Many people use personal loans for different reasons – whether to pay off medical bills or buy an RV – but consolidating credit card debt may be the most common. You can eliminate the need to make multiple monthly payments on high-interest credit cards by obtaining a personal loan to settle your debt-often at lower interest rates.
Can Personal Loan Can Help You Pay Off Credit Card Debt?
Paying your credit card debt using a personal loan is a form of debt consolidation, and it has several benefits. The following are three reasons to take out a personal loan to pay off your credit card debt:
You Can Pay Off All Your Credit Card Debt
You can eliminate credit card debt with a personal loan if you have high credit card balances. You will gain peace of mind by paying off your credit card debt and improved credit score. It is important to remember that repaying your debt with a personal loan is not the same as becoming debt-free. Your loan still needs to be paid off after you repay your credit cards. Paying off your high-interest credit card balances, and saying goodbye to the fees that come with it, can feel like a huge relief and is one of the most significant advantages of paying off the debt with a personal loan.
Your Interest Rate Will Probably Be Lower
The average credit card APR is around 16 per cent in the current market. However, many of the best personal loan rates hover at about 6 per cent. Although your actual interest rate depends on factors such as your credit score, the amount you wish to borrow, and the terms of your loan, there is a good chance that you will pay less for a personal loan than you would for a credit card. Using your loan to pay off your credit card debt could save a lot of money in interest charges by taking out a loan with a lower interest rate than you’re paying on your credit cards.
You Will Only Have One Payment Per Month
It can be challenging to balance multiple credit card payments each month. Consolidating your debt with a personal loan makes it easier to pay one monthly bill. If you do this, you will be able to plan for your monthly loan payment, which will expedite your repayment process.
Don’t forget: The more money you put toward your loan payments per month, the more you’ll save in interest fees over time.
Final Thought
Paying off your credit card debt through a personal loan can help you regain control of your finances. Nevertheless, personal loans aren’t the only option for people seeking to repay credit card debt. Another good way to consolidate credit card debt is to use a balance transfer credit card. Weigh all options before applying for a loan. You should ensure the personal loan you are considering has lower interest rates than your credit cards, and you should consider a plan for paying off your loan without increasing your credit card debt.
