The Bright Life > Credit Cards

Should you consider a Loan to Pay Off Credit Cards?

Personal loans can wear off the burden of debt you carry on your cards! But do they actually work?
May 23, 2020
Carolyn Deng
Director of Business Development and Credit Product, Bright Money
Avi Patchava, Varun Modi, Amit Bendale, Avinash Ramakanth, Deepak Thakkar
Published on December 11, 2019

Credit card debt or Personal credit loan? What would you prefer if you are short of cash and have to buy essentials from the next-door market store?

It’s more likely that you will end up choosing Credit cards because they are more convenient, they are handy and always in your pockets, and more importantly because you can get a credit card more easily than you can get a loan! It’s an unsecured form of loan, which usually comes at a higher interest rate. Personal loans, on the other hand, are secured forms of loans and need collateral with the bank but come handy at a cheaper interest rate and longer pay off durations.

Common Ways to Deal with Credit Card Debt -

Credit card debt is a revolving phenomenon for you if you are not disciplined to make full payments every month. It comes with heavy interest costs, which only make you end up paying more than the purchases you made from your cards. To get out of debt can take you years, with huge fees paid to card companies and it can be tiring and tearing at the same time.

How do you deal with it?

  • Get disciplined with payments of your card.

  • Make sure your credit utilization is going down month on month.

  • Use a Balance transfer card to reduce interest charges paid each month.

  • Make use of universal strategies like Debt Snowball or Debt Avalanche.

  • Pay more than just a minimum due to get out of debt.

Paying Off Credit Card Debt with an installment Loan -

Not everyone does the hard math in calculating the amount they end up paying to credit card companies. It’s often due to the unavailability of cash that you get in the debt-trap and just never get a path to get out of revolving debt. But taking a personal loan can help you improve your financial situation. Installment loans help you with a cheaper interest rate which goes straight towards your card payments and saves you $100s each month.

Why use a personal loan to pay off credit cards?

It’s very natural to ask why to take another debt to pay off existing debt. Personal loans are just another form of debt and not the best solution out there since they are not available as easily as 0% APR cards. The suitable way to take maximum advantage of your personal loan is to use it only to pay your cards, and only take a loan when you get it at a cheaper APR than your cards.

Ways to use a loan to pay off credit card debt

Think long term, your 0% APR cards will also be charging you interest in a year’s period and if you are someone very much used to making purchases from your cards, you are not far from paying interests up to 26% then on your now called 0% APR purchases. On the other hand, a personal loan when taken will have a cheaper interest rate and is a one-time debt commitment to pay off other debts. If used properly and with the right calculations, it can help you get debt-free faster.

Bright offers a credit line of up to $10000 to users instantly, if they have a credit score of 720 and above. This helps you pay your cards at the ease of automation and saves you $1000s on interest fees you waste on your credit cards.

Is using a personal loan to pay off credit cards the right option for you?

In ideal cases, anything which gets you debt-free faster should be the right option for you.Personal loans are just a better alternative to 0% APR cards and get you a sense of responsibility to pay down your debt.

Bright’s automated debt management system provides you a personal credit line within a single day and helps you pay down your cards such that you save maximum on your interest fees and speed up your debt payments.

Bottom line...

Considering a loan to pay off cards is a good choice, only until you are confident you are not baiting one debt with another and are determined to use the loan amount to pay off your existing debts.

Carolyn Deng
Director of Business Development and Credit Product,
Bright Money

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