Should You Use a Personal Loan to Pay Off Credit Cards

Will I spend my entire life paying off credit card debts that never seem to end? This question haunts many people who are struggling to clear multiple credit card debts at the earliest. Specialists in debt management say that unless you stop using your credit card for ongoing purchases, eliminating credit card debts is a distant dream. They suggest you should take out a personal loan to clear off the debt to get back on track with your finances. However, here again, you should know when and how!

When should you take a personal loan for paying off credit card debts?

There are some instances where applying for a personal loan to pay off credit card loans make sense. Here, you are just moving the cash around. The debt exists, but you transfer the money you have from loan to another. The new debt has better terms and conditions that make it simple for you to clear it off. However, before taking out a personal loan, consult a competent financial advisor first. The professional will be able to assess your profile and suggest to you the right step to take for your specific needs.

Why personal loans for credit card loans?

If you want to put an end to credit card debt, a personal loan will help you. The interest rate you pay on personal loans is much lower than credit card loans. You will get peace of mind and financial stability faster.  Personal loans have the following benefits-

  1. Lower interest rates– If you have multiple credit cards and paying interest on them, it makes sense to take a personal loan and get one loan to pay off. The interest rates for a personal loan are comparatively lower; however, it does depend upon certain factors like your credit history, the amount of the loan you need, creditworthiness, and more. Debt management professionals advise you to check the terms and conditions of the personal loan before you apply for them. Research thoroughly and assess your current debt situation with skilled professionals to get the best options.
  2. Switch to a single payment– If you have several credit cards, you need to remember their due dates for payments. This is cumbersome and frustrating. It makes sense to move to a personal loan where you can clear your credit card debt with a single payment every month in installments. The process is simple and takes off the stress from your shoulders.
  3. Reduce installment payments every month– If you use a personal loan to consolidate your credit card debts, the installment amount you pay every month reduces. If you take the total of installment amounts you pay for multiple credit card loans, you will find that the installment amount you pay every month for your personal loan is much lower.
  4. Clear debt with certainty– The rate of interest is fixed, and so is the duration of the personal loan. The monthly installment you pay is affordable, and this means the debt will be cleared over time. You can get peace of mind when you know you will be financially stable in the future as your debts are in control.

Get out of debts quicker

Experts in debt management state when you reduce payments every month, you can create a debt snowball that helps you get rid of personal loans faster. For instance, if you used to pay $500 every month as minimum installments to your credit card companies, you can save $100 and pay $400 on your loan every month. The extra $100 you save can be paid directly towards the principal amount of your loan that will help you to eliminate the debt faster.

2 Key factors to note when applying for personal loans to pay off credit card debts-

  1. There might be a fee– There are some personal loan lenders that might charge you a fee for loan disbursement. Talk with them and check their terms and conditions.
  2. The exit is hard because there are foreclosure charges– It is difficult for you to exit from a personal loan as lenders have foreclosure charges you need to bear. They suggest you should carefully consider all the pros and cons of your current financial condition before you make a choice.

Restructuring your credit card loans

Only taking out a personal loan to eliminate credit card loans is not enough. You should save money and cut down on monthly expenses to eliminate the existing debt. If you are unable to change your spending patterns, taking out a personal loan to clear off credit card debts is not a good idea.

Stay out of debt to get the financial stability you deserve

Taking out a personal loan does not mean you start piling up new credit card balances again. Check your spending habits and focus on clearing your personal loan. Moreover, get to the root cause of the problem- Why do you get into debt? Do you have a spending habit you cannot control? Do you find it challenging to stick to a budget every month? These are just some of the issues you need to address to eliminate and stay out of debt.

Improve your financial health over time

Once you have eradicated the debt, the next step is to stay out of it. The following tips will help-

  1. Set up a monthly budget and stick to it.
  2. Write down your recurring expenses and compare them to your income. Cut down on miscellaneous expenses like partying, eating out, etc. Learn how to cook- you will save a lot of money over eating out.
  3. Keep aside at least 20% of your income. Transfer them to a different bank account to create an emergency fund.
  4. Invest wisely and always consult a competent financial advisor for guidance. These professionals know the financial market and can advise you on how to invest wisely.

Personal loans will help you arrest financial credit card debt woes over time. However, be cautious, smart, and educate yourself thoroughly. Speak to skilled financial advisors and understand the terms of the personal loan clearly before taking the final step!


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