Paying Off Credit Card Debt with a Personal Loan
Have you ever thought about paying off your credit card debt with a personal loan? This may not seem like it would make a big difference, but doing so could actually improve your credit score. Here’s why:
Credit card accounts are viewed as revolving debts. Personal loans are considered installment debts. The personal loan may look better on your credit reports because it has a definitive end. Credit cards do not.
Some experts suggest that transitioning to a personal loan could boost your credit score significantly. This will obviously depend on other factors that are hurting your credit at the time, but in general, a loan will look better on your credit.
Getting a personal loan may also save you money in interest. If you have a credit card with a 14% APR and you qualify for a loan at 8% interest, you will obviously be better off with the loan than you will be with the credit card. You just have to make sure you are able to make your personal loan payments.
One downside to this process is that you will have higher minimum monthly payments. Rather than having a low minimum payment on your credit card account of, say, $20 to $30, you might have a minimum of $100 to pay on a personal loan each month. You will get rid of your debt faster this way, but you will have to make more room in your budget.
Check into your personal lending options if you find yourself with high interest charges on your credit card debt.