Should You Use A Personal Loan To Pay Off Credit Card Debt?

By: Carrie Smith

How nice it would be if there was just one single best method to pay off all forms of debt. Sadly, nothing like that exists. Each family has to come up with their own formulas. My husband and I have tried many ways to solve our debt problem, each with mixed results.

After several attempts, we hit upon a strategy that is well known, but that we hadn’t tried before: refinancing our credit card debt into a personal loan.

Tried and Failed Methods

First, we tried the “snowball” method by paying our smallest debt balance first and then going down the list from smallest to greatest. Second, since we were determined to knock this debt out, we started paying it down very aggressively. We would pay off the entire balance, but then we’d have to charge it up again with regular living expenses and household costs. Third, we tried the juggling method of making monthly debt payments while making many, many balance transfers to 0 percent APR cards.

Each method we used to try to pay off our debt had its benefits and drawbacks, but none were as difficult as the third — juggling.

Yes, the juggling act we did was the easiest on our wallet, but with that came the endless balancing act and constant vigilance needed to make sure that everything was getting paid on time.

After many, many long talks about our money, my husband suggested that we put a stop to this unending tension by paying all our credit cards off in one fell swoop. We chose to use a personal loan to consolidate our credit card debt.

Pluses of Personal Loans

A personal loan is a great answer to your situation when you’re paying high interest rates on multiple credit card accounts. Here’s why:

Low Interest Rate

The average credit card interest rate in 2015 was in the 13.12 to 22.99 percent range. When we were comparing personal loan rates, we compared four different companies and landed on an interest rate of only 10.89 percent. That’s significantly lower than the average credit card interest rate, and it will save us a large chunk of money over the long-term.

A Single Payment

The ease of having just one, smaller payment to make each month seemed like it was a lot less than the four different payments we were making.

It was nice not to have to pay multiple small amounts throughout the month. It was nice not to stress about when the next 0 percent APR deadline was. And it was nice not to do the juggling act — to only send a single check each month.

Simplify Your Debt Payoff

One of the main reasons that we decided to use a personal loan to pay off our credit card debt was because we wanted a simple debt-payoff plan that would finally work for us. Since going this route, we’ve been able to avoid the long discussions about how to handle our debt. These planning discussions are now quick updates about the progress we’ve been making towards becoming debt-free.

Drawbacks to Using a Personal Loan

Debt consolidation strategies like using a personal loan have both pros and cons. Before making a decision, research all your options and make sure that you know the drawbacks before proceeding.

Paying More Interest

If you don’t have good credit, you may not be able to qualify for a personal loan with a lower interest rate than your credit cards. Personal loan interest rates can be as low as six percent or as high as 35 percent. You don’t want to end up paying more than the original credit card interest, so choose carefully.

Check out CentSai.com to finish reading this article and to read other personal stories about finance.