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.
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.
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.
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.