Reduce Debts: Pay Off Credit Cards with Personal Loan - Unity Bank
5 min read | 10 months ago
Last year, in 2023, Bloomberg reported that card transactions in India rose to $18 billion in August 2023. This indicates that Indians are becoming reliant on using credit cards, consequently racking up constant debts. However, clearing up this debt is not an easy task for most people, such as young professionals.
Overcoming your credit card debt can be a huge undertaking, and this can be more daunting when the bank imposes high-interest rates on your credit card. Nevertheless, in this situation, a personal loan may be a viable option to help you consolidate your credit card debt. By taking on a personal loan, you can clear all of your credit card debts and instead of delivering multiple credit payments, you will now have just one monthly loan payment. Personal loans are effective because they charge lower interest rates than credit cards, and this saves the user interest and paying off the loan is quicker.
Understanding the burden of Credit Card Debt
Credit card debt is a heavy financial burden to many individuals. Analyzing the key factors that lead to this debt is of utmost importance in debt management and reduction. These may include but are not limited to high-interest rates, overspending, and unplanned expenses. An individual can be debt-free and achieve financial stability by establishing a budget, paying more than the minimum, and using personal loans.
The benefits of using a
Personal Loan
Credit card debt consolidation is the major reason people usually opt for personal loans. Consolidating high-interest credit card debt into a lower-interest personal loan helps individuals save money on interest and simplify their monthly bill payments. However, the advantages of using a personal loan only do not end with debt consolidation. These loans usually come with lower interest rates than credit cards, which make them a good choice for paying for large purchases or unexpected emergencies. However, the main feature is the fixed interest rate and repayment schedule that provide a clear and predictable path to paying off the debt. In general, getting a personal loan improves your financial control and makes accomplishing your financial goals more viable.
Assessing your Financial Situation
Knowing your financial situation is an important step in credit card debt management. Begin with budget preparation, and specifically, prioritize cutting back on unnecessary expenditures. Next, evaluate the option of consolidating high-interest debt by opting for a personal loan or by approaching credit card companies with an offer of lower interest rates. By taking a preventive step and managing your loans wisely, you will get your finances in order and enjoy more stability in the long run.
Exploring Personal Loan options
Personal loans are one of the most commonly used financing alternatives that enable individuals to borrow money for multiple purposes like debt consolidation, home improvements or unforeseen costs. These unsecured loans do not require collateral, and the interest rates are usually lower than those of credit cards. Before applying for a personal loan, it is wise to compare interest rates, loan terms, and fees to determine the option that best fits your needs and budget.
Applying For And Securing A Personal Loan
Getting a personal loan is typically seen as a challenging task to accomplish, but using the appropriate strategy could make the process easier.
Determine your credit score
The first thing you need to do is to check out your current credit score. The interest rate you will pay, the quantity you can borrow, and the loan terms will be based on your credit score.
Shop around for lenders
Once you know your credit score, look around for lenders who can offer you personal loans. You can compare interest rates, loan terms, fees, and others in your search for the best lender that appeals to your needs.
Gather your documents
First, get all the required documents you need before applying for a personal loan. For this purpose, your personal data, means of income, proof of employment and documents the lender needs are important.
Apply for the loan
Once you've chosen a lender and gathered all the necessary papers, apply for the loan next.
Wait for approval
Once you have submitted the loan application, you will need to wait for approval from the lender.
Review the loan terms
After getting approved, read the loan terms carefully. It involves the interest rate, the amount of the loan, the repayment period and the fees and charges.
Sign and receive the loans
If you are satisfied with the offered loan terms, sign the loan agreement, following which the lender will disburse the loan.
Using The Personal Loan To Clear Credit Card Debt
If you are facing high credit card debt and high-rate interest, then a personal loan could be a good choice for you. Consolidating your debt into one loan that fits your budget and financial condition can save you a lot of money. Nonetheless, you need to consider the loan terms to be sure the loan is worth it in future.
Conclusion
Taking out a personal loan to clear credit card debt can be a smart financial decision. A lower interest rate and fixed repayment terms can help you pay off your debt faster and save money on interest charges.
FAQs
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
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