Advantages and disadvantages of a personal loan to pay off credit cards
Understanding whether a loan to pay off credit cards is appropriate is worth determining all the pros and cons.
Benefits
Payment control. The main advantage of a personal loan is fixed interest rates and stable payments. Thus, a credit card personal loan will help improve your financial situation.
Low annual interest. Everyone knows that credit cards have the highest interest rates. If you regularly make payments and do not allow fines, then there is an opportunity to issue personal loans for credit cards with a minimum interest rate. Thus, most of the money will go to repayment of the loan, not interest. It will significantly reduce the final payments and bring the final price closer.
Making a single payment. When applying for a personal loan credit cards, you can combine all costs into one. Thanks to this, you will not have to worry about depositing funds into several accounts. Plus, the number of commissions and interest is reduced. It will help to save a little.
Disadvantages
The size of the debt does not decrease. If you owe $20,000, it will remain $20,000. But you will owe another creditor.
Not all loans are exempt from commissions. You are wrong if you thought that a personal loan for credit card debt would free you from all overpayments. Often, when rescheduling debts, you have to pay a commission. It is necessary to remember to choose the best loan to pay off credit cards.
The desire to use a credit card does not disappear. The habit of paying for everything with a card with a limit is not going anywhere. You will have to work hard not to take another credit card for free use.
Interest rates will not necessarily be low. A specialist studies your credit history when issuing a credit cards personal loans. Based on this information, they decide on the granting and size of the loan and the amount of interest. If you have late or outstanding payments, there is no guarantee that a loan will be more profitable than a credit card.
Making a deposit. There are two options for a personal loan:
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unsecured;
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secured.
You can apply for a secured loan if you have a bad credit history. This option will help you get financing on favorable terms. Movable or immovable property is accepted as collateral. But be careful. In non-payment, the car or the property pledged will be seized.
If you decide to pay off your credit card debt with a personal loan, you should compare all the offers. It is especially worth paying attention to interest and the maximum financial assistance. You should also study the terms and conditions of making payments.
What other solutions are there for repaying the loan
You should try alternative options if you didn't get a personal loan to pay off a credit card. You can arrange a balance transfer at zero interest if you have a small debt. You can issue a card for a period of 12 to 21 months. But, for this, you need to have a perfect credit history.
Try talking to the lender. Some companies are ready to go to meet their customers. It will work in the event of a sudden loss of a source of income. It would help if you did not wait for the moment when a lot of debt accumulates. As soon as it becomes clear that it is impossible to pay the debt, you should contact the bank. Perhaps you will be reduced in interest or the size of the monthly payment.
Credit counseling. Particular companies will tell you how to deal with debts. Specialists know how to pay off a credit card correctly and will create a financial plan. But it would help if you were prepared that the whole procedure will take several years.
The snowball method. With this strategy, you will have to pay only the body of the smallest loan. After that, you should move on to more and then even more. In this way, you can handle all the loans.
Debt avalanche method. In this case, it is necessary to deposit money to repay the loan, which has the highest annual rate. Then it would help if you went to the second largest and the third. Thus, you can quickly repay those loans requiring the most money. This option is a little longer than the previous one. But in financial terms, it is more profitable.
