Credit cards maxed out? Barely able to make those minimum payments each month? Taking out a personal loan might be a good solution, but is it really the best way to pay off your credit card debt?
If you're one of the millions of Americans who is over their head in credit card bills, you've probably wondered what your options might be, especially when you look at the interest rate on your credit card bills every month. Unbelievably, some are ranging between 36 and 48 percent these days, and that's making those minimum payments even harder to make every month. And even if you do succeed in making those payments, the length of time to pay those bills off can be as high as ten years! Clearly, there has to be a better way.
That's where the personal loan comes in. Personal loans typically have a lower interest rate than those charged by credit card companies, so you stand to save a lot of money on interest, and since personal loans have a set timeframe to pay them off (usually three to five years), you can actually see light at the end of the tunnel, so to speak.
Depending on your credit score, your interest rate could be as much as 10% or even 20% lower than the interest on the credit cards that you plan to pay off, and combining all those "minimum" payments into one lower monthly payment can also free up money in your budget every month. So, a personal loan is definitely something that you'll want to consider to clear mounting credit card debt.
How hard is it to get a personal loan? Honestly, that depends on your credit profile. If you've been making all of your payments on time, have adequate income to repay the personal loan, and your credit score warrants approval, your chances are very good. The application can usually be completed online, then in a few days, the money is typically dispensed to your credit card companies and/or put in your bank account for you to pay off the credit cards.
Just be careful, if you choose this route, and don't run up your credit cards again. If you do, you could find yourself in an even bigger financial bind!