Getting a Loan to Pay Off Credit Cards is a Bad Idea
Getting a loan to pay off credit cards – Not a great idea. Financial advisors and investing hobbyists will all tell you the same thing… in more cases than not it is a bad idea to pay off a credit card debt with another loan. It’s certainly attractive, and many loan companies will make it seem like they are offering you the best deal in the entire world by allowing you to pay off all of your credit cards in one swoop. This would occur in exchange for one monthly payment from the new loan you are taking out.
Debt consolidation loans are products in the financial market and this means that the companies which offer them are in it to make money.
Tips to avoid falling into a loan trap when paying off your credit cards:
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- 1. Spend some time doing the math necessary to see how long it would take you to pay off all of the interest and balances on your credit cards at your current payment rate. Then you can use that to compare it to the length of time it would take if you were to take out a debt consolidation loan or a personal loan in order to pay these debts off. A debt consolidation loan may cost you more money over time than if you paid off all of your credit cards at your normal pace.
- 2. Do research on the monthly payments you would be paying if you were to take out a debt consolidation loan or a personal loan in order to pay off your credit card debt. If your loan payment is going to be more expensive than the payment you are able to make on your credit card debt, then you may benefit more from just applying that money towards the credit card debt instead of worrying about a new loan. Loan terms on large amounts of money are usually fairly long, so even if your payment is less on the loan than it is on the credit card debt you may still lose money over time due to the interest on the loan.
So how should you pay off your debt?
It all comes down to your behavior and the mathematics involved in the process. Sometimes if you are drowning in credit card debt and there is going to be no way for you to make a dent in it anytime soon, then you may benefit from a debt consolidation plan. Some debt consolidation agencies will work with you based on your current job and allow you to set up an automatic debit program that bills your bank account every month.
If you want help with your debt then you should seek it out immediately. Do not let judgments from friends or family stop you from making this move. Credit counseling programs and debt repayment programs all exist for a reason and that reason is to help people like you who are worried about their future. Some of these programs can even assist you in negotiating lower rates on the debt you have accumulated or point you towards debt consolidation programs that have a proven track record.