Benefits Of Consolidating Credit Card Debts With A Personal Loan

If you have multiple credit card accounts with balances on each of them, you might want to look for a way to pay these off, especially if you currently can only make the minimum payments on each credit card account. While there are several good options you could use for help with this, one of the best options is a personal loan. Here are some of the top benefits of choosing a personal loan as a way of paying off your credit cards.

You Will Not Need Collateral

One of the differences between personal loans and other types of loans is that a personal loan does not require collateral. When you purchase a car and get a loan for it, the loan is based on the car being your collateral. If you do not pay the loan, the lender can repossess your car. With a personal loan, you are given money from the proceeds without putting up any form of asset in exchange. This is great news if you need a loan but do not have anything to use as collateral.

A Personal Loan Allows You to Consolidate

The second benefit you will experience from using a personal loan to pay off your credit cards is that this event allows you to consolidate your debt. If you are currently making five or six credit card payments each month, you will no longer have to do this. Instead, you will be able to pay off all your credit card balances and will have just one payment to make each month, and this one payment will go towards your personal loan.

With a personal loan, you will be set up on a repayment plan, which is typically structured like a car loan. You will have a certain number of payments to make, each will be due on the same day of each month, and each payment will be the same amount. Not only will it be easier for you to make just one payment each month, but it will also be nice for you because you will know the exact date in which you will pay off the loan in full. For example, if you take a three-year loan, you will know that in three years, you will be debt-free. You will no longer have to wonder how long it will take you to repay your debt.

You Will Pay Less Interest

Another benefit is that you will probably save a lot of money on interest charges. The interest rates on your credit cards might be around 30%, or even higher than this. The interest rate you get on your personal loan will be closely connected with your credit score, but it will most likely be lower than the rates you are paying on your credit card bills. If you have good credit, you will qualify for a lower interest rate. If you have really bad credit, your rate will be on the higher end.

Your Credit Score Will Most Likely Increase

The other good news about consolidating credit card debts with a personal loan is that you may see a large increase in your credit score. As soon as your credit card accounts update your balances after you pay them off, it should cause your score to increase. Adding a personal loan to your credit report could also cause an increase, simply because diversification of debts is a positive attribute for credit scores.

Getting a personal loan as a way of consolidating credit card debt is a great option to try, especially if you want to avoid using bankruptcy to become debt free. If you would like more information about personal loans or would like to apply for one, contact a lender that offers them to find out how to get started.