Is it Smart to Pay Your Credit Card Debt with Your Personal Loan?

Credit card debt is the #1 reason people file for bankruptcy. It can be devastating when you are stuck with a hefty credit card debt. It is even worse if the interest rates you are paying monthly are exorbitant. Your monthly payments can leave you feeling overwhelmed.

bad credit personal loansBecause you still have to pay off your credit card debt, you are probably looking for ways to reduce both your monthly payments and the interest rates.

One potential option that consumers turn to is taking a personal loan to refinance their debt.
However, this strategy has its ups and downs. Before you jump right into it, it is wise you give it a careful thought to see if it is the best option for you.

The benefit of using a personal loan to pay your credit card debt

1. You can get lower interest rates

A debt consolidation loan helps you reduce the amount you are paying in interest towards your debts. There are debt consolidation companies you can work with, but some consumers don’t like working with them because they make you close the accounts that are included in the consolidation loan. And hey, that’s actually a good thing since many people can’t control their spending and get into trouble again after paying off their consolidation loan! But another great option is taking out a personal loan. You can save a substantial amount of money if you transfer the balances of your high-interest-rate credit cards to a low-interest-rate personal loan.

2. You only make a single payment

If you have more than one credit card, trying to make all your monthly payments on time is not a simple thing. However, when you use a personal loan to consolidate your debts, the debt payoff is somewhat easier. That is because you only have to make a single payment each month.

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3. You can pay off your debt faster

Having to keep up with multiple debts can be confusing. Especially since they will all have varying interest rates, due dates and minimum payments. Its easy to get confused and send the right amount to the wrong lender! Trust me, it happens. I once meant to pay JcPenny but ended up paying Macy’s twice! Nevertheless, with a personal loan, you will only focus on one payment and one creditor. Which will make repayment a lot easier.

The fact that you will only be thinking about a single debt can motivate you to pay the debt faster. You can invest every dime you have loan repayment.

Using a personal loan to pay off your debt has a lot of pros, but there are also a few cons!

The downsides of using a personal loan to pay your credit card debt

1. Some personal loans come with high-interest rate

Personal loans tend to have very reasonable interest rates. EXCEPT when they are for people with bad credit. So. it’s important that take a good look at the rate being charged before you move your credit card debt to a high-interest personal loan. You may have the convenience of one payment, but it won’t be worth it if you are paying more money each month!

2. Not changing your current spending habits.

Consolidating your debt so you can pay it off faster is a great way to get out of debt…..IF you change your spending habits! Too many people consolidate their debt and then start charging again on their credit cards!

Statistics reveal that 70% of U.S. consumers who opt for a consolidation loan, such as a personal loan or other consolidation loans to pay off their debt end up deeper in debt because of continuing their bad spending habits.

3. Not putting the cash you save into paying off your debt faster

So now that you have consolidated your debt to a low (or lower )interest personal loan you will find that you have some extra money in your budget. That money isn’t for spending! Its should be put back into paying off your personal loan even faster! Just because you have 5 years to pay off the personal loan, doesn’t mean you have to take 5 years! Put all your extra money into reducing your debt.

What to do if you have bad credit

If you have bad credit look for a SECURED personal loan. Banks will give you a better rate if they have collateral. You will also qualify for a larger personal loan, and get a longer repayment term. Many times when a bank sees an UNSECURED bad credit personal loan request, if it gets approved, it’s for so little you can’t consolidate your debt onto the loan. The bank wants to minimize its risk, so it will only give you the loan for around 36 months instead of 60 months. And the rate is generally so high you are not saving any money.

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With a secured personal loan, they have the collateral so they feel safer lending a larger amount, with a better interest rate, and for a longer term. A good way to find a secured personal loan would be your local Credit Union. Having worked at a federal credit union (FCU)for several years I know that they have many programs to help their members. You can also check with your local bank.

Since 1997 we have been helping entrepreneurs to finance their dream businesses. In 2000 we added a section to our site for people interested in home-based businesses. Why?  The best way to get out of debt is to make more money!

If you are interested in possibly starting your own home business. Please visit us here. We have articles and free/cheap business opportunities that don’t require a lot of money to start or a lot of training to get started making money!

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pay your credit card debt with a personal loan

Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

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NewHorizon.org is an independent, advertising supported website. The owner of the site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. NewHorizon.org has not reviewed all available credit card offers in the marketplace.

Privacy Policy Terms of Use

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