Personal Loan To Pay Off Credit Cards

Personal Loan To Pay Off Credit Cards – You usually can’t pay off the entire balance on one credit card with another credit card unless you transfer the debt from one card to another in a process called a balance transfer. While this method may work for some financial situations, it doesn’t make sense for everyone. Since moving debt from one credit card to another may not be a good idea for your unique financial situation, you may want to weigh your options and consider other ways to pay off your credit card balance directly.

This post discusses whether you can pay off one credit card with another and presents other ways to pay off credit card debt.

Personal Loan To Pay Off Credit Cards

In some cases, you may be able to pay with one credit card through a balance transfer to another credit card. Balance transfers allow cardholders to transfer outstanding balances from one credit card to another, often for a fee.

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Credit card issuers often offer introductory periods for new credit cards that include interest-free balance transfers or low APRs (annual percentage rates), giving you the opportunity to consolidate your debt into one account with your business.

While this provides an indirect option to pay with one credit card for another, be sure to read the terms carefully before choosing this route. Intro periods are limited and you may end up paying a lot of interest after the period ends.

Credit card companies generally require you to meet certain balance transfer criteria, including a good credit score. If you have bad credit, it may be difficult for you to qualify.

In addition, the approved credit limit may not cover the amount you owe. Since lenders have different terms, consider shopping around and researching the terms of different credit card issuers before applying for a balance transfer card.[2]

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

To find out if a balance transfer will save you money in the long run, you need to do the math.

Let’s say your current credit card has a 20% APR, you have a $2,500 balance, and you pay $250 a month. It would take 12 months to pay off the debt and you would pay a total of $2,758, including $258 in interest and fees.

Let’s say a new balance transfer card has a 5% APR (assuming the 0% introductory APR ends in 12 months), includes a 5% balance transfer fee, and you pay $250 a month. It would take 11 months to pay off the debt with a balance transfer and you would pay a total of $2,625.

You may find that transferring your balance to a new card is worth your time and effort in this case. Additionally, this calculation assumes that the new card has no annual fee and that the initial APR is valid for 12 months. The initial balance transfer period can last as little as 6 months, so be sure to factor that into your budget.

Should You Get A Personal Loan To Pay Off Credit Card Debt?

Because cards and issuers have different approval requirements and credit limits, look for the best balance transfer credit cards for your unique situation. Forbes’ Balance Transfer Calculator helps you compare your options.

While you may be tempted to pay off your debt by taking a cash advance from another card, these advances often come with a hefty fee.

In addition to paying ATM fees and cash advances, you may have to pay a higher APR for a cash advance than for regular purchases. Because cash advances can add to your debt, don’t only use them as a last resort in a financial emergency.[5]

Instead of opting for a balance transfer or cash advance, you can consider other options to help you get your personal finances in order.

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If you’re in debt but feel like you can’t handle it on your own, the following services can help you get control of your finances.

If you have good credit, you may consider a personal loan to pay off credit card debt. This idea makes sense if you can get a personal loan with a lower interest rate than your credit card.

However, irresponsible financial management can lead to a higher debt burden. Personal loans may also have additional fees and an interest rate that depends on a variety of factors, including your credit score, information on your credit report such as late payments or repayments, the amount of the loan and the terms of your agreement. .

Before you decide to take out a loan to pay off your credit card balance, consider the following factors:

Is A Credit Card Or Personal Loan Better?

As an alternative to simply shifting debt through balance transfers or personal loans, you can fight your credit card bills head-on with the following strategies. You can also think about paying off debt or saving money, maybe creating savings goals or adding side gigs to your trip.

If you have multiple credit cards with outstanding debt, you may want to start with the debt avalanche method. This debt repayment strategy recommends paying off the card with the highest interest rate first before switching to the card with the next highest APR.

By focusing on high-interest credit cards, you avoid potentially racking up even more debt (in the form of interest) while you try to reduce it.

You can also try the snowball method when deciding which debt to pay off first. This repayment strategy allows you to pay off the card with the lowest balance first to eliminate debt from smallest to largest.

How To Lower Your Credit Card Payments By Consolidating Into A Personal Loan

While both approaches can help you pay off your card balance, the snowball method allows you to gain momentum and stay motivated by eliminating debt from your list.[7]

While you must make at least the minimum monthly credit card payment, paying only that amount can keep you in debt for much longer. There’s even a warning on your credit card statement: how long it will take to pay off the balance and how much interest you’ll pay if you make just the minimum payment. You may be able to eliminate debt faster—and pay less in interest—by finding a way to pay more than the minimum each month.[7]

While you can indirectly pay one credit card with another credit card using a balance transfer, it doesn’t always make sense. You may want to consider other methods to help you reduce debt more directly.

Getting on the Right Financial Path includes tools and information to help you understand how to build or rebuild your credit.

Pay Off Your Personal Loan Or Credit Card First?

Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Advisor® and bilingual personal finance author and educator dedicated to helping people in need of financial literacy and guidance. His informative articles have appeared in various news publications and websites, including the Huffington Post, Fidelity, Fox Business News, MSN, and Yahoo Finance. She also founded www.AcetheJourney.com, a personal finance and motivational website, and translated into Spanish the book “Financial Tips for Blue Collar America” ​​by Kathryn B. Hauer, CFP. Ana teaches personal finance courses in Spanish or English on behalf of V!SE (Working In Support of Education), conducts seminars for non-profit organizations in New York.

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By submitting my information, I agree to the Terms of Service, Consent to Use of Electronic Documents and Signatures, Privacy Policy, Disclosure of Consumer Reports, and Customer Recognition Program. Many people use personal loans for various reasons, whether it is to pay medical bills. or buy a mobile home – but the most common may be credit card debt consolidation. You can eliminate the need for high-interest credit card monthly payments by getting a personal debt settlement loan—often with a lower interest rate.

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Paying off credit card debt with a personal loan is a form of debt consolidation and has several benefits. There are three reasons to take out a personal loan to pay off credit card debt:

If you have a high credit card balance, you can eliminate credit card debt with a personal loan. Get peace of mind by paying off your credit card debt and improving your credit score. It is important to remember that paying off debt through a personal loan is not the same as getting out of debt. After paying off the credit card, you still have to pay off the loan. Paying off loans with high interest rates

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