider looking into credit cards specifically designed to be used to pay for medical care.

Medical credit cards sometimes offer low or no interest for a predetermined period of time, which means that you may be able to pay your medical bill with the credit card and then pay off the card before it accrues interest.

But be careful—if you can’t pay off the credit card before the interest-free period is over, you might face high-interest charges, which could actually end up making your medical bills more expensive.

Consider pulling out the calculator and doing some math to see if you can afford to pay off your medical bills during the interest-free period before you decide to put the costs on a medical credit card. This can help you determine how useful a medical credit card might be in your specific situation.

Negotiating Directly With The Hospital

If you’re facing a big bill from the hospital, one thing to consider is reaching out directly to the hospital billing department to see if you can negotiate the total amount of your medical bill.

While it’s not precisely like haggling for a used car, most hospitals have a financial department that might be able to help you determine if you qualify for any cost deductions or discounts.

One other thing to keep in mind is that cash might just still be king. Some hospitals and medical providers might give you a discount just for paying in cash. This can be a good option if you can afford to make the payments in one lump sum and want to avoid any extra fees.

Taking Out A Personal Loan

Taking out a personal loan might also be a solution to managing medical debt. While personal loans are often overlooked, they may offer more benefits than credit cards, like lower interest rates and more flexibility.

In order to use a personal loan to pay off medical bill debt, you’d borrow money from a lender which you’d use to pay your medical debt, then you’d pay that money back to the lender over time in regular monthly payments. Like other types of loans and financing, lenders generally look at your personal financial history and ability to repay (among other factors) when deciding if you qualify for a personal loan and determining your interest rate.

Unlike other types of financing, however, a personal loan can be used for almost everything—from paying off a hospital bill to paying for your groceries while you’re out of work due to an injury or illness.

If you’re wondering how to clear medical debt from multiple sources, a personal loan might help. You may be able to use a personal loan to consolidate numerous medical debts into one monthly payment. This could work by taking out a medical loan and using it to consolidate different medical bills, which allows you to focus on paying off just one debt instead of managing multiple varying deadlines every month.

When searching for personal loans to pay for medical debt, be sure to read the fine print. Some providers may charge origination fees to process your loan, or prepayment fees if you pay off your loan early.

Also be wary if interest charges in your search, as high-interest charges could add more money paid over the life of the loan.

One other potential benefit of using personal loans is that the application process is relatively simple and you can usually find out your eligibility pretty quickly. With SoFi personal loans, it just takes a few minutes to check your rate. And with SoFi, there are no fees required.

There’s no way around it—medical bills can be hard to deal with. But making a plan for repayment you help you get on your way to financial and physical wellness.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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You may have heard that consolidating your debts can hurt your credit score. So, if you’re considering this financial strategy to free up cash flow and otherwise streamline debts, it’s natural to wonder if that’s true. And like so many questions related to finances, the answer depends upon your specific situation.

It’s important to remember that a combination of many factors can affect credit scores and to understand how those factors are considered in credit score algorithms. We’ll use FICO® as an example—according to them, the high-level breakdown of credit scores is as follows:

•  Payment history (35%): This includes delinquent payments and information found in public records.

•  Amount currently owed (30%): This includes money you owe on your accounts, as well as how much of your available credit on revolving accounts is currently used up.

•  Credit history length (15%): This includes when you opened your accounts and the amount of time since you used each account.

•  Credit types used (10%): What is your mix? For example, how much is revolving credit, like credit cards? How much is installment debt, such as car loans and personal loans?

•  New credit (10%): How much new credit are you pursuing?

Now, here is information to help you make the right debt consolidation decision.

Benefits of Debt Consolidation

When you’re juggling, say, multiple credit cards, it can be easy to accidentally miss a payment. Depending on the severity of the mistake, that can have a negative impact on your credit score. This, in turn, can make it more challenging to get loans when you need them, or prevent you from getting favorable loan terms, like low interest rates. Plus, even if you don’t miss a payment, when you have numerous credit card bills to juggle, you probably worry that one will get missed.

Plus, it’s not uncommon for credit cards to have high interest rates, and when you only make the minimum payments on each of them, you very well may be paying a significant amount of money each month without seeing balances drop very much at all.

So, when you combine multiple credit cards into one loan, preferably one with a lower interest rate, it’s much more convenient, making it less likely that you’ll accidentally miss a payment. And paying less in interest will likely make it easier to pay down your debt.

How you handle your debt consolidation, though, and the way in which you manage your finances after the consolidation each play significant roles in whether this strategy will ultimately help you.

Steps to Take: Before the Debt Consolidation Loan

Debt accumulates for different reasons for different people. For some, unexpected medical bills or emergency home repairs have served as culprits. For others, being underemployed for a period of time may have caused them to start carrying a credit card debt balance. For still others, it may be about learning how to budget more effectively.

No matter why credit card debt has built up, it can help to re-envision a debt consolidation strategy as something bigger and better than just combining your bills. As part of your plan, analyze why your debt accumulated and be honest about which ones were under your control and which were true emergencies.

And if you end up using a lower-cost loan to consolidate your bills, consider using any money saved to build up an emergency savings fund to help prevent the accumulation of credit card balances in the future.

The reality is that, if you consolidate your debts in conjunction with a carefully crafted budgeting and savings plan, then debt consolidation can be a wonderful first step in your brand-new financial strategy.

Debt Consolidation: When It Can Help Your Credit Score

Based on the factors used by FICO, here are ways in which a consolidation loan can help credit scores:

Payment history (35%)

Because making payments on time is the largest factor in FICO credit scores, a debt consolidation loan can help your credit if you make all of your payments on time.

Amount currently owed (30%)

Although you may not instantly reduce the amount you owe by, say, consolidating all of your credit card balances into a personal loan, there can be a benefit to your credit score here. That’s because the credit score algorithm looks at credit limits on your cards, as well as your outstanding balances, and creates a formula that calculates your credit card utilization.

Here is more information about credit card utilization, including how to calculate and manage yours.

Credit types used (10%)

As you may know, there are several different types of credit, such as credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. According to myFICO , responsibly using a mix of these, such as credit cards and installment loans, may help your credit score.

However, it’s certainly not necessary to have one of each, and it’s not a good idea to open credit accounts you don’t intend to use.

Debt Consolidation: When It Can Hurt Your Credit Score

Now, here are ways that the same initial step—taking out a debt consolidation loan—may hurt your credit.

Payment history (35%)

As is the case with most loans, making late payments on a consolidation loan can hurt your credit score (depending on the severity of the situation). Loans in a delinquent status are mostly likely to have a negative impact on your credit, depending on the lenders’ policies.

Learn more about payment history .

Amount currently owed (30%)

Now, let’s say that you pay off all your credit cards with a personal loan and then you begin using them again to the degree that you can’t pay them off monthly. Any gain that you saw in your credit score will likely disappear as your credit utilization numbers rise again.

Another way that credit consolidation can harm your score is if you combine all of your credit card balances to just one credit card, resulting in a high utilization rate. But if you are able to keep it relatively low, it is less likely to negatively affect your score.

Learn more about amounts owed .

Credit history length (15%)

If you close credit cards that you pay off, you’ll reduce the age of your accounts, overall, and this can hurt your credit score.

Learn more about length of credit history .

Credit types used (10%)

If you combine all of your credit card balances into just one credit card, as described above, you won’t have opened an installment (personal) loan, so that won’t help with diversifying credit types.

Learn more about credit mix .

New credit (10%)

If you apply for a personal loan or a balance-transfer credit card and are rejected, this can cause your credit score to decrease. And if you apply for multiple loans or credit cards, looking for a lender that will accept your application, this can also hurt your score. Multiple requests for your credit report information (known as “inquiries”) in a short period of time can decrease your score, though not by much.

Learn more about new credit .

Concerned about building or rebuilding credit? Check out a few tips SoFi put together on how to strategically boost your credit score.

Investigating a Personal Loan for Debt Consolidation

When it’s time to apply for the personal loan, you’ll want to get a low rate. In February 2019, the average credit card interest rate was reported as 17.67%; this means that, by not consolidating your credit cards into a personal loan with a lower interest rate, you could be paying more interest than if you did.

When choosing a lender, ask about the fees associated with the loan. Some lenders charge fees; others,like SoFi, don’t. You can always use a lender’s annual percentage rates (APRs) as a way to understand the true cost of financing.

Also, you may consider calculating the shortest loan term that your budget can comfortably accommodate because, the more quickly you pay off the debt, the more money you’ll save over the life of the loan because you’re paying less in interest.

You can find more information about saving money as you consolidate your debts, and you can also calculate payments using our personal loan calculator.

Consolidate Your Debt with a SoFi Personal Loan

If you’re ready to say goodbye to high-interest credit cards and to juggling multiple payments each month, a SoFi personal loan may be a good option.

Benefits of our personal loans include:

•  Fast, easy, and convenient online application process

•  Low interest rates

•  No origination fees required

•  No prepayment fees required

•  Fixed rate loan

You deserve peace of mind. And by taking out a personal loan to consolidate debt, the stress of juggling multiple credit card payments can be history. Ready for your fresh start?

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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