Paying Down Debt: Can You Use a Personal Loan To Pay Down Credit Card Debt?
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What Is a Personal Loan?
Can a Personal Loan Be Used To Pay Down a Credit Card?
The Pros and Cons of Using a Personal Loan To Pay Down Credit Card Debt
Benefits of a Personal Loan To Pay Down Credit Card Debt
A personal loan can allow you to pay down all of your credit card debts. When you take a personal loan, you’ll likely choose to borrow an amount that’s enough to pay all of your credit card balances in full. This is what debt consolidation is. Your credit score could improve. When you pay down multiple accounts, you’ll have fewer outstanding balances, which could have a positive effect on your credit score. A personal loan will also add to your credit mix, which plays a factor in your credit score calculation. You might save money on interest charges. Personal loans are likely to offer lower interest rates than credit cards, which will allow you to save money on interest. Your monthly payments may be lower. Either by having a lower interest rate or by having a longer repayment period, it’s possible to have a lower monthly payment when you use a personal loan to pay down your credit card balances. You’ll only have to make one monthly payment. One of the most attractive things about using a personal loan to pay down your credit card debt is that you can consolidate your balances into one loan. And when you have just a single payment to make each month, your finances may be easier to manage.
Downsides of Using Personal Loans To Pay for Credit Card Debt
You’ll be taking out another loan. The reason that you may need to use a personal loan to pay down your credit cards is that you’ve been unable to control your level of debt. Taking out a personal loan just means that you’ll owe money to another type of loan. You may be tempted to continue to incur more credit card debt. Once you’ve paid off your existing credit card debt, you will have freed up your lines of credit. And if you’ve gotten used to using your credit cards to pay for your regular monthly expenses, then you might continue to use them and incur more debt. Personal loans can have fees. You may have to pay origination fees to take out a personal loan. And you can also incur late payment fees and insufficient funds fees if you don’t manage your personal loan responsibly. A personal loan may not have a lower interest rate. If you have excellent credit, then a personal loan may offer you a lower interest rate than your credit cards. But if you’re using a high percentage of your total available credit and you’ve had problems making your monthly credit card payments, then you may not be able to qualify for a personal loan with a lower interest rate than the credit card accounts you currently have.
Alternatives to Personal Loans for Paying Down Credit Card Debt
Tips on Getting a Personal Loan To Pay Down Credit Card Debt
Looking for a Loan
Getting Your Documents Together
Applying for Loans
Compare Personal Loan Rates With Lantern by SoFi
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