Want to use a personal loan for credit card debt? Consolidate outstanding balances by choosing a personal loan with a lower interest rate.
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Credit cards are one of the most convenient ways to make purchases. If you don't pay bills on time, you may end up with a large credit card debt due to higher interest charges. As personal loans require no collateral and the funds can be used for any purpose, the idea of getting a personal loan to pay off your credit debt may sound like a good idea. But is it the right way to take control of your finances? Read more to know whether getting a personal loan for repaying the credit card debt is a smart move.
A personal loan is an unsecured loan that you can get if you meet the eligibility criteria. The loan amount you get through a personal loan has no usage restriction. So, you can utilise a personal loan to pay off your credit card bills and clear the outstanding balance.
Multiple lenders offer instant personal loans within 24 hours for those who meet the eligibility criteria. Such loans allow you to take care of immediate expenses. You can also use them to pay off large credit card debt on a single card or multiple cards.
Benefits of Getting a Personal Loan to Pay Credit Card Debt
When you choose to apply for a loan for credit card debt, you can get the following benefits:
Affordable Credit
Credit cards have a spending limit, and the interest rate charged on the outstanding balance may fluctuate based on how much credit is utilised. If you fail to pay your bills on time, the interest on unpaid bills can quickly increase because of the additional fees and charges.
Read MoreWith personal loans, you have to pay a fixed monthly EMI and often, personal loan interest rates are lower than credit card loan interest rates. So, you will pay less interest when you pay credit card bills with a personal loan.
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Streamlined Monthly Payments
Credit card debt can become unmanageable, especially when you have multiple credit cards with higher interest rates. Once your personal loan is approved, you can use the loan amount to clear outstandin Read Moreg balances on all the credit cards. Then, you can pay monthly EMI towards your personal loan and simplify the payments. Read Less
Manage Credit Score
Every credit card has a fixed credit limit based on the cardholder's eligibility criteria and the card issuing bank's policies. Your credit utilisation ratio will be higher if you have a large credit card debt. As a result, it can impact your credit score. Paying outstanding balances on your credit cards will allow you to free up your credit card limit. However, be responsible while using your credit card because your overall credit utilisation ratio will still be higher until you repay the personal loan.
Read MorePaying off credit card debt using personal loans may help you improve your credit score. However, you must ensure you continue making prompt payments for your personal loans to maintain and improve your credit score.
Read LessIf you struggle to make minimum monthly payments on multiple credit cards, a personal loan can be useful to clear all outstanding balances and manage loan payments more easily. Consider the following before you apply for a personal loan to pay off credit card bills:
Interest Rates
Interest rates of credit cards vary from 20% to 30%, while personal loan interest rates are between 8% to 20%. When you want to pay off credit card bills, compare the interest rates offered to you. You can take a personal loan if the interest rate is lower than the credit card.
Loan Terms
Personal loans have a fixed loan tenure and, thus, a fixed EMI. For example, if you take a personal loan for 2 years to pay off credit card debt, then you must commit to paying the EMI for the entire loan tenure. Analyse your financial position and ensure that you are ready for that commitment.
Understand Fees and Charges
When you take a personal loan, you must pay a processing fee. Some lenders impose prepayment penalties if you want to close the loan early. Missing personal loan EMIs can result in late payment charges and additional fees. Compare the overall borrowing cost of a personal loan before getting it to pay off credit card debt.
Credit Score Impact
Not paying credit card bills on time will affect your credit score negatively. Using a personal loan to consolidate credit card debt can be a good option to improve your credit score. Your credit score may initially fall when you apply for a personal loan with an already high credit utilisation ratio. However, once you pay off all the outstanding balances on your credit cards and start making prompt payments towards the personal loan, you can slowly build your credit score over time.
How to Apply for a Personal Loan to Pay Credit Card Debt on Bajaj Markets
Bajaj Markets simplifies the process of getting a personal loan to pay off your credit card debt. The steps to apply for an online personal loan are given below:
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Visit the Bajaj Markets website and click on Check Offers
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Select your profession, and enter your mobile number and pin code in the respective boxes. Click on Proceed to get your OTP.
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Verify your OTP.
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In the application form, enter your personal details such as name, PAN number, date of birth, monthly salary or income, employer information, email id etc and click on Submit.
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On the next page, you can get loan offers from multiple lenders.
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Compare the available loan options and opt for the most suitable one for credit card debt repayment.
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Submit your application and wait for the lender's approval.
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After loan approval, get the funds credited to your bank account.
Getting a personal loan to manage and pay off credit card debt may prove to be useful. It allows you to simplify payments towards a single personal loan instead of multiple credit card bills. You can lower the overall interest outgo by choosing a personal loan with a lower interest rate.
There are other ways to manage credit card debt without getting a loan to pay credit card debt:
Use your savings: If you have sufficient savings to pay off all your credit card balances, you can do so. This allows you to lower your credit immediately. However, when you do this, you may not have sufficient funds to meet any emergencies that may arise later. Once again, it can take time to build a savings corpus.
Get a balance transfer credit card: When you find a card issuer with a lower interest rate and a balance transfer option, you can transfer outstanding balances from one or more old credit cards to a new card. Often, balance transfer cards have 0% APR for the first few months (6 to 24 months) so that you can have enough time to pay your balances without interest charges.
- Negotiate with your card issuer: Those with a long-standing relationship with a card issuer can try to negotiate directly with the issuing bank to lower the credit card interest rate. If you have been paying your bills promptly, you may receive a lower interest rate, which can help you clear your credit card debt without a new loan.
Credit cards carry higher interest rates, and not paying the bills on time can result in a huge debt as the interest accrues for each unpaid day. Consolidating credit card debt is a viable option to pay off all outstanding balances and simplify future payments using a personal loan. When considering this option, compare personal loan offers from multiple lenders and choose the best affordable loan. Bajaj Markets allows you to compare multiple lenders and get a personal loan to help you pay off credit card debt and improve your credit score.
Frequently Asked Questions
Is taking a personal loan to pay off credit card debt a good idea?
A personal loan can help pay off credit card debt because it often has lower interest rates. It combines multiple debts into one fixed monthly payment, making repayment structured and predictable. Before choosing this option, check the loan terms, fees, and your ability to repay on time.
How does taking a personal loan for credit card debt impact my credit score?
A personal loan can improve your credit score by lowering your credit utilisation ratio. This ratio shows how much credit you use compared to your limit. Making on-time payments also helps build a strong credit history. But, missing payments or taking on new debt can lower your score.
What is the difference between a personal loan and a balance transfer for credit card debt repayment?
A personal loan gives you a lump sum with a fixed interest rate and repayment term. This makes it a good option for consolidating multiple debts. A balance transfer moves existing credit card debt to another card, often with a low or 0% introductory interest rate. Balance transfers may include fees and require transferring debt between different card issuers. The best option depends on your debt amount, interest rates, and ability to repay.
What is the maximum loan amount I can get to pay off my credit card debt?
Lenders decide loan amounts based on income, credit score, and existing debts. Some banks offer up to ₹50 Lakhs, but approval depends on eligibility.
Can I get a personal loan to pay off multiple credit card balances?
Yes, a personal loan can combine multiple credit card balances into one fixed payment. This makes repayment easier and may lower your interest costs.
Will consolidating credit card debt with a personal loan reduce my total interest payments?
It can, but only if the personal loan has a lower interest rate than your credit cards. Fixed repayment terms also help you clear the debt within a set period. Compare the loan’s rate, fees, and terms to your credit card costs before deciding.
Can I still use my credit card after paying off the balance with a personal loan?
Yes, but be careful not to build up new debts. Paying off the full balance each month and keeping spending in check can prevent future financial strain.
