Many of us find ourselves in a situation where large sums of money are required to meet an urgent, immediate need at certain times. This could be due to healthcare issues, tax payments requirements, commodity acquisitions or any other reason.
One may choose to pay a credit card bill to meet an immediate need. Credit card bills can come with serious strings attached. If not paid within the required time frame, credit card bills can cause financial stress. Personal loans without collateral are a smart option in such situations. You can use the money to pay off credit card debts, before they accumulate to a significant extent that it is crippling.
This article will discuss the advantages of taking out a personal loan to pay off your credit card debts. It will also show you the most efficient and easiest ways to get such a loan.
Why would one need a personal loan in order to repay credit card debts?
It is important to consider the nature of money spent when making emergency payments using credit cards. Credit is not owned by anyone, but it can be treated as unsecured debt.
Credit debts can be stressful and should not be left unresolved.
This situation shows that credit debt can only be taken if the money is not available. It follows that the borrower doesn’t have enough money at the moment to pay off the debt.
Although it might seem counterintuitive to take out an additional loan to pay off a debt, this is where personal loans have their interest rates to make it interesting.
Lower interest rates
Although credit debts can be structurally identical to personal loans, they have high interest rates. Credit card interest rates can rise to as high as 45% per year.
A personal loan interest rate typically hovers between 10-20% per year. If you use a personal loan to pay off credit card debts, you will save a lot of money over the long-term. This can result in debt reductions of nearly one-third when compared with paying credit card debts.
Meeting credit score deadlines:
It may seem that taking the time to pay off credit card debt would be a good idea. Banks regularly review a person’s payments details and assign credit scores based on the timeframe or lag in required deposits.
Failure to meet credit card debt clearing deadlines will result in the account being marked as “past due”. This will negatively impact credit scores. This could prevent you from obtaining important loans or create other problems.
A personal loan is a way to ensure that payments are made on time and that their credit rating is maintained at the bank.
Efficient financial management:
A personal loan is a great option if you have multiple types of debts that need to be paid to different parties, such as credit card debts.
This basically means that different types of loans can be combined under one personal loan. The personal loan is a consolidation of different loans that can be paid off with borrowed money. This allows one to create more efficient budget plans by simply calculating the amount due for the personal loan.
Only one needs to repay the entire credit card debt and the personal loan. They can then pay the much lower EMI on loans periodically, and maintain a perfect credit score.
How does one get a personal loan?
Any registered financial institution in India can provide a personal loan. These banks or institutions offer loans to individuals who meet certain criteria. The banks evaluate their income, credit score and employment history to determine how much they can borrow.
Visit individual banks and NBFCs websites to access the evaluation tools. This will allow you to estimate the amount of money you can get and the amount you must repay before you approach a bank. This information is required:
Address of the applicant with proof
The applicant must be at least 21 years old to qualify for a personal loan. The loan maturity period must expire before the borrower turns 57.
The applier’s income source is either a salaried person or self-employed.
Minimum Rs 13500 required.
CIBIL score (minimum 600) or Experian score(minimum 650).
Money View’s calculator will calculate the loan amount that the applicant can receive, based on current financial rates. Once you have entered the data, Money View will generate an estimate. This figure does not represent your eligibility. After all information has been verified, the lender or bank can offer the final figure.
There are other situations where a personal loan might be advantageous:
Personal loans can be very helpful for strategizing and organizing financial plans that may result in a significant profit over the long-term.
A personal loan from a trusted institution can be used to get certain tax benefits. This makes it a plan that is future-proof.
A personal loan can be used to help with any financial emergency, new start-up or purchase of something essential in an urgent situation. It also provides financial support for other financial needs, depending on the individual’s financial circumstances.
In some cases, interest benefits can also be claimed for a personal loan relative to the loan amount.
You can take a personal loan at any time and anywhere you want, with legal freedom to use the money however you wish.
Although credit card debt might seem manageable from the surface, it is difficult to handle due to the numerous clauses and conditions that come with it, as well as the high interest rates.
A personal loan allows you to pay off all of your debt in one lump sum. However, it also reduces the interest rate and helps to lower the cost of borrowing. A personal loan is able to make it possible to pay EMI over a period of time, while potentially allowing you to receive tax benefits.
A personal loan is a good option to pay off credit card debts. It can also help reduce monetary losses and reflect negatively on the credit score of the bank.
The possibility of getting a personal loan to repay credit card debts is an obvious option for anyone with vision and efficient budgeting.