Pros and Cons of Paying Off Credit Cards Using Personal Loans

 

Even with student loans looming over our heads, it seems credit cards may be a bigger threat. With low incomes and huge bills, it can get really scary sometimes.

Often referred as Credit Card Consolidation Loan, these loans come with a lower interest rate than what you’re paying on your credit card as well as a set repayment period. This allows you to get a defined repayment plan.

Finding themselves in deep credit debt, several people turn towards personal loans to pay off the debts. While it may be a good move to use a personal loan to pay off consolidate credit card debt, there are a few cons to consider before going forward with it.

How to pay off a credit card with personal loan?

Personal loan in an unsecure loan offered through credit union, bank or other lending institutions. The terms and interest rate depend on your credit score. You can use an online aggregate to apply for several offers or you go straight to a lending institute.

While applying for a loan, you need to provide your name, address, phone number, date of birth, employer information and social security number.

There may be a chance you might be required to provide name, address and telephone numbers of some of your relatives – who will be contacted if you do not finish your loan payments.

PROS

LOW INTEREST RATES

The interest rates go down based on your credit scores. Even a small change in interest rates makes a huge difference when acquiring a loan.

SINGLE PAYMENT

Move debt from several credit cards to one – this results in simplifying the payment and you won’t have to worry about different payment dates and amounts. This means you owe the money to one lender instead of several.

QUICK AND EASY DEBT PAYOFF

By simplifying and moving debt to one credit card, you pay one fixed interest rate and one debt payment every month. This leads to easy and quick debt payoff.

 

CONS

HIGH INTEREST RATES

As stated before, you need an excellent credit score to get best deals as most personal loan companies offer low interest rates.

PAYING A FEE

Using personal loans to pay off credit cards could be even more expensive with low interest rates. This is because some personal loan companies charge an origination fee which ranges from 1-6% of the loan amount.

PROBLEMS IN AFFORDING

Considering the point above and if you move your credit card balance to a credit card consolidation loan which you have to pay off in just a few years – might result in overstepping your budget. 

Before applying for a personal loan, run the numbers and check if you can pay off your debt smoothly. Using a personal loan for people with good credit score and income is a smart move but it’s not a good idea for everyone. 

Be honest with yourself about your spending habits, if you have poor credit you will end up with fresh bills on your card. Track your credit regularly and get in touch with banks and institutions of you require assistance. 

 

 

Published by Anya

Founder at The TechGirl Journal & The IDEA Bucket ; Anya lives in California while working in the field of Computational Genomics. TechGirl Journal is focussed on the lifestyle of a girl in STEM and tips on how to build a business and a career in tech with a focus on skill-development, interviews, internship, personal projects, and pet-peeves! The IDEA Bucket is focused on small business ventures and practical, urban lifestyles. For specific inquiries, you can e-mail: hello@techgirljournal.com

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: