Americans have over $840 million in credit card debt — an average of over $6,000 per family. Doctors are no exception to this common source of debt. According to Medscape’s 2021 Physician Wealth & Debt Report, 25% of physicians are currently paying off credit card debt.
Accumulating this can be a slippery slope, leading to substantial toxic debt. If you are working to overcome your debt, credit card consolidation could be a great option for you.
Credit card consolidation is a debt management strategy that rolls multiple credit card balances into one monthly payment. This is beneficial if the new debt has a lower APR than the rates of the credit cards. Credit card consolidation can reduce your interest costs, make payments smaller and/or shorten your payoff period.
From limited work availability in school to low pay and high expenses in residency, doctors’ unique career paths mean many are likely to take on significant credit card debt. This can create a significant financial burden on young doctors — especially when coupled with student loan debt.
Even after completing residency and beginning to receive a full salary, doctors can continue to build on this debt because of bad credit card habits and poor financial decisions. This debt quickly becomes toxic as high-interest rates cause your initial balance to increase exponentially.
There are two primary paths to credit card consolidation, including a balance transfer credit card and a personal loan. We will briefly walk through both of these, so you can understand your options.
Balance transfer cards charge no interest during a promotional period (often 12-18 months), but require good credit, carry a balance transfer fee, and have an even higher APR after the promotional period.
Credit card consolidation/personal loans offer fixed interest rates and lower APRs, but can be hard to get a low rate with bad credit and sometimes carry an origination fee.
Home equity loans offer even lower rates than most personal loans, but require homeownership and equity in a home, which may not be the case for many — especially young doctors.
401(k) loans are taken from employer-sponsored retirement accounts, meaning lower interest rates and no credit score impact, but aren’t an option for doctors who are not receiving a 401(k). Any borrowing from retirement accounts should be taken with caution and typically are not a first option.
When home equity and 401(k) loans are not an option, those in debt are left with balance transfer cards and personal loans as their main option for credit card consolidation. Personal loans are often preferable to balance transfers because of balance transfers’ steep increase in APR after the introductory period, but there are disadvantages to personal loans that must be considered.
Doctors can experience difficulty with personal loans because of the likelihood of high rates due to their bad credit after residency and other life events. Panacea Financial’s PRN personal loan removes this barrier by not basing your approval on your credit score.
Additionally, PRN loans have no fees and reduced or zero payments during an introductory period based on where you are in your career. Whether in your last year of school, in residency or already in your career, these personal loans can be a great option for credit card debt consolidation.
Panacea’s personal loan application is simple and able to be completed in less than 10 minutes. To apply and begin your path to overcoming toxic credit card debt, visit our PRN home page.
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