One common issue related to credit card is high interest. Unfortunately, people still keep this card because it’s very flexible to fulfill daily basis need. Moreover, many banks or credit union give lower minimum payment to attract more customers. You still have to pay each of them using personal expenses. If the debts are at high level, you may rely on personal loan to pay off credit card debt.
What is personal loan? Actually, credit card seems to be personal loan itself, but this type is different. Bank issues credit card to give loan for paying anything. In return, the credit card owner has obligatory to pay regular payment and interest. This loan might be high or low based on agreement you sign when receiving the credit card.
On contrary, personal loan for paying credit card in this term still creates the debt, but not into credit card condition. It is similar to loan you receive from friends as cash and full money. You receive it based on what you apply. The loan will be transferred into your account and you are free to do anything. That money is what you use to pay all debts from credit card. Of course, you still have debt that needs to pay, but from personal loan not credit card. This is what it means when choosing personal loan to pay off credit card debt.
This kind of loan has pros and cons. It is one of some methods to pay off the entire debt from credit card, and potentially for other loans, such as mortgage. However, you need to apply and only eligible candidate will be approved. Bank or credit union has specific rule about this thing.
The Advantages of Personal Loan
- New term and interest
One reason to choose personal loan to pay all credit card debts is new term. Instead of having two or more debts from credit card, you pay off them with single payment and the source of money comes from personal loan. At the end, your debt is only one, which is from this loan itself.
Other benefits are term and interest. Personal loan might give longer or shorter term depending on your financial capability. The term goes side by side with interest. When choosing personal loan to pay off credit card debt, you need to get short term with lower interest. Credit card has interest rate in two digit, but this loan is lower, even half rate. You get benefit from this gap and still have advantage from shorter term.
- Single debt and credit history
Credit score plays important role when people want to take more loans. With personal loan, you may not have much change on credit score. It is good sign since you still have single debt to pay, but more affordable based on your personal income.
Well, credit card is important, but be careful when using it excessively. In order to keep the balance in check, review the spending and budget before shopping or paying anything. Besides personal loan to pay off credit card debt, you can do for other debts as long as the interest and rate are favorable.