If you are a regular user of credit cards, you would definitely vouch for the convenience it offers. You can pay for purchasing things and services in a jiffy using a credit card. As for the repayment, it can be done without any extra cost (interest) in the interest-free period.
But unless you clear off all your credit card dues before the interest-free period, you will be subject to very high rates of interest. At times, the rates are even higher than 40%!! So if you are not careful about handling your credit card outstandings, you will end up getting stuck in a debt trap.
Now there is an easy and smart solution to your credit card woes. You can say that in a way, it’s a type of card debt consolidation loan.
But why does this make sense? We try to answer these with following points:
- Interest rates on personal loans are much lower than those that have to be paid on credit card outstandings. A credit card company can charge you 40% plus whereas personal loans are available from 15 to 20%. So you can save a lot of money on interest.
- If you use personal loan to repay outstandings on all your cards, then you just have to manage one loan instead of many card repayments.
- You will also have a clear repayment schedule with one personal loan as you would know exactly how much EMI you have to pay and when.
- Your credit score will also start improving, as you will be clearing off high-interest loans (credit card dues) in one go.
So taking a personal loan to clear off all of high-interest credit card dues makes a lot of sense. If you are finding it tough to get out of your credit card repayment cycle, then you should seriously consider it.