Should I Get a Personal Loan to Pay Off My Credit Card?
October 8, 2020
By Rahul Iyer
Credit cards can be helpful in tackling unexpected expenses. If used responsibly, they don’t have to become a financial challenge; however, there are times when the frequency or size of unfortunate and unplanned financial obstacles cause a credit card balance to go way higher than you can handle.
To be completely frank, this can also happen if you lose self-control and spend way more than you should. There are many who simply get a personal loan to cover their credit card debt. The question that we will answer in this article is if it is a good idea to pay off a credit card with a personal loan.
Whether it is a wise decision to get a personal loan to pay off your credit card is dependent on the rate and terms of the loan that you will be getting. You will also need to be sure that you are in a position to consistently make all the payments of the new debt on time. If these are all favorable and you can make the payments, using a personal loan can protect your credit score.
Here are three reasons why a personal loan can be very useful in clearing credit card debt:
More Favorable Interest Rate
Given that you have good credit, the interest rate of a personal loan will work out to be much more favorable. By moving your balance to a loan facility with a lower interest rate, you are saving money and making the process of repayment easier. Before hopping into a personal loan, be sure to compare the annual percentage rates (APR) of each loan arrangement.
Fewer Payments to Make
If you have multiple credit card balances to relate to, a personal loan can be a great option to narrow these down to one payment. A personal loan is often called a debt consolidation loan. By having your debt in one place or at one institution, you can better keep track of it.
Longer Time to Repay
While a longer repayment period may cost you more in interest, it can make monthly payments smaller. This reduction in the size of your monthly payments can make the management of your debt easier. By doing this, you will be in a better position to protect your credit score. This makes a personal loan great for individuals who have recently lost a large portion of their spending power.
Credit cards offer great benefits, but they can put you in financial bondage if you don’t have the requisite discipline. In the event that you are in a position where your balance has ballooned to an unmanageable level, you could consider getting a personal loan or a debt consolidation loan to get your debt under control.