Are you considering consolidating high interest credit cards with a personal loan in order to save some money and have one convenient monthly payment? Depending on your personal situation and what you’re approved for, a personal loan COULD be a good option to accomplish this. Read on to learn more…
*The content in this post if for informational purposes only and does not constitute professional advice and shouldn’t be taken as such.
We have a lot of visitors who come to our website to compare personal loans and many borrowers are interested in using a personal loan as a way to consolidate high interest credit card payments and wrap up several credit card payments into one, easy monthly payment via the personal loan. Before consolidating credit cards with a personal loan, there are a few things you need to consider. We’ve listed several questions below that you should ask yourself before consolidating credit cards with a personal loan. These questions certainly aren’t the only questions one should ask before consolidating high-interest credit cards with a personal loan, but it should give you a good start when you make your list of pros and cons BEFORE taking out a personal loan. Although there’s many more, here are 5 things to think about before taking out a personal loan in order to consolidate high-interest credit cards:
- Will consolidating credit cards with a personal loan ACTUALLY save me money? You would need a lot of information from your credit card companies in order to figure this and you would need to make a list of all of your current monthly credit payments and interest rates before you could even begin to figure this out. You also need to look at prepayment penalties and other considerations. Additionally, you’d need to know the personal loan interest rate, terms, and length of the personal loan to know how much your new monthly payment would be after consolidating all of your credit cards. Chances are, if the personal loan interest rate that your approved for is quite a bit lower than your credit card interest rates, you could save money on your monthly payment or on the total amount of interest paid.
- Will you be sure to be diligent and cut your credit cards up after you consolidate them with a personal loan? This is a tough one, because you need to trust yourself and make sure that you’ll follow through. If you don’t get rid of your credit cards after taking out a personal loan, you may find yourself using them again after taking out the personal loan and THEN you have a personal loan to pay off AND a credit card payment. Personally, I would cut up the credit cards that I consolidated with a personal loan if I wasn’t already required to do so as a condition of approval for the personal loan.
- Is a personal loan the BEST way to consolidate credit cards? There may be ways to get loans with lower interest than a personal loan that could be used to consolidate high interest credit card debt, however, the other ways of consolidating credit card debt could have pros and cons as well, as opposed to using a personal loan. For example, some people may use a home equity loan to consolidate credit cards because a home equity loan may offer a lower rate than a personal loan, but now you’re putting your house on the line and you’re taking up some of the equity in your home. Personally, i would not want to use the equity in a home to consolidate credit card debt and would rather use a personal loan.
- Are there other ways to pay off your credit cards or get out of debt that are better than using personal loans besides a home equity loan? Some people may be able to sell an asset, draw from savings, get a second job, or do a multitude of other things in order to get out of credit card debt instead of taking out a personal loan. You need to do what’s best for you and your personal situation, which only you know.
- Will I be able to afford and make the monthly payment on a personal loan after I consolidate my credit cards? You’ll need to consider the monthly payment of your personal loan before you consolidate your credit cards and compare that to at least what your making in minimum credit card payments each month.
Before taking out a list of pros and cons to taking out a personal loan on order to consolidate credit card payments, I would look at those 5 questions above and also make a list of several more questions (maybe a dozen or more) to consider before applying for a personal loan to pay off your credit cards. After making your list, you may want to speak to a licensed professional before taking out a personal loan to consolidate credit card debt. *The content in this post if for informational purposes only and does not constitute professional advice and shouldn’t be taken as such.