When to Use a Personal Loan to Pay Off Credit Card Debt | Debt Consolidation
There’s no denying credit cards are convenient. For many of us, they allow us to pay for things safely and are our everyday card, or are there to cover us when we’re in an emergency, but they can also become a trap.
The problem is, they often allow us to fund things we wouldn’t otherwise be able to, and allow us to lie to ourselves about our ability to afford something or our willingness to pay for it.
Saying, “I can afford it,” is easy when you see something you want – or have a situation that has to be paid for – and have a credit card in your pocket with “space” on it.
Thing is, while credit cards can be a great tool when paid off monthly, as soon as we fall out of the habit of taking 1-3 months to pay off each expense, we’re going to be racking up some serious debt and interest – debt and interest we often aren’t able to pay back.
Credit card interest rates are high (average of 17%) and late charges can be deadly to its affordability and your credit rating, so what can you do? Many take out a personal loan to pay off their credit card debt, but is this a good idea?
Should I use a personal loan to pay off my credit cards?
The answer is… it depends. Here are a few things you need to consider:
- Are your credit card interest rates high? If your credit card interest rates are already low (say under 10%), then you’re probably not going to save much money by transferring that debt to a loan.
- Are you dedicated to becoming debt-free? You need to seriously consider your dedication and what you’re going to do with your credit cards once you transfer the debt. The biggest mistake you can make is to transfer your debt to a loan and then continue to use your credit cards as you did before. You’ll fall into a deep pit that’s going to be almost impossible to claw your way out of, so if you’re a chronic spender, you need to think about what you need to do to the prevent this.
Consider addressing the psychological aspect of what’s allowing you to do this damage to your financial situation, look at your expenses and income and if you can change anything there, and close credit card accounts after you’ve got the loan if you have to. It’s better to take a temporary hit to your credit score than end up ruining it entirely.
- Do you want to be “forced” to pay off your debt? One major benefit of paying off your credit card debt with a loan is that a loan has a repayment period, meaning you can’t keep your debt forever. Credit card debt, if you only pay the minimum, can stay with you forever, but when you have a loan you can rest assured that if you make the payments every month, you’ll pay it off by the end of the loan’s term.
- Is one big payment easier for you, or are you more motivated by small balances? Having multiple credit cards can make the debt management process a difficult one to keep on top of. Consolidating it into one regular, fixed amount can be beneficial for your mental health, but if you simply want to get it paid off as soon as possible, “defeating” certain cards and balances more frequently may be more motivating.
When shouldn’t I use a loan to pay off credit card debt?
Personal loans are often the best way to get on top of your credit card debt and get back on the right track, but there are some circumstances when it may not be a good idea.
- If you can pay it off in 18 months or less, and the interest isn’t crazy, you can probably just go ahead and start chipping away at it.
- Your credit card debt may be a symptom and not the problem. If you are also having difficulties making ends meet, paying your utilities or even affording food and clothing then you need more help than a loan, providing you could qualify for one, would give you. There is help available. Credit.org in particular will help you get back on track with some sort of debt management plan. They may even suggest that applying for bankruptcy is the best thing for you to do next.
What’s the difference between a personal loan and a debt consolidation loan?
There really isn’t any difference between a personal loan and a debt consolidation loan, it’s just a term the finance industry uses for personal loans that are designed to tackle debt. You can usually specify that your personal loan application is for debt consolidation purposes when you compare loans or apply.
Requirements for Getting a Personal Loan for Debt Consolidation
To get the best single figure APR loans, you will need a credit score of something around 760. As long as you have been paying at least the minimum on time every month then your credit is likely not to have been so badly affected that you can't get a loan that’s cheaper than the rate on your credit card.
If you haven’t been quite so careful that may not be so easy and if the interest on a prospective loan is the same as on the credit card balance then there might be little point in moving the debt. However, you would get the benefits of fixed payments and an end date.
How to Apply for a Personal Loan to Pay Off Credit Card Debt
Applying for a personal loan can be tedious and time consuming but US Loan Applications makes it quick, simple and will help ensure that you get exactly the right deal for you and your circumstances.
Our application takes just a few minutes to complete, and then we compare all the terms our lenders may offer and connect you with the best. We take all the drudgery out of the process and give you the greatest chance of getting the loan you need with no hassle.
We can help with personal loans from $1,000 to $35,000, and you will often get an answer within minutes. Best of all, it’s completely free to get the best loan through us, so apply now.