Reasons to Get A Loan to Pay Off Your Credit Cards

The truth about credit card debt is that more than forty-one percent of households have debt linked to credit cards. The median debt is a little over two thousand dollars, while the average is almost six thousand dollars.

When you are in credit card debt, it can often feel overwhelming. For this reason, many look for ways to pay it off sooner than later. Many people attempt to do this by taking out a loan. However, this is often controversial. Some people believe that it is a smart decision, while others don’t think it is.

Here are some reasons why you should get a loan to pay off your credit cards.

Consolidate several credit card payments. When you owe money on more than one credit card, there are times when it feels like you are struggling to pay the minimum for each of them. When you do have a little extra money to put toward your credit card bills, it can be hard to figure out where it should go.

By consolidating them all together, you have one bill to pay every month, so you can focus all of your time and energy into paying that bill.

Lower monthly payments. Many people find that when they get a loan instead of having several credit card payments, they are able to pay less each month. That being said, it is a good idea to pay more than the minimum to help you get out of debt quicker.

Lower interest rates. Most credit cards have very high-interest rates, so a loan with much lower interest rates could save you a lot of money in the future.

Not only could your monthly payments be more affordable, but having a lower interest rate will allow you to pay more toward your principal each month. You will find yourself out of debt faster, plus you will end up paying less in the end.

Here are some reasons you shouldn’t get a loan to pay off your credit card debt.

Because of your debt, you may not be eligible for a loan. Lenders are very careful about who they lend money to, so if you owe a large amount of money, you may not be able to get a loan at all.

Though a loan might look good on paper, there may be some fees that you don’t know about. It is important to read the fine print. You may find yourself paying off your loan quickly, only to be told there is a penalty if you pay the loan early.

There could be some other hidden fees that may cost you more in the long run. Some loans come with a loan origination fee, which can be up to six percent of your total loan. If you find yourself on a loan with an origination fee, you could find yourself paying several hundred or thousand dollars more, just to get away from your credit card debt.

It isn’t going to take care of the problem. If you are in debt because you overspend or are out of work, a loan isn’t going to fix that. Instead, you may have a loan, continue using your credit card, and find yourself in an even deeper hole.

So, what does this mean for you? You have to look at the terms of the loan before you sign on the dotted line. Not only do you want to make sure that you will be paying less each month with a lower interest rate, but you also don’t want to find out that you will be penalized if you pay it off early. It also won’t help if you take out a loan to pay off your credit cards but struggle to get by without using them. You could end up in a lot more debt.

Previously published on Medium and/or Newsbreak.