If you are carrying balance on your credit card, you may have to pay a huge interest on it each month. When you feel that your credit card issuer is charging you with high interest rates, then one of the best options to pay off your debts is by opting for a personal loan.
The reason behind paying off credit card debts through personal loan is because of its lower interest rates. If your credit card interest rate is higher than your personal loan interest rate then you’ll save significant amount of money with the loan. But if the interest rate on your personal loan is higher than your credit card rates, then you won’t save any money. However, there’s still another reason to consider the personal loan, which is your credit scores.
A personal loan is considered to be a systematic financial tool, since you’ll have a fixed loan amount and fixed payments over a fixed period of time. Whereas a credit card is a revolving account, which means the balance and repayment fee structure can fluctuate month to month.
A personal loan is an installment debt, which has lesser effect on your credit scores, while the credit card debts can ruin it! When you pay off credit cards with personal loans you’re converting revolving debt to installment debt. And, doing so will likely cause your credit scores to go up. Hence taking a personal loan to pay off your credit card debts is a viable option!