Is a Personal Loan better than Credit Card Debt

Personal Loan better than Credit Card Debt

It’s very easy to over-pay on a credit card because you don’t see money changing hands or feel the balance of your bank. How do you do if you spend more than you can pay for and now get caught up in the debt loop with your credit card?

There are a number of ways to address this situation in the form of converting the outstanding into EMIs (depending on the card you hold and the bank), transferring the balance to a new card, and making a personal loan is the most popular form of payment for the credit card debt. Does turning your credit card debt into personal loan make sense?

The positive points:

A personal loan has many advantages that make payment of credit card bills a common route. Secondly, the interest rate on personal loans is significantly smaller. For any rate of credit card interest ranges from 30 to over 40 percent a year, while personal loans range from 18 to 24 percent.

This is also useful is that a personal loan may be used for consolidating the debt of your credit card, or that you have any outstanding credit card balances. It would also make your life simpler, as you only need one due date to mess with an EMI rather than multiple due dates to payment amounts. If you want to consolidate your credit card debt, a personal loan is a good way to do this.

A personal loan will also help you to establish an EMI that is best suited to you over a period of time without affecting your financial situation. Credit card interest rates are so high that even their minimum due balance is a huge problem. It should also note that it takes years for you to pay the minimum unpaid balance every month to clear your credit card debts.

Better financial grip:

A personal loan is an unsecured loan, like a balance on a credit card, which allows you to make those decisions. You have the right to go shopping and get the best possible interest rate. You will also agree on the duration of the loan and other terms and conditions. Choosing a lower interest rate allows you to properly control your debt and increases the ability to reduce it.

For the future effect of your credit rating, the impact is minimal as the outstanding credit cards are still expressed in your credit ratings and substitution of the debt with personal loans just ensures that one form of unsecured loan is moved to another. Furthermore, the outstanding credit card contains a revolving balance, which means that you have not paid off the balance and it will be compounded with interest next month, which is more costly and more difficult to pay than the payment obligation it comes with a personal loan.

It is increasingly significant, as in April 2015 the average credit card debt in India was Rs 14, 764, which resulted in a 52 percent increase from Rs 9, 700 in April 2011. In comparison, by March 31, 2015, the total amount outstanding for credit cards was Rs 30,500, as opposed to the total amount paid for credit cards over the year at more than Rs 1,90,000 crore. This level is much smaller than the western countries at around 16%, but something that needs to be closely monitored.

Converting your credit card debt into personal loans also frees up the card ‘s balance, but care must be taken not to use the balance available indiscriminately and to run further debts. It will put you in a really hard situation and put you in a lot of financial difficulties. Work within your means and pay off the personal loan used to fund the interest on the credit card.

Briefly, if you think that you will easily pay off your unpaid credit card indebtedness, it might not be worth a personal loan. At the other hand, it is best to look for a personal loan if you believe your debt is unmanageable and stretches through one and more cards. Staff loans enable you to consolidate different debts, easy to comply, easily understand and above all have a much lower interest rate than a credit card.

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