Credit card is substitute to money even in case if you have no bank balance or no cash in your pocket, still you have the purchasing power with credit card. In most of the cases, we assume credit card as our extended source of money and thus use it without keeping a note on our expenditures. Generally, in such situation we end up paying more without thinking of repayment of the expenditures. The situation becomes more grim when we hardly pay attention to the outstanding amount on our credit cards and still continue shopping and make payments with it. In that situation the outstanding balance keeps increasing because of higher interest levied by the credit card companies. When you get badly trapped in this vicious cycle of credit card loan, then you look for options to get out of it. Personal loan is one of the most feasible option which you can explore to save yourself from paying higher interest. Here are some important reasons why you should consider personal loan to pay credit card loan:
Lower Rate of Interest: The rate of interest on personal loan is lower than the interest rates charged by the credit card companies on the loan. The interest rates in credit card loans are much more higher than the personal loan.
Easy to Manage: It is more easy to pay lower EMIs as compared to higher EMIs. If your EMI amount is higher, then there are high chances that you will default on payments. But, in case if your EMIs are within your reach, then you can repay them easily without any hassle. One the other hand taking a personal loan with lower rate of interest much more better than paying high end loan.
Longer Tenure: In credit card loan you can avail the loan for maximum 12 months to 24 months depending upon the terms of the bank/credit card company. Besides, in personal loan you can choose the longer tenure of upto 5 years to repay the loan amount. A longer tenure helps in making the loan EMIs more affordable.
Flexibility in Fixing the Tenure and EMI: Personal loan also helps in choosing from the maximum or minimum tenure. You can choose from the minimum tenure of 1 year to maximum tenure of 5 years. You can choose the tenure based on your repayment capacity. It also helps in choosing the higher or lower EMIs. If you will choose the longer tenure it will automatically reduce the size of EMIs and if you will choose the shorter tenure it will increase the amount as monthly EMIs.
Credit Score: Personal loan is unsecured loan and banks generally approve the application of customers based on their credit history and monthly income. If your monthly income is higher in that case you will easily get loan approval from the banks. With a good credit score you will be able to get a loan on competitive rate of interest. For this you should always ensure that you keep on paying the minimum amount due on your credit card.
Choose a Lender with No Prepayment Charges: Always choose a bank which will not impose any prepayment charges. However, there are banks which charge 2% to 5% extra prepayment charges on the principal outstanding amount. It will also help in prepaying the loan early and saving more money on your loan.
Personal Loan to Pay Off Credit Cards
If you want to pay off your credit card dues, availing a personal loan is surely a wise move as it allows you to clear your debt in a very hassle-free manner. Yes, availing a personal loan is far better than any other option. Suppose, if you want to clear your debt trap by availing a credit card loan, lenders may usually charge you with an interest rate of 35.4% per annum, whereas, a personal loan can conveniently be availed at an interest rate starting from 11.49% per annum. Hence, there is a huge difference in both, thus personal loan is without a doubt best choice.
(Updated on:17th October,2016)