According to research done in the first quarter of 2022, the average American credit cardholder had an average of $5,769 in credit card debt. That’s a 3% increase over the previous year. With numbers like that, it’s no wonder many people are looking for ways to manage and pay off their debt more effectively.
One option that many people are now considering is using a personal loan to pay off their credit card debt. While this strategy can be effective, it’s important to weigh the pros and cons of using personal loans to pay off credit card debt carefully to determine if it’s the best approach for your situation. Below are some of the pros and cons of using personal loans to pay off credit card debt:
The Pros and Cons of Using Personal Loans to Pay off Credit Card Debt:
The Pro
- You May Earn a Lower Interest Rate
One of the biggest advantages of using a personal loan to pay off credit card debt is that you end up with a lower interest rate on the loan than you’re currently paying on your credit cards. This is due, in large part, to the fact that personal loans typically come with much lower interest rates than credit cards. According to recent data, the average interest rate on personal loans is about 11.08%, compared to an average of 16.65% for credit cards.
This lower rate can translate into significant savings over time, allowing you to repay your debt more quickly and at a lower overall cost. And by putting an end to high-interest debt, you’ll be able to focus on other important financial goals without having your money eaten up by the cost of interest payments.
- You Can Consolidate Your Debts into One Payment
Another potential benefit of using a personal loan to pay off your credit card debt is that you can consolidate all your outstanding debts into one convenient monthly payment. This makes it easier to stay on top of your finances and can also help you save money in the long run. For example, consolidating your debts may reduce or eliminate any late fees you might otherwise incur due to missed payments.
- You Can Secure a Lower Monthly Payment
You may also be able to secure a lower monthly payment by stretching out the repayment period for a personal loan. The lower monthly payment can free up some much-needed breathing room in your budget and make it easier for you to get out of debt overall.
The Cons
- It Could Lead to More Debt
One potential downside of using a personal loan to pay off your credit card debt is that it could actually lead to more debt if you’re not careful. That’s because once you’ve consolidated your debts into one personal loan, it may be tempting to start using your credit cards again since they now have available balances. If you do this, you could end up right back where you started (or worse). So, it’s important to make sure that you can resist the temptation of using your credit cards again after consolidating them into a personal loan.
- You’re Not Guaranteed a Lower Interest Rate
Another potential downside of using a personal loan to pay off your credit card debt is that there is no guarantee that you will actually earn a lower interest rate by consolidating your debts into one personal loan. In fact, depending on your credit score and other factors, you may wind up with an interest rate that is higher than what you’re currently paying on your credit cards. Be sure to do your research and compare rates from multiple lenders before making a decision. You don’t want to end up in a worse position than you were in before.
As with any financial decision, there are pros and cons of using personal loans to pay off credit card debt. By taking the time to understand both sides of the issue, you can make an informed decision about what is right for you and your financial situation.
My Funding Choices
If you have weighed the pros and cons of using personal loans to pay off credit cards and are looking for a short-term loan to help you get rid of those high-interest credit cards, look no further than My Funding Choices. Their loan application process is quick and easy, so you can have your money in hand in no time at all. So why wait? Apply for a loan with My Funding Choices today and start tackling your credit card debt with confidence!