Can credit card debt be solved with a personal loan?
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UPDATED: Sep 12, 2011
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A personal loan from a private source like a bank is a short-term solution for those in need of some fast cash to help them in a financial crisis. One situation may be overwhelming credit card debt.
There are situations in which taking out a personal loan can help reduce payments and make credit card debt more manageable; however, there are many aspects of the process that might make this option less beneficial and even more expensive in the long run.
Obtaining a personal loan would not eliminate the credit card debt completely, it would merely shift it into another form. The borrower would owe the lender rather than the credit card company. Borrowers should keep in mind also that in order to receive a personal loan, they must have a good enough credit score for the lender’s approval, and this may affect the interest rate.
The additional disadvantage to switching over your debt to a personal loan is that they often have a shorter repayment period – no longer than five years – than credit card payments – up to 10 years. Less time to pay off the loan means higher monthly payments.
Finally, this option for debt management may also reduce a borrower’s credit score, which can hurt when applying for loans or credit cards in the future. However, if the individual proves that he or she can successfully manage this new loan over time, his or her score may actually go up.