Finance

When is the Right Time to Pay Off Credit Card Debt With a Personal Loan?

debt consolidation loan

One of the best financial habits that you can adopt to keep your credit score high is to pay your credit card debt on time and in full. In doing this, you can build a good credit score and most importantly, enjoy financial freedom. Conversely, if you have been accumulating credit card debt, your financial health is likely to be at risk. One way to get out of this is to tackle credit card debt by paying it off with a personal loan for debt consolidation.

If you’re wondering when it is suitable to get a personal loan to pay off credit card debt, take a look at two instances where you must consider paying your credit card debt with a debt consolidation loan.

When your annual credit card interest rate is higher than that of a personal loan

Availing a high interest rate personal loan doesn’t serve the purpose of debt consolidation as the main objective is to dilute the annual interest rates applicable on your credit cards. This is only possible if you get low interest rates on a personal loan. Once you avail a low interest rate personal loan for debt consolidation, it will give you a chance to get out of the debt cycle faster. So, it is important to compare personal loan rates and apply for an affordable one.

When you use more than one credit card and the outstanding dues are hefty

Having multiple credit card dues make managing your finances extremely stressful and also hard on your pocket. Consolidating several debts into a single personal loan will eliminate the need to manage multiple payments. It also means that you will now have to pay just one reduced monthly payment as the interest rate on a personal loan is lower than the combined annual interest rate on multiple credit cards. Choose a personal loan EMI that you can easily pay without risking the stability of your credit score. Also, use your credit card more responsibly after paying off your dues.

Now that you have knowledge about whether it is a good idea to consolidate debt with a personal loan, you may want to know about how personal loan will affect your credit score. So, take a look at the evolution of your credit score through the process of using a personal loan to consolidate debt.

  • As is, you may have a bad credit score with all your credit card dues. When you avail a personal loan, your credit score will further dip.
  • Once you repay your credit card debt with the personal loan, your credit score will increase to an extent.
  • Over time if you repay your personal loan EMIs regularly, your credit score will get into even better shape.

However, you should be prudent when applying for a personal loan as these carry higher interest rates than a secured loan. Remember, your purpose is to get out of debt, so avail low interest rates personal loans. The only way to bag a good deal is to compare personal loan rates before applying for one.

There are several vendors who have simple personal loan eligibility criteria, minimum documentation, and flexible repayment options. When you apply for a personal loan from Bajaj Finserv, you can enjoy quick approval and disbursal within 24 hours and high value amounts of up to Rs.25 lakh at nominal interest rates. Thus, you can pay off your credit card debt in a jiffy and free yourself from the cycle of debt. Use the online account management feature to keep a track of your finances and enjoy flexi loan features that allow you to pay interest only EMIs with repayment of the principal at the end of your tenor.

To avail this loan and benefit from your customized deal, check your pre-approved offer and expedite your financing via a one-step hassle-free personal loan online application.

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