Racking up a serious amount of credit card debt can be stressful. It can lead to a significant build-up in interest which can be overwhelming to pay back. That is why for some it may be beneficial to take out a personal loan to cover their debt. In the following article we look at the benefits of taking out a loan to pay off a credit card debt and the alternative options available. With all these options, it is important to close any unwanted credit card accounts to avoid incurring more debt.
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Using a loan to repay credit card debt
Taking out a personal loan to consolidate debt is often a good way to clear credit card debt as the average interest rates on personal loans are usually lower than those on credit cards, helping to make repaying the debt cheaper and quicker.
This becomes a more significant factor if you have several credit card debts. A personal loan can consolidate all this debt in one place, which can make it easier for you to pay back as you won’t need to keep track of all the different due dates.
However, this can also be a disadvantage as personal loans come with set payment instalment plans, which means you will have to pay a set amount each month. Meanwhile, although credit cards require a minimum repayment each month, this gives flexibility to some users who cannot afford the same regular payment each month.
In addition to this, there are many personal loans which charge a fee, and this will need to be considered when calculating the overall cost of your personal loan. To compare the different personal loan options available to you, consider using our charts. On this page you will also find a loan repayment calculator which will give you a quick indication of how much your loan should cost.
For a more detailed understanding of what you will ultimately owe, use this eligibility checker from our preferred loans partner Loans Warehouse. Not only will you get an understanding of the best rates available to you, but the check does not affect your credit score.
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Using a 0% balance transfer card
Credit card borrowers with a small amount of debt may find it is a better option to use a 0% balance transfer credit card than a personal loan to clear their debt.
A 0% balance transfer card will offer an interest-free period when an outstanding credit card debt has been transferred to the card. This means that borrowers have a period, which can be as much as 30 months, in which to repay the debt without incurring any interest.
Interest is usually then added to any outstanding balance once the interest-free period ends.
Borrowers considering this option should be aware that many 0% balance transfer credit cards will charge a transfer fee when balances are moved to the card.
As well as this, unlike a personal loan when monthly repayments are pre-set, a 0% balance credit card requires consumers to be disciplined with their repayments to ensure that the balance is repaid in full before the interest-free period ends.
FAQ
Where can I go if I can’t afford my credit card debt?
What happens to credit card debt when you die?
When you die credit card debt is rarely forgiven in the UK and will normally be repaid from the value of your estate, unless your beneficiaries were jointly responsible for the credit card in which case they will become responsible for the debt.
How to get the best credit card rate?
Usually, lenders will offer their most competitive personal loan rates and their best 0% balance transfer card deals to consumers with high credit scores. As such, consumers looking to take out a personal loan or apply for a 0% balance transfer card may want to check their credit score first – which can be checked for free online here.
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.