Credit Cards and Personal Loans

Credit card debt can become staggering, and for many consumers, that can happen a lot faster than they might imagine. When we consider that many consumers carry anywhere from three to ten credit cards in their wallets, it should come as no surprise that the payments on those cards can become overwhelming once they are used. What may be a surprise to some people is that often enough the total amount of money that is required to pay monthly credit card bills is more than any other expense encountered in the household.

There are some viable methods for reducing the total amount of money needed to pay credit card bills. Some of these are good, while others carry some serious drawbacks. One of the more popular means of paying off credit card debt is to take out a personal loan. On the surface this may seem like a great way to get rid of those expensive payments on the cards and replace them with a single payment for the personal loan. However, there can be financial hazards with this plan as well.

If you are considering taking out a personal loan to pay off all or some of your credit card debt here are some tips that might help you with that decision.

One of the first things that you should consider is the interest rate that you are paying on your cards as it compares to the interest rate of the personal loan. If your cards are carrying a very high interest rate (and this might be anything above 15 percent) you may want to think about a personal loan but only if the interest on the loan is going to be below what you are now paying. The lower it is below that high card rate the better.

Some consumers may be asking why not use a balance transfer program as offered by many of the card companies? It is a good question. One thing to keep in mind about balance transfers is that often the rate they allow you in the beginning is only a teaser rate and it will go up. You need to know what that final rate will be before you accept one of these offers. Also, you may be charged a fee which can become substantial if you have many balances from various companies that you want to transfer. Lastly, if you are only allowed to transfer a portion of your current credit card debt you will still have to make the payments on those cards that are not transferred.

If you qualify for a low-interest personal loan for the amount needed to pay off your credit cards you can, literally, pay them off and be done with all those monthly bills. For some consumers this is a wonderful way to get out of that crushing debt and, usually, keep more money in the household budget at the end of the month.

Another bonus is that using a personal loan to pay off high-interest credit cards offers a set date of final payment. In other words, if your personal loan states that the loan will be paid off in thirty-six months then you know that at the end of that time your bill is paid. It is the end. That is not often the case with credit card debt, which can seem to go on forever.Peter Kenny is a writer for The Thrifty Scot, please visit us at Personal Loans and Best Credit CardsVisit www.thriftyscot.com