Credit cards are plastic money which is used by many people across the world. Credit cards are gaining so much attention that the credit card user base in 2019 reached 47 million and the market is anticipated to grow at a CAGR of more than 25 percent during 2020-2025. Growth is amazing for the economy but sometimes it gets people into trouble if the card is not used wisely. The credit card debt does not balloon just by swiping it again and again but if a person fails to make the payment or overspends from your limit and a higher rate of interest, as high as 48 per cent lands people in such a situation. One of the most popular ways to deal with such a problem is taking a personal loan to pay all the dues of the credit card. Here is a lowdown of a couple of benefits of taking a personal loan to make payment of credit card dues:-
Credit card interest rate is comparatively higher than the interest rate on a personal loan. Credit card charges as high as 48 percent as a rate of interest (ROI), whereas on a personal loan, a rate of interest lies between 10-24 percent. This means that it is better to pay EMIs at the lower interest rate rather than paying interest on the credit card dues.
If you have multiple credit cards, and due to financial issues you have outstanding on all of them then it is better to pay one EMI of a personal loan rather than paying all credit cards debts on the higher interest rate.
Determining EMI amount/tenure
In credit cards, you have to make a payment of a certain amount at a given time which is according to the lender. However, in the personal loan are free to choose how much EMI you will be able to pay and select the loan tenor. It also comes with flexible prepayment and foreclosure terms.
Enhancing credit card score
A personal loan is a better option if you are sinking due to credit card dues as it will also impact your credit score which should be a big no for future purpose. It is better the pay comfortable EMI of personal loan, it will help in enhancing the credit score as well as you can pay EMI depending on your finances.
Things To Remember
You need to be careful while selecting personal loan as the interest rate of all the lenders differ, select the one which offers the lower interest rate. If your credit score is not good then there are chances that your loan might get rejected as well as check what kind of fees and charges are charged by the bank for prepayment or foreclosure.
If you have an existing home loan then you avail a top-up loan at a lower interest rate than the credit card interest rate. The top-up loan can be used to pay off the debts of a credit card. The top-up loan can be availed easily if you have been paying your EMI on time for more than two years.
Looking at the benefits of having a personal loan over a credit card debt, definitely indicate that it is better to have a personal loan as you might save money on that because personal loans are provided at a lower rate of interest when compared to credit card interest.