One of the most common uses of personal loans — apart from paying off medical debt or purchasing an RV — is to consolidate credit card debt. Applying for a personal loan could be beneficial if you want to pay off your debt more quickly than paying the minimum amount with credit cards each month. However, a personal loan has both disadvantages and advantages. Let’s know how paying credit card bills with personal loans can affect your finances.
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Advantages:
The average interest rate for personal loans is less than 10%. In case you have a good credit rating, it will work for your benefit. Thus, you will end up paying your debt quickly and reduce the total amount of interest you pay by half.
You can combine your credit card payments into one monthly payment on a personal loan. Reducing the number of payments allows for more time and room for other obligations.
The 10% of your score that is made up of your credit mix is increased by taking out a personal loan. By having a variety of debts and credit, you can demonstrate to lenders and creditors that you are responsible for the money.
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Disadvantages:
You are borrowing more money if you take out a personal loan to clear credit card bills. You’re accruing extra debt if you take out a personal loan to pay off your credit cards and then start using them again with a balance.
Personal loans have typically lower interest rates than credit cards. If your credit rating is less, you might not be approved for a personal loan. If you have lousy credit and get approved for a personal loan, your interest rate might be higher.
Some lenders impose a variety of costs, such as late payment, origination, and insufficient funds fees.
