Inflation is rising at its highest rate in 40 years, and it’s impacting how consumers save and spend their money.
Over the past year, 50% of Americans have been unable to pay their bills on time, according to a new investigation of Consumer Affairs. Less than a third (32%) of respondents were able to save regularly, while just over a quarter (26%) were able to invest. About a fifth said their ability to pay their bills had deteriorated due to inflation.
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This comes at a time when credit card balances are growing at a record pace, according to the Federal Reserve Bank of New York, indicating that Americans are increasingly dependent on credit card spending to make ends meet.
Keep reading to learn more about the impact of inflation on household finances, as well as what you can do to offset rising consumer prices and credit card debt. One way to reduce expenses is to consolidate debt into a personal loan when interest rates are at historic lows. You can compare debt consolidation loans on Credible for free without affecting your credit score.
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Inflation weighs on household finances, including essential spending
The consumer price index (CPI) rose 7.5% annually in January, meaning Americans face higher costs for basic necessities like food, shelter and essentials. public services.
Consumers said inflation had the biggest impact on groceries and daily necessities (45%), followed by health care (18%), housing costs (12%) and car loans (11%), according to the survey.
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Three-quarters of consumers have had to change their spending habits in the past year to make ends meet, such as buying less groceries (31%), selling personal items (26%) and getting a second job (25 %). In addition, 1 in 9 respondents had to withdraw their children from daycare.
As inflation soars, household debt has risen by $1 trillion in 2021 – the most since before the Great Recession, according to the New York Fed. Notably, Americans added $86 billion to their revolving credit card balances during this time.
If you’re looking for ways to pay off high-interest credit card debt amid rising consumer prices, you might consider opening a debt consolidation loan. It is a type of personal loan used to pay off debt in fixed monthly installments at a low interest rate. You can compare personal loan rates on Credible and use a personal loan calculator to estimate your monthly payments.
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How to consolidate debt into a personal loan
Using a personal loan for debt consolidation is relatively simple and the application process can be done entirely online. Consolidating debt at a lower interest rate can help you lower your monthly payments, pay off debt faster, and save thousands of dollars over time. Here’s how it works:
- Calculate the loan amount you need to borrow. Add up all of your high-interest debt payment obligations, such as credit cards and payday loans. This will help you determine the minimum amount of loan you need to consolidate your debts.
- Check your credit score. Personal lenders determine your interest rate and eligibility based on your credit history. This includes your credit score and your debt-to-income ratio, which is your monthly debt payments divided by your income.
- Compare personal loan rates. Most lenders allow you to be prequalified to see your estimated interest rate with a soft credit inquiry, which will not impact your credit score. This way you can shop around for the lowest possible rate for your financial situation.
- Choose a loan offer. Shorter loan terms may offer lower interest rates, but they will come with higher monthly payments. Longer loan terms can help lower your monthly payments, but they can cost more over time due to higher interest rates.
- Apply for a formal loan. Once you have chosen the personal loan contract that suits you, you will make a formal loan request. This will require a rigorous credit check at the time of application, which will have a temporary but minimal impact on your credit score.
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Upon loan approval, funding can be deposited into your bank account the next business day. You can then use the money to pay down your credit balances to zero. Just be careful not to rack up more credit card debt while you pay off the personal loan.
You can browse the current personal loan interest rates in the table below and visit Credible to see which debt consolidation offers are right for you without hurting your credit score.
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