A personal loan is a type of loan that you can use to pay off credit card bills. A personal loan can be used for any purpose, including paying off credit card debt. But there are still some things you should know before taking out a personal loan to pay off your credit cards.
What can a personal loan be used for?
A personal loan can be used for many different things, including:
- Paying off debt. If you have credit card bills or other debts that are weighing on your finances, a personal loan can help. You can use the money from the loan to pay off some of that debt and free up some cash in your budget.
- Buying a car or other big-ticket item. If you need cash for something expensive and need more saved up, a personal loan could help get it done! You can put down payments on cars, boats or motorcycles; buy computers; renovate homes; pay off student loans; and do any other things with this type of financing.
Is a personal loan to pay off credit cards a good idea?
If you want to use a personal loan to pay off credit card, it’s important to consider the interest rate of both loans. Generally, a personal loan has a lower interest rate than a credit card. However, getting a personal loan may benefit you if you get a lower rate on your personal loan and pay off your credit card balance in full before any grace periods end.
On the flip side, if you have high-interest credit card debt but low-income or poor credit history that prevents you from qualifying for competitive rates on new loans, using a personal loan might actually cost more than just paying off those accounts in full with cash from other sources like savings or investments.
SoFi professionals state, “Taking a personal loan will consolidate your numerous card payments into 1 monthly debt payment.”
When is a balance transfer credit card better than a personal loan?
There are a few situations where you might decide against a personal loan and instead opt for a balance transfer credit card.
- Personal loans come with higher interest rates than credit cards, so if you’re trying to pay off your debt quickly, it may be more expensive to do so with a personal loan.
- Balance transfer credit cards have no interest for a set period, which can save you money on interest payments if used correctly.
- If there’s already a balance on the card that you want to pay down, consider transferring it over to another card with no-interest financing before making any payments or transferring money from your bank account into an account at your credit card company while still paying off the balance owed on the original card.
Should you use personal loans to pay off credit cards?
Personal loans are a good option if you can’t pay off your credit card bill in full. However, if you have a high debt-to-income ratio, it’s best to avoid personal loans altogether.
Personal loans are only a good option if you can pay off your credit card bill in full. In this case, prioritizing which bills to pay should be based on their interest rates and the time left until they’re due for payment.
You can get a personal loan to pay off credit card debt. It’s a good option if you need better credit, have no job and need cash quickly. But it does have some downsides too.
