Are Personal Loans Good for Debt Consolidation?

To borrow or not to borrow, that is the question. It’s a question that many in debt struggle with every day. Is it a smart idea to borrow more to get your head above water when it seems like you’re already drowning in debt. Although the idea of borrowing more may be scary, it may help you to consolidate your existing debt and pay it off faster and more efficiently. If you are a borrower committed to paying down debt responsibly, a personal loan can be a perfect solution.

The pros of personal loans for debt consolidation

·      Personal loans give you the benefit of a fixed interest rate, often lower than higher interest loans and credit cards. Many credit cards can have high interest rates. Especially those who lured you with a very low introductory rate only to increase that rate significantly when your introductory period ended. The fixed rate of a personal loan may also be attractive to those looking to consolidate variable rate loans.

·      A fixed payment term can provide you with a monthly payment you can budget for.

·      One monthly payment makes it much easier to manage debt. You will be more likely to make your payment on time and have fewer missed payments than when you are juggling numerous credit card and loan payments due at different times.

·      A low-interest personal loan from your local credit union can provide the interest savings and flexible loan terms you need to pay down debt faster and more effectively.

·      An unsecured personal loan allows you to borrow money without using any assets as collateral.

·      One of the biggest benefits of personal loans is their flexibility. You can use them for any reason at all. This makes them a great option for debt consolidation. You can use a personal loan to pay off credit cards bills, to pay off higher interest loans, to pay medical bills or any other debt. You can even use them to pay off a combination of different types of debt.

·      If you’ve hurt your credit score with many missed or late credit card payments, debt consolidation into one payment that you commit to making on time every month can help your score over time. It may also help you add a little diversity to your credit history, thereby improving your credit mix. This may be especially helpful if you only have credit cards in your mix.

Personal loan considerations

It’s always important to remember that debt consolidation does not mean debt elimination. It is basically combining or restructuring multiple debts into one, easier to manage loan. The idea is to pay down your debt faster, at a lower interest rate, hence saving you money in the long run. This can include high-interest credit card balances, high-interest loan balances, medical bills and more. You also need to consider that your credit rating will impact the personal loan interest rate for which you qualify. A higher credit score means a better rate.  When shopping for personal loans, be sure to compare any fees or costs involved with the loan in addition to the rates. Consolidating debt is a common reason borrowers take out personal loans. Still confused? Speak to your credit union lender to see if it’s the right debt consolidation move for you.

Applying for personal loans

Applying for personal loans can be a quick and easy process at a local credit union, such as Spirit Financial Credit Union, which serves the Bucks County community. Look for a credit union or personal loan lender that offers fixed, low interest personal loan rates, flexible terms and a fixed payment to help you tackle your debt.

Learn more about personal loans by reading our blog articles Personal Loans vs. Personal Lines of Credit and Personal Loans vs. Credit Cards.