When faced with a payment deadline for a monthly installment, you’re desperate to arrange the funds from anywhere possible. In a moment of frenzy, you might consider options that may or may not be practical for you in the long run.
The high interest rates often scare credit card owners enough for them to lurch at any opportunity they find. Think back to the time when you were in a financial crunch? You just wanted to somehow get done with the debt.
This is why some consumers consider personal loans to pay off dues. It can be sought to pay off your credit card dues. But this doesn’t come without strings attached to it.
Here’s something to look into.
How to use a personal loan
A personal loan is an unsecured sum of money offered by a financial institution such as a bank, lender, or credit union. An interest rate is decided after evaluating your credit score and income at that moment.
You’re allowed to place a request for one or more loan offers at the same time. You’d be required to provide your credentials and other information, as well as names of a few contingency contact people.
Pros of Using a Loan to Pay Off Your Dues
The biggest pro of getting a personal loan to pay off your credit card dues is the interest amount you end up saving. You can save yourself from a high-interest credit card payment with the help of a low-interest personal loan.
This way you only have to pay a lesser additional charge on top of your credit card payment. For example, a 9% APR on a loan is a better deal than a 19.99% APR on your card.
Another major reason to opt for a personal loan is that it helps consolidate different credit card payments within one loan. This means you’re saved from keeping track of multiple payments, deadlines and interest rates. This is an effective strategy for budgeting your payments.
Cons of Using a Loan to Pay Off Your Dues
One of the biggest hurdles in getting a personal loan is your credit score. With a low credit score, the prospect of using a loan to pay off dues is not as promising.
Your consolidation loan may become unaffordable with the interest rate that comes with a low score. Ultimately, it’s all about seeing the tradeoff between the credit card interest and the loan interest.
If there’s not much difference, is there even a point in getting a loan?