Need A Loan To Pay Off Credit Card Debt

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Need A Loan To Pay Off Credit Card Debt

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How To Pay Off $22,000 In Credit Card Debt In 2 Years

If you’re struggling to get rid of credit card debt, you’re not alone. The average interest rate on credit cards in the US is only 20%, and many card issuers charge more. Here, we’ll discuss whether it makes sense to use a personal loan to pay off credit card debt, the pros and cons of personal loans for debt consolidation, and the alternatives.

Use a personal loan to pay off credit cards if the interest rate on the loan is lower than your credit card interest rate.

Let’s say you purchased a new roof for your home with a credit card. The credit card interest rate is 21%. When interest accumulates, it seems like you’ll never pay it off. Then you will see that you can get a personal loan with an interest rate of 9%. You decide to take out a loan, use the loan money to pay off your credit card, and repay the loan. This way, you will pay less interest.

This is debt consolidation. Debt consolidation means taking out a personal loan to pay off another debt. You then pay back the loan (which usually has lower interest rates than, say, credit cards).

What Are The Pros And Cons Of A Personal Loan To Pay Off Credit Cards? — Tally

Here’s an example of how much time and money you can save by using a personal loan to consolidate credit card debt:

If you make regular payments of $450 on your credit card debt, it will take 51 months to pay off and you will spend $7,799 in interest.

If you take out a personal loan with a low interest rate of 9%, the loan can be repaid in 39 months, and you will pay a total of $2,356. That’s 12 months of savings and $5,443.

Yes – if a personal loan offers low interest and saves you money, it’s better than a credit card loan.

Lines Of Credit: When To Use Them And When To Avoid Them

With most personal loans, the amount you pay each month stays the same. These are so-called “fixed rate” loans. Although it may seem difficult at times, paying these fixed monthly payments will pay off steadily in your debt consolidation.

For credit cards, the monthly payment may vary. A credit card’s “minimum payment” is usually a percentage of the balance. As interest accumulates, the balance changes, and so does the monthly payment.

Pro Tip: Making fixed payments (like with a loan) shortens the time it takes to pay off the loan and saves you money too.

Before you decide to use a personal loan to clear your credit card balance, review the pros and cons.

Seedly’s Guide: Why Getting Out Of Debt Should Be Your Priority?

Pro tip: If you’re struggling with excessive spending, a credit counselor can help. Talk to someone before you decide to take out a loan. There may be better options to help you on your way to financial freedom.

If you shop around and find that using a personal loan to pay off your credit card debt isn’t saving you money, you need an alternative. Of course, none of these alternatives are easy – but each is proven to work.

If you’re looking for personal loans because you’re having trouble making regular credit card payments, call your lender and let them know what’s going on. Be honest about the issues and ask them to work with you. They may lower your interest rate or forgive part of the loan.

It’s important to remember that if your lender lowers your interest rate or pays less on your loan than you owe, the agreement will be reported to the credit bureaus and affect your credit score. Any loan payments can remain on your credit record for up to seven years. However, if you make late payments or make partial payments, your credit score is already negatively affected. It’s important to stop the bleeding and build strong credit.

What Happens If You Only Pay The Minimum On Your Credit Card

Pro Tip: If your problem isn’t big but bad credit, you can get a bad credit personal loan. But don’t settle for the first loan you see. Shopping is still important.

If credit card debt is giving you sleepless nights and you think your budget needs some tweaking, this is the first place to look. Any deductions you make (even small ones) can be rolled over to your credit card debt, allowing you to beat interest and pay it off faster. You don’t have to cut anything out of your life completely, but consider cutting back on spending until your credit card debt is paid off. Here are some easy ways to get started:

If you’re struggling with debt, you’ve probably thought about how to make more money. Here are some ideas that won’t take over all your free time, but will add extra money to your monthly budget:

If you decide that a debt consolidation loan is the best way to become debt free, you can easily get started. Here is a quick overview of the steps. For more information, see our comprehensive guide to getting a personal loan.

Should You Pay Off Your Car Loan Or Credit Card?

Order a free copy of your credit report. One in five Americans found at least one error on their credit reports. Even one mistake can lower your credit score, so carefully review your three reports—from Experian, TransUnion, and Equifax—to make sure the information is correct. If you find any errors, please report them to the Inquiry Office. They have 30-45 days to correct the information or remove it from the report. If this seems like a problem, remember that the best loan rates and terms go to borrowers with strong credit.

Shop creditor. Everything from minimum credit scores to interest rates and personal loan terms vary from lender to lender, so apply to several. The best personal loan lenders run a preferential credit check to see what you qualify for (it doesn’t affect your credit score). Once they do the soft check, they will tell you what your interest rate will be. Only when you meet with the lender is there a hard credit check. This check puts a small dent in your credit score, but it recovers quickly with regular monthly payments.

Prepare documents. When a lender runs a strict credit check to verify all of your information, there is usually a request for documentation. You may be asked to provide proof of identity, payment statements or tax returns. The sooner you submit this to the lender, the sooner you will receive the loan.

Sign the loan documents and wait for funding. Personal loan lenders can take anywhere from one business day to several weeks to deposit funds into your bank account, so be sure to ask lenders about funding times when shopping around.

Should You Use A Personal Loan To Pay Off Credit Card?

Pro Tip: To save time, get proof of identity, employer information, pay stubs and last year’s tax return before applying for a loan.

Debt consolidation with a personal loan can be a faster and cheaper way to pay off your credit card balance. Before you take the plunge, cut costs, or take out a personal loan to consolidate debt, consider what’s right for you.

Looking for a personal loan but don’t know where to start? Our favorites offer fast approval and the lowest interest rates. Check out our list and find the best loan for you.

Dana George holds a BA in Management and Organizational Development from Spring Arbor University. She has written and reported on business and finance for over 25 years and is still passionate about her work. Dana and her husband recently moved to Champaign, Illinois, home of the Warriors. And while most people don’t like the color orange, he thinks they really enjoy champagne.

Should I Pay Off My Credit Card Debt With A Personal Loan?

Eric McWhinney has been writing and editing digital content since 2010. He specializes in personal finance and investing. He also holds a bachelor’s degree in finance.

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