If it’s taking you longer to pay off your credit card debt than you planned, you may be considering a personal loan. Although planned spending and saving are still the best ways to manage debt, life happens. So, if you find yourself with more credit card debt than you intended a personal loan might be right for you. Consolidating your credit card payments into one monthly payment could help you get to your end goal quicker and might even cost you less in interest payments.
A few things to consider before applying for a personal loan.
Interest rates
If you’re using more than one credit card, you’re probably paying a different APR for each card. Any balance carried over each month collects interest, which could get you trapped in the repayment cycle. A personal loan would help consolidate your credit card debt into one payment with one interest rate. And if that wasn’t enough incentive, personal loans typically have much lower rates than the average credit cards. Which means your debt could be paid off faster and with less interest. To qualify for the best personal loan interest rate you need a good credit score. If your credit history has some blemishes, make sure you double check that the interest rate makes sense for your plans. You don’t need it higher than your credit card rates!
Your repayment schedule
If you’re looking to trade-in fluctuating balances and payments for a set monthly payment a personal loan could be the way to go. A fixed-term loan offers the added stability of knowing exactly when your loan will be paid. This can take the guess work out of managing your credit card balances. By consolidating your credit cards into a fixed-term loan, you’ll be able to make one monthly payment and know that each month you’re getting closer to your financial goals.
Staying at zero
Once you’ve paid off your credit card debt with a personal loan beware of a false sense of debtless-ness. Put those credit cards away or use them sparingly until your loan is paid in full. Pro Tip: Your first instinct may be to cancel your credit cards. Yet, if you can keep them open without falling back into monthly debt, it can help establish a longer credit card history which is good for your credit score.
There are many things to consider before submitting a loan application. A personal loan isn’t an easy out, there can be late fees, loan origination fees and other related fees. So, you’ll want to make sure to do a thorough comparison of your credit card balances, APR, annual fees, etc., with the loan’s terms and agreements. Consolidating your debt into one monthly payment can be the answer to reaching your financial goals, but you’ll still need a plan, budget, and a strong commitment to succeed.
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