Credit card debt is something you're always told to avoid.
But life has a funny way of sometimes making things difficult, particularly so when it comes to managing finances. You could be at the top of your game ensuring you have no, or low, balances on your cards. Yet, expenses could pop up where you're forced to put everything on credit.
If you have credit card debt piling up, you may want to consider taking out a personal loan to get your finances in order and find some relief.
Credit card debt is serious
Before you know it, your credit card debt is in the thousands of dollars. In reality, you aren't that different from the average American household. According to a study from NerdWallet, the typical household in the U.S. holds nearly $15,310 in credit card debt.
Large amounts of debt are usually spread across many cards, all with varying interest rates. What this ends up translating to is that you having to make multiple monthly payments to pay off each card. It's not unusual to make payments for more than two cards.
While that may not seem overwhelming at first, the different amounts will eventually add up and you also have to take into account interest rates. Making only the minimum balance will end up costing you over the long term.
Throw in other important monthly expenses, and your wallet may start to feel the pinch.
With the help of one financial tool, you could eliminate your credit card debt.
Enter the personal loan
Personal loans are exactly what they imply - for personal use. Theoretically, you could use them for anything you have in mind.
When it comes to credit card debt, however, personal loans can be more helpful than you think. Instead of making multiple monthly credit card payments, you can consolidate your debt by taking out a personal loan.
Essentially, the new loan will help you pay off debt from credit cards. Now, instead of making multiple payments, you'll only have to make one to pay back the personal loan. The bank you approach for a loan may even offer better repayment terms and lower rates, provided you have a worthy credit score.
Debt consolidation is a viable financial option to explore, but it's also one that carries some risk. You have to ensure you are serious about eliminating your debt. As NerdWallet highlighted, it's common for individuals to dig themselves deeper into debt because they start maxing out credit cards again.
How do I know if consolidation is right for me?
In order to decide if debt consolidation by means of taking out a personal loan is the right move, you first have to ask yourself some important questions:
- How long will it take to pay off your debt?
- Are you willing to change spending habits?
- What will potential interest rates be set at?
Ideally, debt consolidation works best if you believe you can pay off all of your outstanding bills within five years. By having a more manageable debt situation, you'll be able to successfully utilize consolidation as a way to become debt-free.
"Debt consolidation works best if you can pay off outstanding bills within five years."
However, if your debts are much higher, a personal loan may not be the right decision. Borrowing more money is rarely the right move, particularly if you don't think current bills will not be paid off within five years. At that point, you'll to explore other, more serious financial options, such as starting a debt management plan.
Personal loans can be used for many things. One of the best uses for this type of loan is debt consolidation. You'll need to be serious about eliminating existing credit card debt.
Once you are, a personal loan can help you dig yourself out of a hole.
For more information about smart ways to manage your finances, contact Landmark Bank.
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