A personal loan to pay off credit cards is often called as consolidation loan (CL). The idea is to get a credit card CL with a lower interest rate than what you’re paying on your card as well as a set repayment period. This way, you get a defined and fixed repayment plan.

Advantages of using a PL to pay off cards

PL will carry the biggest benefit if you’re currently paying high interest rates on multiple card accounts. Here’s why.

1. Potentially lower interest rate

A small change in your interest rate can make a big difference, that too if you have a lot of card outstanding. Keep in mind that there’s no guarantee your “Interest Rate will be lower on a Personal Loan“. It will depend on your creditworthiness.

2. A single payment

Various card outstanding payment through one consolidated finance can easy your repayment capacity and allows you to get rid of balance on card in defined time frame.For example, you won’t have to worry about various payment dates and amounts. Also it helps in being organized with single payment pattern as a constant EMI.

3. Quicker oystanding payoff

Constant repayment and monthly EMI may enable you to save more from income and interest part and thus repay in lesser time frame .

Since credit card often don’t have fixed repayment period the outstanding amount keeps on piling up. When the debt is high then you can not just get away with repayment just by paying minimum amount due .

Disadvantages of using a personal loan to pay off on cards

Despite multiple benefits for opting CL there exists certain demerits as well which cant be overlooked.

1. Potentially higher interest rates

Not all PL companies offer low interest rates. It all depends on your credit history and lender comfort .

2. You might not be able to afford it

Repayment on defined time for fixed EMI might break your budget amid your fixed spending and disturb your saving pattern for a short while .

3. You might have to pay a fee

Some PL companies charge a processing fees. This fee typically ranges from 1 percent to 6 percent of the loan amount. If you borrowed Rs15,000, for example, you’d pay between Rs150 and Rs900 upfront.

So, It depends on situation that using a personal loan to pay off credit cards could be more expensive although if the loan has a lower interest rate and offers fixed EMI .

Is a credit card consolidation loan the best move for you?

If you have a good repayment history and high-interest card debt, a combined loan could help you save money on interest and repay your debt sooner.

At the end of the day, make sure you’re taking the time to consider all your credit card debt consolidation options. Even if you don’t qualify for the best deals out there, you’ll have the knowledge you need to create your next action plan for paying off your credit cards effectively.