If you are worried about how to pay off your holiday credit card debt, here are the pros and cons of taking personal loans.
If you think the financial hangover after holiday shopping, and has been considering a personal loan to pay off your credit card debt, you have to make a decision.
When I was young, struggling with a big decision, my mother suggested that I create a list of pros and cons. I would get a piece of paper, draw a line down the middle, one side I would write if I made a special decision positive things may happen, but on the other hand I will write negative things, from the verdict.
So, you should take out a loan to pay off the debt vacation? This is a list of our strengths and weaknesses. We hope that it w ill help you decide.
Remove personal loans
One advantage. You may reduce your interest rate
One of the main reasons to use a personal loan to consolidate your credit card debt is to visit a lower interest rate. Make sure you take out more than you will pay a lower interest rate on your credit card debt personal loans.
2. You can simplify your bill payment
Say you have five different credit cards. Consolidate their loans through a single bill will simplify the payment process, making it less likely that you will ignore the bill. If your automatic payments, this is a win-win contract Lenders also tend to offer a preferential interest rate. Less interest you will pay, and never have to worry about forgetting to make payments MAKE in.
3. It can improve your credit score
Took personal loans can sometimes improve your credit score. While you should not take on more debt just to improve your score, if it already makes sense, then, this could be an added bonus.
A credit bureau to find things is a mixed credit. The greater the variety of credit types, a higher credit score. For example, preferably in a car loans, credit cards and personal loans than three credit cards payments are made in time. Mixed credit account your FICO® score of 10%.
4. You can pay off your debts faster
It is possibleYou will repay the debt off faster if you lower interest rates, and no commitment to a long repayment schedule. Be sure to carefully read the loan terms, and signed an affordable monthly payment, without increasing the overall cost of the loan.
Personal loans taken disadvantages
1. Your interest rate is not guaranteed to lower
Lending interest rate fluctuations and lenders flexibility when it comes to setting these rates. As of today, personal loan interest rates range from 5.99 to 35.89 percent, depending on your credit score, the amount you need to borrow. The interest rate gap between the two is enormous.
To illustrate the difference, if you take out a loan of $ 5,000 at 5 percent interest and pay it off within three years, your monthly payment will be $ 150, you will pay $ 395 of the loan in life.
However, if you borrow $ 5,000 at 35 percent interest, payment will be $ 226 for three years, you will eventually be interested in a payment of around $ 3,142.
If you provide personal loans at interest rates very close to you at the rate of credit card payments, you might be better off with a card attached, as soon as possible and give them the.
2. You might spend more money
If you borrow enough to repay credit card debt, it is tempting to re-use card spending. You can tell his own stress caused by the holidays, you rack up debt, but you need to make a firm commitment not to spend more. If nothing is done to make your first credit-dependent control, you can have more credit card debt on your personal loans find themselves top of Onal region.
3. You increase your debt
Out another type of loan to income ratio is only useful when you put your debt ratio low income (DTI). DTI refers to the relationship between how much you owe and how much you earn. Let’s say your monthly gross income is $ 7,000, with a total monthly debt payments in the amount of $ 3,500. DTI you get $ 7,000 divided by $ 3,500 or 50% of the 0.5 found.
Lower, the better your DTI. For example, most of the mortgages tend to less than 43% DTI, some want it to be less than 36%
4. You may have to pay a loan fee of
Some personal loan companies charge a fee payment, usually a percentage of what you borrow. Origins fee from 1% to 8% of your loan amount. For example, if you borrow $ 5,000, you might be tea rged of $ 50 to $ 400 fee. If you pay off the debt on the loan vacation every dollar counts, remember to factor in the fees and the corresponding loan.
There is no doubt that the holidays can be wonderful, but the debt is no fun. Weigh the pros and cons, also applies to your situation, do the math and figure out which option is best for you. In the meantime, when you pay off bills 2019, you may need to develop a plan to avoid more debt in 2020