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 — using a credit card payoff calculator like this one helps you figure that out — but that’s 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, which can make paying off the balances a little less predictable than personal loans, which generally have a fixed rate. On top of that, people sometimes struggle to pay off debt while continuing to use their credit cards. Because personal loans are installment loans — you can’t add transactions to them like you can a credit card — it can be easier to work toward that end 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 14 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 on Credit Cards:
- Credit.com’s Expert Credit Card Shopping Tips
- How to Get a Credit Line Increase
- Are Annual Fee Credit Cards Worth It?
Image: Wavebreakmedia Ltd
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