Credit cards are overwhelming & attractive especially when you have a higher limit on it. Having multiple credit cards is another trend going on which is also a kind of social status. However, the bitter truth is credit cards are boon to you only when you are using it wisely and clearing its bills on time. Else if you are using multiple cards that too without any strategies, you can be caught in the debt trap. This can also lead to situations where borrowing money is the only way to dig your way out. But what are your options to borrow in such a situation? Friends & Family? Or a local money lender? Or a loan from an authorized bank?
Well, borrowing from friends and family can sometimes stain our personal relationships. Whereas borrowing from a local money lender is risky stuff and it can cost you much as the interest rate charged by them is very high. So, considering all the options the only one which you can rely upon is borrowing from a bank. Personal loans offered by the banks are the best to help you consolidate your debts. Let’s see how and why.
- Personal loans are collateral-free
- You can save a lot of interest.
- You can get personal loans easily
- This will also help you build your CIBIL score
- This will also help in determining an EMI that is best suitable for an individual.
- The interest payable on a personal loan is comparatively lower as compared to interest charged on credit cards.
Debt consolidation is the process of paying off your unsecured debts by opting for a single loan. In this process, you combine your total payable EMIs and opt for a loan whose EMI is less than the total of your previous EMIs. Hence, doing things saves a lot on the payable interest and hence reduces your debt burden.
A personal loan could be used to consolidate credit card debt.
If an individual has outstanding balances from several credit cards, they can opt for a personal loan to pay off all the credit card bills. As a result, he/she just has one EMI left as opposed to multiple EMIs, which is much less than the previous EMIs.
Why Personal loan for debt consolidation?
The interest payable on a personal loan is comparatively lower as compared to those on credit cards. This means that one has to pay comparatively lower EMIs from what they would have paid for credit cards.
Determining EMI amount and loan tenure
Personal loans also help in determining an EMI that is best suitable for an individual when consolidating a credit card debt. Personal loan offers the flexibility of choosing the loan tenure which helps in deciding the affordable EMI amount.
Well, the other plus point of going with a personal loan is prepayment and foreclosure options available with it.
Hence you can say that a personal loan, unlike credit cards allows you to choose the duration of the repayment tenure.
Boost your credit score
By the time borrowers opt for a personal loan to consolidate their credit card debt, they are neck-deep in credit card debt which makes their credit score low. And when you take a personal loan, you can repay the loan in comfortable EMIs which will slowly reflect in your credit score.
You can consolidate your debts with one payment
If you’re struggling with several credit card bills and APRs, it can be difficult to have a debt repayment plan, and difficult to make sure that you’re making and maximizing your payments.
Using a personal loan to pay off your existing debt helps you to get rid of multiple payments and go down to one payment per month. Additionally, this is done at a much lower APR. This makes things more sorted and you can get rid of your debt burden as well.
Taking a personal loan to pay off your credit card debt helps you to pay off debt faster and at a lower interest rate.