Should I take out a loan to pay off my credit card?

Racking up credit card debt can land you in some hot water if you aren’t careful. Credit card payments have very high interest rates. Which means this type of debt is very expensive and if you are only paying the minimum monthly installment, you are going to end up with an exorbitant amount to pay back. However, there are options that will help you consolidate your debt and get you closer to financial freedom. 

Cyber Finance explores three different loan options to help you decide how to move forward with paying off your credit card debt.

Personal Loan

Personal loans are the most common type of loan used for debt consolidation. They have a considerably lower interest rate which takes some of the pressure off and allows you to pay back your debts faster. If you’re juggling multiple credit card debts with high interest rates, taking out a personal loan allows you to consolidate your credit card into a single payment.

Although personal loans are arguably the most popular way to consolidate credit card debt, they may result in a cash flow issue if you aren’t careful. A fixed rate personal loan requires you to make a monthly payment for a specific period of time, and the monthly payment may be higher than the minimum payments on your credit cards. When applying for a personal loan as a debt consolidation option, make sure you have the means to pay back the monthly installments without putting yourself at risk.

Balance Transfer Credit Card

Another possible way to consolidate your credit card debt is by applying for a 0% balance transfer credit card. In a nutshell, a balance transfer credit card allows you to move outstanding debt from one credit card to another, depending on your credit score. By moving your debt, you will be able to transfer it to a credit card that offers significantly lower promotional interest rates and better benefits. Try and look for an option that offers you a 12-month balance transfer as this will mean you are only paying off what you owe for the stated 12-month period, with zero interest. A balance transfer is a good way of consolidating debt, only if you stick to your monthly payments and the allocated time frame.

Home Equity Loan

Home equity loans should be considered as a last resort when trying to consolidate your debt. Home equity loans allow homeowners to borrow against the equity of their homes, which gives them easy access to cash. It is very important to weigh the pros and cons before taking out this type of loan, as it uses your home as collateral. If you can’t make the payments, you risk losing your house. If you are just going to shift debt around when taking out a home equity loan, without a concrete plan towards becoming debt free, then it shouldn’t be an option.

The above three options are ideal if you have a good credit record and qualify for these solutions. However, if you find yourself in a difficult financial position and have a bad credit record these options may not be available to you, but there are alternative solutions available. This is where our specialists come in, they will take a look at your financial situation and suggest possible solutions based on your unique financial position.

Cyber Finance has a team of debt-specialists that can help you decide on the best possible solution for consolidating your debt. Book a free consultation with one of our specialists today and start your journey towards financial freedom with Cyber Finance.