Do you have lot of outstanding on your Credit Cards? Are you concerned about paying them off before they pile up like a heap on you? We seldom use Credit cards, which turn into a liability later rather than an asset, and then we start worrying on how to pay them off. In such a situation, transferring your outstanding Credit Card balance to a Personal Loan would bring in lot of benefits. Making use of a Personal Loan to pay back your Credit Card debt is definitely a good option for many reasons than one.
Many people these days opt for this facility.They Apply for Personal Loan to consolidate the outstanding payments of multiple Credit Cards. The bank (from which you took Personal Loan) pays back that outstanding amount to the respective Credit Card companies and you will then need to repay just one consolidated Personal Loan EMI (equated monthly instalment). Now you may wonder why should you to do this? Ultimately, the debt is still there; you are justshifting the money fromone bank to another. Well, there are many reasons people go for this option.
Let’s have a look at some of those reasons:
One Payment Compared to Multiple Payments
Just think abouthaving multipleCredit Cards and each of them hasa lot of unpaid balance to be cleared.Doing this can exhaust you as you will have to pay the bills of multiple Credit Cards each month. When you procure a Personal Loan, all your multiple payments can be convertedinto a single monthly instalment. This way you can easily track and manage your EMI outgoing.
You Have a Longer Time Limit to Clear Your Loan
This is the next great benefit of having a Personal Loan in order to clear your debt. A Credit Card keeps gathering interest once you get past the interest-free time. This means that the longer you take to clear your bill, the more interest it will accumulate, and the more overloaded you will become with the debt. Let’s take an instance: You have a card with an annual percentage rate (APR) of 39% p.a. Your outstanding Credit Card billamount is Rs.40,000 and the lowest payment is Rs.2,000 (@ 5%). If you just keep paying the minimum amount due of Rs. 2,000, then after a year, the interest on your Credit Card will be Rs.15,500.
This means you will have to pay Rs. 40,000 plus interest cost, which fetches your total up to Rs. 55,500. A Personal Loan lets you pay the fixed EMIs for the time period you have opted (up to a maximum of 5 years) that will provide you enough time to pay off your debt.
A Personal Loan accrues much lower interest rate than that of Credit Cards. Hence, applying for a Personal Loan to pay off your Credit Card bills can help you reduce your interest cost.
Reduces Your Monthly Payments
Using a Personal Loan to combine your Credit Cards overdue amount can also lower your entire monthly payments for the debts that you repay. Your monthly money outflow to repay your credit will be much lower than it used to be earlier.
When you are at a stage where you are lookingout for a better option to clear your Credit Card debt, then of course taking a Personal Loan to consolidate all your Credit Card debt is a smart choice.