Paying off debts can be very overwhelming most times. While no one wants to take a loan to pay off or consolidate debts, sometimes you have no choice but to do so. Due to the high interest on credit cards, it is important to know when to use a personal loan to pay off a credit card bill.
Generally, personal loans can be used to meet several needs like wedding bills, medical bills, home improvement bills, and even debt consolidation. With a personal loan, you can pay off credit card bills but timing is quite important. In some cases, you may not need a personal loan to pay off these debts. Times when you need to use personal loans to pay your credit card bills are stated in the write-up.
When to Use a Personal Loan to Pay Off Credit Card Bill
Debt consolidation means taking out a loan to pay off multiple debts. Through a personal loan, you can easily pay off these loans including your credit card bill. However, this process is beneficial if you can qualify for a personal loan with affordable interest rates. The following are when you can use a personal loan to pay off credit card bill:
To qualify for a lower interest rate
Qualifying for the best personal loan insurance rate and term makes paying off your credit card bills much easier. Comparing several personal loan rates and quotes can help you find the best interest rates for a personal loan.
To consolidate your credit card loans into a single payment
Managing multiple credit cards with varying payments and APRs can be difficult. A personal loan can help you reduce payments and APRs. A debt repayment calculator can help you determine how soon you can pay off debt at a lower interest rate. For example, if you have $12,000 in debt with a 10% APR, obtaining a personal loan may allow you to contribute $200 per month and begin paying off more than your interest.
Get a minimal monthly payment
A personal loan with a lower annual percentage rate and a predetermined repayment plan can be just what you need if you’re drowning in credit card debt and still find yourself paying more in interest each month than you make. If your consolidated debt has a lower annual percentage rate and a long enough repayment period, you might be able to negotiate a lower monthly payment. To be certain, you’ll need to experiment with a debt consolidation calculator.
Want to be debt-free
One major issue with credit cards is that you might never be able to pay off your debt if you continue to use them for purchases. Contrarily, personal loans have fixed interest rates, fixed monthly payments, and a fixed repayment schedule that specifies when you will finally pay off your debt. You might be better off using a personal loan to consolidate debt before moving to cash or debit cards if you’re sick of paying off credit cards but never seeing any progress.
When to Not Use a Personal Loan to Pay Off Credit Card Bill
While there are several cases when you use a personal loan to pay off your credit card bill, there are some cases when it is not a good idea. A different consolidation method may be a good idea depending on your needs and situation. These methods include:
Paying off a small debt Quickly
If you have a credit card bill you can easily pay off within 12 to 21 months, instead of a personal loan you may want to consider applying for a balance transfer credit card. With no APR credit card percentage, you can easily qualify for an interest balance transfer of up to 21 months. However, you will be required to pay a balance transfer fee which costs between 3 to 5% of your transferred balance upfront. Through this method, you can easily save more on interest if you pay down debts during your introductory offer.
Keeping your spending habits
When you consolidate your credit card bills, it does not change your bad spending habits which cause your inability to repay your debt. Instead, it will get you into more debt if you continue in that habit. Rethinking your financial plan before you consolidate your debt can help you handle your spending habits. Consulting a personal finance coach or professional and learning about different budgeting tactics can help you find what works for your habit and keep you out of debt.
You are desperately in need of help with Your debt
There are times when your debts must have accumulated beyond your power and savings to pay off the debt. While taking a personal loan for debt consolidation seems like a good idea, working with a debt relief organization or a non-profit Consumer Credit Counseling Service is a better option. Also, debt management plans or debt settlement plans can help out in this situation. However, if you have accumulated too much debt that seems almost impossible to repay in the long run, you may be an applicant for bankruptcy.
Other Alternatives to Manage Credit Card Bills
While it is a good idea to pay off credit card bills with a personal loan, it is not always the best for everyone. Other alternatives to managing your credit card bills include:
- Debt management plans.
- Balance transfers.
- Credit card debt settlement.
Through these processes, you can use a personal loan to pay off your credit card bill easily. Paying off your debt will free up cash each month, allowing you to save more. Consider taking out personal loans and other debt consolidation programs. To avoid incurring late fees while repaying debt, refrain from using credit cards and instead use cash or debit cards.