Should You Replace Credit Card Debt with Personal Loan?

It is the human psychology that makes it difficult to spend when we can see the immediate cash outgo but more comfortable when the purchases are made with a promise to pay later. Credit cards have encashed that psychology much to their benefit, allowing you to spend as per their sanctioned limits. The business model of credit card companies tends to be based on encouraging their customers to spend more than they can repay in one go so that they can earn from finance charges and interest. No wonder, many financially unfit individuals fall into debt trap of credit card dues. These dues increase exponentially with each passing month due to high-interest costs levied by the credit card companies.

It is also seen that credit card companies promote balance transfer facilities, which only shifts your debt from one credit card to another. Instead of doing any good, this defers your debt problem to another month. This can is very dangerous for your financial health.  Instead, one should plan to systematically get out of the debt trap as soon as possible. Does it make sense to replace credit card debt with personal loan? Let’s look into it.

Should you replace credit card debt with personal loan?

Getting your credit card debt transferred to a personal loan has many benefits as discussed below:

1. Lower Interest Expenses – Credit cards tend to charge 2.5% to 4% interest per month on dues and any payment made by the customer is first appropriated towards this interest and other charges. Transferring credit card debt to personal loan helps you shift your liability from a high-cost loan to a lower cost loan. Personal loans will generally charge interest in the range of 12-15% per annum, translating to around 1% to 1.25% per month. Hence, your interest costs will be lower, helping you accelerate your payment towards credit card debt with the same repayments every month.
2. Better Financial Management – As you shift your credit card debt to personal loan, you reflect your intention to lower your costs and ultimately repay your liabilities at the earliest. This helps to portray you as a credit-responsible individual. You also save monthly finance charges, which are levied by credit cards apart from interest when you continue to avail credit from them. Also, by fixing EMIs for your loan, you can get pay off your loan in a systematic manner.
3. Favourable impact on your CIBIL score – A transfer of credit card debt into a personal loan will not affect your credit score per se, as it is just transferring your debt from one pocket into another. However, a systematic approach to repay your debt through the personal loan will help you eliminate the unsecured loan liability from your credit history steadily. Further, paying off the unsecured personal loan as per the repayment schedule certainly leaves a favorable impact on your credit score.
4. Debt Consolidation – Availing a personal loan to pay off your credit card debt, which may be with different banks, helps you consolidate your debt under a single basket. This means that you don’t have to worry about different due dates.

Should you replace credit card debt with personal loan for full or part of your debt?

With the above benefits, it certainly makes sense for the individual to replace credit card debt with personal loan for the entire amount of debt. However, one should certainly be cautious about the tenure of the loan and set it in a manner so that the monthly installments can be easily paid. Any delinquency in repayment of the personal loan can adversely impact the credit score.

How to get a Personal Loan?

In the era of technology, it has become way easier to apply for a personal loan and get one sanctioned at the touch of a mobile screen. Money View Loans offers an easy personal loan. Check your eligibility on the app. A user can apply for a loan of an amount ranging from Rs. 10,000 to Rs. 5,00,000 and get it within two business hours of loan approval. It benefits the user in terms of being transparent, quick, personalisation of the loan and staying paperless. Move ahead to manage your finances in a better manner right away.