Should I take out a loan to pay off my credit cards? This is a question many people are asking.
Anyone who has ever had credit card debt knows these two things: It’s expensive, and it can take forever to pay off.
You can save a lot of time and money by increasing the amount of money you pay toward the debt every month. This when where a credit card payoff calculator can help. However, that is not the only way to reduce the cost of getting out of credit card debt. You could also use a personal loan to consolidate your balances.
Personal loans often have lower interest rates than credit cards. Credit cards also tend to have variable interest rates. This can make paying down the balances a little less predictable. However, if you have a personal loan, it will generally have a fixed rate.
On top of that, people sometimes struggle to pay off debt while continuing to use their credit cards. Since personal loans are installment loans, you can’t add transactions to them. This can make it easier to work towards your goal of getting out of debt.
Personal loans can also be extremely helpful for people whose credit card debt involves multiple cards. By paying off all your credit card debt with the personal loan, you make the debt easier to manage with a single payment and a single interest rate.
Keep in mind you have to apply for a personal loan, which will result in a hard inquiry on your credit report and a slight ding in your credit scores, and the better your credit score is, the better your interest rate on your personal loan will likely be. Interest rates and loan approval also depends on how much much you’re asking to borrow and your ability to repay the loan (like your income or other debt obligations you have).
Before you apply for a loan to consolidate your credit card debt, get an idea of where your credit stands: You can get a free credit report summary, updated every 30 days, on Credit.com. That summary will show you an aspect of your credit scores called “account mix” and if you happen to have no open installment loans, a debt consolidation loan could actually help you in that area.
Personal loans aren’t the only strategy for paying off credit card debt. You might also want to consider a balance transfer (here’s an expert guide to picking a balance transfer credit card), which can give you some breathing room from your debt during a promotional period of 0% interest. Again, you’ll want to check your credit and consider the balance transfer fees involved before applying.
More from Credit.com
- 5 Tips for Consolidating Credit Card Debt
- How to Get a Credit Card With Bad Credit
- A Simple Checklist to Get Out of Debt
This article originally appeared on Credit.com.
