Those of you who have got a huge amount of debt from credit cards must be agreeing how frustrating it is. You may keep on paying the minimum payment necessary for each of the cards. Should you not consider taking out a loan to clear your credit card balance?
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Often people also take a personal loan and clear their debt for credit card, as the rate of interest of a few personal loans is a bit lower than credit card. So, you can save some of your interest money. However, going for any personal loan also has a few pros and cons and hence you must be a bit careful when you decide to go for a personal loan to clear your debt on credit card.
When it can be wise to use any personal loan for consolidating the credit card debt?
Considering personal loans can surely be another way of consolidating your debts of credit card, based on what interest rates the lender charges, which may be often lower than credit cards.
Therefore, if you are having many credit card monthly payments and also paying a very high interest rates, then consolidating all your debt into any single personal loan having a lower rate of interest than you are currently paying can be wise decision.
However, remember that most lenders offer $1,000 to $5,000 loan amount. As a result, personal loans may be your viable alternative only if your debt falls within that range.
A few drawbacks of personal loan
- It is also another debt
You must understand that you may clear your debts on a credit card but at the same time you are opening another debt for you, and here too you have to pay regularly a monthly installments failing which your interest will increase.
- Often it may be difficult avoiding credit card use
If you do not have discipline on your spending then certainly you cannot avoid making use of your credit card again to purchase something. As a result, your debt may keep on increasing again.
- Lower interest of personal loan is not granted
The interest rate on any personal loan will remain lower as long as you have a better credit history. However, if your credit rating is poor then the interest rate of personal loan can also be much higher.
- A certain fees are also charged
Remember, personal loans are not completely free. There are processing fees also included. Besides that if you fail to pay in time then the late payment charges can also be quite hefty that you have to bear.
If you have got a better control of your finances then it makes good sense to go for any personal loan otherwise you are creating another debt.