Paid for by Discover® Personal Loans:

Moving into a house, starting a family, chasing after your dreams. Navigating your life can become a financial balancing act. That’s especially true when you have debt to pay off. Revolving interest rates and constantly shifting account balances can make it challenging to plan for your financial future.

A personal loan can be a useful tool to help you simplify your financial life, especially if you have a plan in place for how you’ll use it, says Matt Lattman, vice president of Discover Personal Loans. “A personal loan can help simplify your financial picture. Maybe you consolidate multiple higher-interest bills into one fixed rate personal loan. Or, use it to take care of unexpected expenses so they don’t end up on a higher-interest credit card. Either way, you know that you have a path to paying off your debt.”

As Lattman points out, a personal loan can be an effective solution for a variety of situations. Here are some ways a personal loan might simplify your financial picture.

1. Personal loans help consolidate high-interest credit card debt

High interest rates make it challenging to pay down credit card balances, even if you have good credit and use your cards responsibly. A personal loan makes handling credit card bills easier in two ways. First, your monthly bill management is easier if you choose a personal loan with fixed interest rates. This will allow you to consolidate multiple payments into one set regular monthly payment. This makes it easier to keep track of what you owe and to make your payments on time. “It's just annoying to pay a lot of different bills every month. It's easy to forget one and wind up having a late fee. Writing one check, or better yet, automating it, is just a lot easier,” Lattman says.

Second, consolidating your higher-rate credit card balances can help save money on interest. According to a survey* by Discover, 95% of surveyed customers said they saved money or time by consolidating debt with a Discover personal loan. While personal loan interest rates vary based on multiple factors, including your credit score, the interest rate offered to you may be lower than the interest rates on your credit cards. You can check rates across multiple lenders, which will initiate a “soft pull” to your credit. This won’t affect your credit score but can help you understand how much lower your interest rate could be. Once you apply for the loan, your application will then include a hard credit pull or credit check, Lattman explains.

2. Personal loans help you deal with unexpected expenses

The COVID-19 pandemic led to unprecedented financial difficulty for many Americans. According to a Discover survey**, 58% of Americans have taken steps to address an unexpected expense since the beginning of the COVID-19 pandemic. The survey also revealed that, of those respondents who already had medical debt, 53% had to take on new medical debt. This debt, the survey showed, led to more anxiety surrounding finances than health.

“You should be focused on getting and staying well, rather than feeling held back by medical bills,” Lattman says. “If there are gaps between what you owe, what insurance will cover and what’s left in savings, turning to a personal loan might allow you to pay off medical debt or other expenses in one lump sum, with a lower interest rate than other financial options, and without hidden fees.”

Medical expenses aren’t the only unexpected expenses that may crop up. Auto repairs, a need to care for an ill family member or a relocation can all lead to feeling financially stretched. In these cases, a personal loan can be a potential option to mitigate financial stress. “For many, unplanned costs created roadblocks in financial journeys, especially for people who were already feeling the strain from other areas of debt and expenses,” Lattman says. “If you do find yourself in one of these situations, the important thing to know is that there are options available.”

3. Personal loans allow you to budget for a life event or large purchase

Personal loans aren’t only useful for paying down debt. Whether it’s replacing your roof or paying for a wedding, a personal loan may be a less expensive option than placing a purchase on a high-interest credit card. Personal loans also typically offer a quick approval process and don’t require collateral, key differences from home equity loans. While there may be other financing options available, depending on the purchase, it’s a good idea to consider the pros and cons of different options.

For example, if you’re purchasing an engagement ring, it’s not uncommon for the jeweler to provide financing options. But these may have high interest rates or rigid loan terms. Meanwhile, a personal loan may give you more flexibility in deciding the length of the loan term and amount, so you’re more comfortable affording the monthly payment. In addition, personal loans might give you the flexibility to make something happen sooner. “Personal loans can help bridge gaps in savings,” Lattman says.

4. Personal loans offer flexibility in payback terms

With a personal loan from Discover, you can choose from several repayment terms. A shorter repayment term means a larger monthly payment and that you will pay off your loan faster. A longer repayment term means smaller monthly payments, but higher overall interest expenses, explains Lattman. And, if you do end up getting a bonus or a windfall, you can use that money to pay off the loan early.

That’s why, along with interest rates, it’s important to compare fees. Some lenders may charge fees in addition to the loan, which may include an early payment fee for making extra payments on your loan. It’s important to understand what fees are included in the loan up-front. Another common fee is an origination fee, which occurs at the beginning of the loan and means less money hits your bank account. “Discover won't charge you any fees as long as you pay on time,” Lattman says. “No early payment fees, no origination fee, no account maintenance fees, no fees to pay in certain ways. As long as you make your standard payments, we won't ever charge you a fee.”

5. Personal loans help you save for the future

Knowing exactly what you owe each month can free up money and mental energy to figure out where you want the rest of your money to go. “Debt consolidation can be a really good tool to create a predictable path to paying off debt. Build on the momentum of debt consolidation by looking for other opportunities to cut spending, like unused subscriptions, so you have additional opportunities to build savings,” Lattman says.

Even as you’re paying down debt, you can still make progress towards short- and long-term savings goals. This might include setting aside money to build an emergency fund that you can dip into if unexpected expenses crop up. Both paying down debt and building savings can reduce anxiety surrounding money.

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From Discover® Personal Loans:

Discover makes loans without regard to race, color, religion, national origin, sex, disability, or familial status.

You can save hundreds, or even thousands, of dollars on interest when you pay off higher-rate debt with a Discover personal loan. To estimate your savings, check out Discover’s debt consolidation calculator and input your outstanding amounts. Discover does not charge any origination fees and offers flexible repayment terms so you can choose the option that works best for you. Learn more about how Discover Personal Loans can help you reach your financial goals.

*About the survey: Figures are from an online customer survey conducted August 19 to September 6, 2022. A total of 665 Discover personal loan debt consolidation customers were interviewed about their most recent Discover personal loan. All results @ a 95% confidence level. Respondents opened their personal loan between January and June 2022 for the purpose of consolidating debt. Agree includes respondents who "Somewhat Agree" and "Strongly Agree".

**About the survey: A national survey of 1,515 U.S. residents ages 18 and up was commissioned by Discover and conducted by Dynata (formerly Research Now/SSI), an independent survey research firm, between September 23 and September 27, 2021. The maximum margin of sampling error was +/-3 percentage points with a 95 percent level of confidence. Generations are defined as: Generation Z, born after 1997; millennials, born between 1981 and 1996; Generation X, born between 1965 and 1980; and Baby Boomers+, born before 1964.

This article was paid for by Discover and created by Yahoo Creative Studios. The Yahoo Finance editorial staff did not participate in the creation of this content.