Is-it-Good-to-Pay-off-Credit-Card-Debt-with-a-Personal-Loan_519110023

Is it Good to Pay off Credit Card Debt with a Personal Loan?

31 August, 2018

If you have been trying to pay off your credit card debt but failing to do so for some time now, this post is for you.

One of the primary reasons people find it difficult to repay credit card dues is the higher interest rates on credit card loans. We say credit card loans because the amount you are using up is technically a loan. So, what if we tell you that you can repay the debt with a much lower interest rates with the principal sum broken down into flexible equated monthly instalments?

But yes, you can do it by taking a personal loan to repay your credit card dues once and for all.

Getting a personal loan to repay your credit card debt

A personal loan gives you access to funds you are free to use at your discretion unlike say an education loan or car loan or home loan which serves a specific purpose. Personal loans are also unsecured loans, which means do not have to put down collateral for getting the loan funds. Thus, personal loans with low interest rates offer a veritable way to consolidate credit card debt.

Now, since personal loans are unsecured, the interest on them is not going to be as low as a secured loan. But then you are also getting the loan without having to put your personal property or valuables as collateral. However, the interest rate on personal loans is still lower than those charged by credit card companies and banks. In some instances, there can be a difference of up to 6 percent between the interest you are paying on your credit card debt and the interest charged by a P2P personal loan provider like Monexo.

So now you must be wondering if a personal loan is the right option to repay your credit card debt, right?

Well, yes and no.

While taking a personal loan will offer you immediate relief by helping you repay various credit card dues and get rid of the financial and mental stress, on the flip side, the debt still has to be repaid. Personal loans are not a quick fix to your financial troubles, they are a planned fix. You will have to plan for the repayment of the personal loan and avoid getting into credit card debt again if you are planning to take a personal loan for repaying your credit card dues.

Ready to apply for a personal loan online to consolidate your debt? Well, hold on a second, there are a few things you should know about personal loan applications.

Things to know before taking a personal loan

• Personal loans are offered by banks, non-banking financial companies (NBFCs) and online peer-to-peer lending platforms like Monexo in India.

• A personal loan application with a bank or NBFC can take up to 10 or 15 days to get approval and funding. Peer-to-peer or P2P lenders offer quicker personal loan finance by reducing the application time and funding to around 3 days due to their online only processing.

• The rate of interest charged by banks and NBFCs is higher because they make adjustment for in-house costs like paperwork and man-hours and these institutions also collect an up-front fee for processing your loan requests. On the other hand, P2P lending platforms offer more flexible loan terms because it is an investment model where people looking for safe investments contribute small amounts to make up your principal loan fund. And since the process is mostly online, the up-front charges are less than half of what the banks charge.

• Banks also charge hefty pre-payment charges to make up for the loss of interest revenue. So, if you are hoping to come into some money soon and need a personal loan to temporarily waive off your dues, peer-to-peer lending platforms are a better option as there are no pre-payment charges on repayment in full.

• Also, you need a good credit score a.k.a. CIBIL score to get a personal loan at lower interest rates from a bank or NBFC. Once again, P2P lenders have their own financial rating standards and hence you can get a personal loan from Monexo even if your application was rejected by the bank.

• Lastly, most banks and NBFCs will offer a shorter tenor for your loan repayment, meaning the EMI amount will be higher. Thus, if you are looking to ease the burden of monthly payments then approaching a bank may defeat the purpose of taking a personal loan to repay your debts. However, P2P lending platforms allow you to negotiate flexible loan terms with lenders and might be the better way around for fixing your financial troubles.

Want to apply for a P2P personal loan online? Visit www.monexo.co/in to start your online personal loan application now.