As you accumulate credit card debt, your objective should be to pay it off as quickly as possible with the help of your income. However, life happens, and you might find yourself with a rapidly increasing credit card balance and a high interest rate that make it difficult to pay off.
One way to pay off the credit card balance is with the help of a personal loan for quick cash. In this case, this is referred to as a debt consolidation loan. Borrowing from one lender to pay another will not always make sense. However, consolidating credit card debt with the help of a personal loan with a low interest rate can be an effective strategy for some eligible borrowers.
Benefits of a Personal Loan to Pay Off Credit Card Debt
When it comes to comparing personal loans and credit cards, consolidating debts with a quick cash personal loan has several benefits.
- Reduced Interest Rate: Generally, personal loans have reduced interest rates compared to credit cards. As per a recent study report, it is believed that credit cards have an average interest rate of 23.7 percent in comparison to the average interest rate of 12.33 percent on personal loans.
A reduced interest rate implies less interest accrues every month, helping you to save money and making it easier to pay down the balances.
- Reduced Monthly Payments: On a personal loan, the monthly payment might be lower than the combined monthly payments on the credit cards. This can make it simpler to avoid missing a payment and the respective credit score damage that typically comes with it.
- Timely Monthly Payments: With a personal loan, you will have fewer payments that are easier to manage. It is important to remember that keeping your credit cards open can help you improve your credit score. It is not advisable to close accounts even once the balance reaches zero. Still, you can consider putting away credit cards such that you are not tempted to use them again.
- Helping with Your Credit: The amount of existing revolving credit you are using at any given time is referred to as the credit utilization rate. The higher is the credit utilization rate, the more it will hurt your credit score. In this case, more lenders might worry that you are significantly reliant on debt.
If you wish to minimize the overall risk to your credit score, your credit utilization rate should be under 30 percent. Using more than 30 percent of the available credit on credit cards can hurt your overall credit. In case you have credit card debt along with a higher credit utilization rate, you can pay off the credit card debt with the help of a personal loan to save your credit.
Should You Pay Off the Credit Card Debt with a Personal Loan?
Paying off the credit card debt or balance with the help of a personal loan, quick cash can be an effective solution. Here are some cases in which this might be the right solution:
- Qualifying for a Loan with a Reduced Interest Rate: Credit card debt or balances with high APRs can increase rapidly. This makes it impossible to catch up on them and pay off the balance. In case you are going ahead with this option due to a high credit card APR, and you qualify for a personal loan with a reduced interest rate, it will help you save significantly in the long run.
- Debt was due to One-off Issues or Expenses: You should not obtain the habit of paying off the debt with another debt. However, it can make sense on a one-time basis for certain situations. For example, your dog needed an emergency surgery, and you had to put an unexpected bill of a great amount on the credit card, as you did not have ample savings.
When you are financially responsible but in a tough situation, you can think of getting a personal loan.
How to Get a Personal Loan
It has become quite easier to obtain a personal loan in India. With the help of innovative solutions, like digital banking, minimal documentation, and quick verification, you can easily apply for loans from a mobile app and get instant cash with the help of quick approvals. You can apply for a personal loan for funding a wedding, consolidating a debt, or paying off educational fees.
Here are some easy steps to follow:
- Understand Your Eligibility: Before you apply for a personal loan, go through the standard eligibility criteria provided by different lenders. This should include information related to your age, income, type of employment, and a good credit score.
- Compare Different Lenders: You can utilize online tools and resources to compare different lenders based on certain parameters, including the loan tenure, processing fee, interest rate, and customer reviews. You can look for lenders that offer digital services and easy loan approvals with the help of a mobile app.
- Gather Essential Documents: Usually, you will require proof of address, your age, and income proof to apply for a personal loan.
- Apply Offline or Online: You can apply directly with the help of the lender’s website or app, or visit a branch for an offline application. Fill out the application form, submit essential documents, and wait for the approval.
Conclusion
You need to be strategic while paying off credit card debt with the help of a personal loan. With the help of quick cash from a personal loan, you can consolidate high-interest credit card balances into a single loan with a reduced interest rate. This helps you save more time and simplify the repayment process.
