Although no one openly talks about it, most people’s lifestyles are funded on credit. The difference between people is how they manage their credit and whether they are spending beyond their means. Due to volatile economic conditions, many people have lately been pushed into large amounts of credit card debt that they seem to have no hope of paying off. One option of getting out of this kind of unsavoury financial bind, is taking out a personal loan to settle your entire credit card debt in one go. If you’re worrying about “Should I take a personal loan to settle my credit card debt”, let’s delve deeper into the pros and cons of doing so.
Settle Your Credit Card Debt with Personal Loans
One of the main reasons that people turn to online personal loans is to settle off other much overdue debts, like credit card debts, in order to safeguard their overall credit scores. The longer you delay repayment of debts, the worse your credit becomes which will greatly affect you in the long-run, especially when it comes to taking out larger loans in future, when migrating to a foreign country or when applying for jobs. These are very specific instances where taking out a quick loan would be the best solution for you. It is important to make it a point to settle credit card debts on time, if you fail to, you might not only have a bad credit score, you also will be charged with a late payment fee and interest everyday you delay to settle in full the due amount of the cycle.
What is the difference between personal loan and credit card debt?
The biggest difference between quick loans’ debt and credit card debt is that when it comes to quick loans, it’s often a fixed amount that you agree to pay off when taking the instant cash loan whereas in credit card debt, the interest accrues as you keep making minimum payments. The periods of these debt types varies and personal loans are on the higher end and credit cards are usually for a stipulated period of time.
Personal loans are often taken to pay up for a huge need which typically involves a lot of money as personal loans are taken to pay up in large amounts with longer repayment times. Each installment is broken down monthly, and customers have the ability to restructure their loans as and when they need. They also have the ability to to pay up their loans early, however they will be charged with a early payment penalty which is usually a smaller amount.
On the other hand, credit cards contain a credit limit you can spend, you are given a credit limit upon application of the card depending on your salary, job and other income plus conditions. This credit limit is the maximum limit you can spend on a given card. It is usually used in instances where you need to finance short term necessities. You are usually given a time period of 21 days to 51 days to settle the credit card debt in full. Credit card interest rates are quite higher than that of personal loans.
Furthermore, unlike online personal loans, your credit card is designed to encourage you to use it more and spend it more, often with lucrative credit card discounts and instalment plans. Therefore, it’s very easy to end up helplessly watching as your credit card debt spirals out of control.
How long should you get a personal loan for?
When taking out an instant personal loan, choose your repayment period very carefully. If your online personal loan repayment period is longer, you will end up paying more in interest and service fees. However, if a longer period will help you balance your finances and end up settling the entire instant cash loan without much difficulty, go for it as that will positively impact your overall credit score which will have great benefits in future. There should always be some research on how much your monthly repayment or installment should be. This will help you understand how much you need to keep separately for such installments and how much money you will have left for other expenses.
When is it a bad idea to take a quick loan to settle credit card debt?
That being said, do not opt for online personal loans if you have no regular source of income. If you do so, even though the instant cash loan will get you out of credit card debt, you will just fall back once more into a personal loan debt which will leave you in greater debt and with an atrocious credit score. As the saying goes, “don’t jump from the frying pan into the fire.” Instant personal loans are only useful to re-calibrate your debt so that your credit score does not suffer, and you can start repaying off a new plan.
Once you have successfully settled your credit card with an online personal loan, make sure to exercise restraint and control when it comes to your spending habits. Getting out of debt is a liberating feeling and we at OnCredit are delighted to facilitate it. So try OnCredit.lk today and get yourself liberated with all the debt that you owe.