Should you pay off credit card dues with a personal loan?
With the help of a credit card, people can spend without having any funds at their disposal. As a result of this, more often than not, individuals end up spending more than they should. This leads to bigger problems at the time of repayment. Since credit cards charge a hefty interest rate, using it excessively can result in outstanding balance. When this outstanding balance continues to grow, people start looking for options to pay off their credit card dues and free themselves from the debt trap. One of the most viable options to pay off credit card dues is taking a personal loan. Let us have a look at why you should consider availing personal loan to pay off your credit card dues.
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Low interest rates: The rate of interest on personal loans is significantly lower than the interest rate charged by credit cards. While the interest rate on credit cards can be as high as 45%, loan-providers charge 11.5-24% interest rate for personal loans.
Easier to manage repayments: With the help of a personal loan, you can consolidate the debt to pay off multiple credit card dues. This will enable you to manage your repayment in a better way.
Flexibility in fixing the tenure and EMI: Unlike credit cards, with a personal loan you can fix the tenure of your loan according to your own repayment capacity. This will help you to plan your repayment properly.
However, before you settle for a personal loan, there are certain factors you must keep in mind.
Credit score: Ensure that you have a high credit score, this will help you avail a personal loan with a lower rate of interest. Most of the financial institutions will check your credit score before approving your personal loan.
Loan Tenure: Your loan tenure is crucial in determining the size of your equated monthly installment (EMI). A longer tenure will mean smaller EMI but it will also lead to higher interest cost. Therefore, it is advisable to opt for a short-tenured personal loan, depending on your repayment capacity and expected future cash flows.
Prepayment charges: opt for a personal loan from a financial institution that does not charge any prepayment penalty, especially if you expect cash inflow in the future. This will allow you to pay off your outstanding balance without incurring extra charges.
To sum up, it is always a better idea to pay off your credit card dues by taking a personal loan. However, you should opt for a personal loan only if you think that your credit card debt has increased significantly. Also, if you find yourself stuck in a debt trap quite often, you should try to change your spending habits and manage your expenses wisely.
With the help of Finserv Markets, you can avail personal loans at competitive interest rates and flexible repayment options. Moreover, you can also customize your personal loan to best suit your needs. So why wait? Apply for a personal loan with Finserv Markets through a hassle-free online process, today.
Finserv Markets, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment, and exclusive EMI store, all under one roof- anytime, anywhere!