Credit card debts can feel terrifying, especially if you are striving to pay the card payments on time.
In such cases, some of us turn to our family and friends or borrow money from lenders who typically charge a high interest along with security. Instead of dealing with such high prices, there are a plethora of viable options that you can consider.
So, in situations where you own various credit cards, paying them off by taking an instant personal loan with low interest can be a smart financial approach.
Though logically, taking another credit to pay off an already existing debt does not make sense, the fact remains that their financial institutions have facilitated such loans. For example, you can take on a personal loan to pay off credit, and since the loan is payable for tenures of up to 60 months, it may be easier for you to repay the loan.
But it is quite difficult for the borrowers who take another loan to pay off the other loan. Let us explore the advantages of using a personal loan to pay off a credit card debt:
List of 4 Advantages Of Using A Personal Loan To Pay Off A Credit Card Debt:
1. It Lowers the Overall Interest Rate.
The key advantage of this approach is that it can decrease the yearly interest rate of your overall debts. As mentioned above, a personal loan with a low-interest rate means repaying smaller amounts every month, which can not only lessen the cost of debt but can also help you get rid of it faster. So, your aim should be to seek a personal loan whose interest rate is lower than what you are paying on your credit cards.
But, before you select a personal loan, use a personal loan calculator to estimate the amount to pay as loan installments. An online and easiest tool used to calculate the EMI amount you have to pay per month and per year.
It only requires the details of the principal amount, interest rate, and tenure details. In addition to this, also examine various repayment terms proposed by the lender as well as prepayment penalties that they may impose for repaying your loan early.
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2. It Consolidates All Debts Into One Payment.
When struggling to handle multiple credit card payments, it can be challenging to track all the debts that you are going to pay each month. This is when a personal loan is useful.
Availing of a personal loan can assist you to merge all your EMIs and bills into a single payment. This way, you can quickly pay off your debts without maintaining a record of all the multiple payments, thus making your debts more manageable. Furthermore, it enables you to concentrate on paying just one debt every month instead of numerous smaller payments that can take a toll on your mental well-being.
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3. It Lowers Monthly Payments.
Are you willing to cut down on the regular payments associated with your debts? Then a personal loan may be exactly what you want. When you calculate the amount each month with a debt consolidation calculator, you will see that the installments of your loan are much lower than the total minimum payments of all your credit cards. Therefore, having an instant personal loan can drop your periodic payments while enabling you to pay them off quicker.
4. It Boosts the Credit Score.
Combining multiple credit cards into a low-interest personal loan is likely to build your credit score in the long run. With credit cards, it isn’t easy to remember the due date of the payment. However, since personal loans have a fixed payment schedule, interest rate, and monthly fee, you will know the accurate time to clear all your debts.
By getting a personal loan, you can make timely payments on your credit card bills, which, in turn, would recover your credit score gradually. Furthermore, it will also build a solid repayment history, which plays a significant role when applying for a personal loan.
A good and ideal CIBIL score helps to instant approval of the loan. Yet there is also a loan available for low credit scores but it takes too much time for approval. Hence, maintaining an ideal credit score is a choice.
Final thoughts
Hence, at last, we find that availing of a personal loan can be an excellent idea to save money and clear your debts sooner. But, if not done correctly, it can also harm your overall credit card debt. Therefore, it is advisable to proceed further with this strategy only if you are completely sure of handling your credit responsibly.
Besides, while applying for a personal loan, watch out for other benefits and tools that might be available. Plus, remember to make regular payments toward your new loan to avoid making the situation more serious for your credit.