Should I Get A Loan to Pay Off My Credit Card Debt?

Apr 16

If you are finding it really difficult to pay back your credit card debt because your spending got out of control, you didn’t make enough money to pay your bills month to month, and the interest rates and fees are too high for you to afford, you may be considering getting a loan to pay off your debt. But is it really a good idea to take out a loan just to pay off your credit card debt? After all, taking out a loan essentially means you would be putting yourself into even more debt with another lender.

Continue reading for some helpful information so you can make the best financial decision for your needs.


Opt for the Right Type of Loan

If you do decide that taking out a loan is your best option, stick with an unsecured personal loan like a signature loan from a credit union or bank. If you qualify for it, make sure the interest rate is reasonable and affordable, and that the minimum payment is also affordable. You may find that the loan rate is actually lower than the rate on your credit card, but this is not always the case.

The only drawback to getting this type of loan is the fact that you can usually only receive small sums of money, so it may not be enough to pay off everything that you owe if you have a lot of credit card debt.


Loan Alternatives

If you do not want to take out a loan to pay off your credit card debt, then consider these alternatives:

  • Contact your credit card company and request a lower interest rate. Provided that you have decent payment history, meaning you never went over your credit limit and you never had late payments because you paid the minimum balance due, you may find that they are willing to adjust the rate for you and make it easier to pay off the debt. Before you contact them, though, do your research by comparing the rates from various credit card companies. Then ask your issuer to match the lowest one you found.
  • Consider transferring the balance from your existing credit card to another card that has a lower interest rate. This is especially helpful if your credit card issuer is unwilling to lower the rate for you.
  • Seek credit counselling if no other options work out for you. You will receive assistance with budgeting, and a credit counsellor can work on getting you a lower interest rate on your credit cards while minimising any hits you would otherwise take on your credit score for being unable to pay off your debt.

When it comes to paying off high amounts of credit card debt, determining the best route to take can be confusing. If you do decide that a loan is the right option for you, check out to see what loans you qualify for and to compare loans so that you can make the best choice.