Using a Personal Loan to Pay Off a Credit Card
Just about everyone nowadays carries at least a little bit of credit card debt. But if you feel like you’ve become bogged down with debt and don’t see any way out, don’t worry! There are lots of ways to reduce your credit card debt.
One of the best is to use a personal loan to pay off a credit card. Here’s what you need to know and how to do it.
What’s So Great About Personal Loans?
Personal loans are almost tailor-made to help relieve you of credit card debt-related stress. They have some great characteristics, one of which being an interest rate that’s fixed for the life of the loan. Not only that, but interest rates on personal loans are usually much more advantageous than those on credit cards.
That means you’ll be paying less over time than you would otherwise. Even high-APR loans are still likely to be better for you overall except in the most extreme of cases.
Additional advantages of using a personal loan to pay off a credit card include the fact that there are no limitations on how you use such a loan. You can use a single personal loan to consolidate credit card debt, pay for repairs to your home or car, and even use anything left over to go out to the movies for once. Other benefits include a fixed repayment schedule with no surprises and not having to put up collateral to take out a personal loan.
Always Check Your Credit First
It’s absolutely true that a personal loan can be just what the doctor ordered if you’re finding it a struggle to deal with credit card debt. At the same time, though, you don’t want to just start submitting applications left and right. There’s a process that you need to go through in order to ensure you nail the audition, so to speak.
The most important thing you need to do before applying for a personal loan is to make sure your overall credit rating is in good shape.
You need to check your credit prior to applying because too many loan applications in too short a period of time can reduce the likelihood of a lender approving your loan application in the first place. Once you have your credit report in hand, you need to go through it and search for any possible errors that might bring your credit rating down.
The higher your credit score, the better your chances are that you’ll get a loan with a good interest rate — and seeing as that’s one of the biggest benefits of using a personal loan to pay off a credit card, this should be a priority.
Even With Bad Credit, You Can Still Get a Personal Loan
If your credit rating is still less than ideal even after you check your report for any errors, don’t worry: you can still get a personal loan. There are plenty of lenders out there willing to take a risk on someone with some black spots on their credit history, especially since so many people do use personal loans to help rebuild their credit by consolidating debt in an effort to make it easier to repay. There are a few things you need to watch out for if this is the case.
Personal loans for bad credit usually still carry a better interest rate than most credit cards, but they do tend to charge more in interest than a loan issued to someone with good credit.
RELATED: How to Get a Personal Loan with Bad Credit
Also, some lenders tack on an “origination fee” of anywhere between 1% to 6% as the cost of processing the loan. Finally, if you plan on paying back your loan early, make sure you don’t choose one that has a prepayment penalty for doing so.
MORE: Personal Loan Fees and Charges to Know
Other Things to Keep in Mind About Unsecured Personal Loans
It’s not always just interest rate and repayment schedule that you have to be aware of when it comes to unsecured personal loans. While it’s rare to find a lender that will charge you a fee just to apply for a loan, there are some that charge what’s called an “origination fee”, which is used to cover loan processing costs. This can be anywhere from 1 percent to 6 percent of the total cost of the loan.
Other things to be on the lookout for are whether your lender will charge you a prepayment penalty to discourage you from paying off your loan ahead of schedule. Since early payment can save you a bundle on interest fees, it’s always in your best interest to avoid lenders who might charge you for doing so.
RELATED: Rate Ratio: Comparing Credit Cards and Personal Loans
Use Match Financial to Help You Find the Perfect Personal Loan for You
It’s always best to compare rates and terms from as many lenders as possible before making a decision on choosing a personal loan to pay off credit card debt.
The easiest and most convenient way is to use Match Financial. We can show you all the relevant interest rates and repayment terms for all the lenders we work with at a glance, making the decision easier than ever. Applications are easy as well, and if you’re approved you can expect to get your money in as soon as the next day in many cases. Take the first step to better financial health with Match Financial today.
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How to Use Personal Loans
From how to use personal loans to ways they can help you to pay off debt and more.