People take out loans for many reasons such as buying a home, buying a car, or getting an education. Personal loans are also available, and sometimes people wonder whether it is a good idea to take out a personal loan to pay off credit card debt. There are many factors that will impact whether taking such a loan is the right thing for a person to do. Exploring these factors can help you to get a sense of whether it might be the right choice for you or something you can avoid.
There are other ways to pay off credit card debt which you can try before incurring yet another debt. Tracking your spending and finding ways to spend less and pay down those credit cards faster is one method. Finding ways to earn more and use the additional money to do that same thing is another. However, there are situations where people are very disciplined about where every penny goes and there is no additional money that can be “found” by adjusting the budget or working more. The minimum payments on the credit cards just barely get paid each month and the interest just keeps adding up and up and up.
People with good to excellent credit are more likely to be granted personal loans than those with fair or poor credit. They also get better interest rates. Of course, if you are in a mess of debt your credit score is not likely to be in very good condition. It never hurts to ask, though, and if you can get a loan with a lower monthly payment than the sum of all your current payments now as well as a better interest rate than what you are being charged now it may make sense to take the loan. A cosigner may be able to help you not only get the loan but get a better interest rate as well, so that is also an option.
Like any financial decision, the decision to take out a personal loan to pay off credit card debt is, well, personal. Smart financial decision making involves considering any financial decision thoroughly as far as its impact on your current financial situation as well as your financial future.
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