Should I use a personal loan to consolidate debt?
If you can qualify for a loan at a lower interest rate and have a plan to repay your debt, consolidating debt via a personal loan is a good option. (iStock).
Money can be a financial burden. It can also make it challenging to manage multiple creditors, especially if there are multiple loans. A personal loan can consolidate your debts and save you the hassle of making numerous monthly payments.
Consolidating debt in this manner means you take a loan from a bank or credit union. The amount of your debt and the loan size will determine how much the proceeds can be used to pay it off.
These loans are outstanding for debt consolidation as you have more flexibility with the loan’s proceeds and can borrow at a lower rate than other types of debt. You can also borrow at a lower rate than different types of debt, such as credit card debt. This type of loan can be used to pay creditors, but it’s not the best choice for all circumstances. It would help if you weighed the pros and cons. The pros and cons
Which types of debts can I consolidate using a personal loan?
These loans have the advantage that you can borrow money for almost anything. You can repay almost all your debts with the proceeds from a personal loan.
- Credit card debt
- Medical debt
- Payday loan debt
- Other loans
You should make sure you only pay off debt with an interest rate more significant than your loan rate. You could end up paying more to pay off the debt.
Credible can help you find the best rates on loans and determine what debts it is worth paying.
Should I get a personal loan?
A personal loan can be used to consolidate your debt. There are many benefits to this method of borrowing money.
- Reduce your interest rate. Your new lender will charge you less interest if you are eligible for a low-rate loan.
- Your monthly payment can be reduced. A lower interest rate can often mean that your monthly payments go down. This will allow you to free up more money in your budget. Credible’s loan calculator will help you estimate how much a loan might cost. To see the current rates available, enter the amount of your loan into Credible’s tool.
- Make it easier to repay. You’ll only need one lender to pay your multiple debts instead of worrying about making multiple payments every month.
- Pay off debt faster. Lowering your interest rate means that more money is available to pay down your debt. You can get out of debt more quickly if your loan repayment term is shorter than the consolidation debt.
There are also downsides to this:
- This could lead to more debt. You could end up owing more money if you repay your credit cards using a personal loan.
- It is possible to pay more over the long term.
There is typically little to no downside to a personal loan if you qualify and are willing to pay it back quickly.
Check out the personal loan rates you are eligible for today to see if this makes sense for you.
Which loan is best to consolidate debt
It will help compare quotes from multiple personal lenders to find the best personal loan for consolidating debt. Compare interest rates, repayment terms, and eligibility requirements to find the right lender.
Credible makes it simple to find the best personal loans. You can compare rates and terms from multiple lenders online without having to affect your credit score.
What are the other options?
A personal loan can be a great way to pay off your debt, but it’s not for everyone.
Other options include a balance transfer credit card that allows you to transfer high-interest credit card debt to a lower promotional APR card. A balance transfer may be an option to eliminate credit card debt for a short time at 0% interest.
Credible’s online marketplace allows you to compare several 0% credit cards simultaneously to help determine whether a balance transfer, personal loan, or balance transfer is the best option to repay your debt.