The outstanding amount of my credit cards are so high that making payments has been difficult. What’s the best thing to do with minimal damage to my credit score? Should I take a personal loan to pay off credit card dues ?
Having too many Credit cards has made a problem for you. Your credit card bills are just sitting there on the counter glaring at you. You’ve been ignoring them for several months now and your total debt just keeps growing.
Making timely payment is the most important factor in your creditworthiness. Making less than the minimum payment due will likely result in the account being reported as past due on your credit report, which will negatively impact your credit scores.
Before you apply for a personal Loan to pay off credit card dues, there are few things you need to know.
What You Should Consider Before Taking Personal Loan To Pay Off Credit Card Dues
Your Credit Score Determine Your Eligibility
With no collateral, all the lender has to go on is your personal creditworthiness. You can expect the available interest rates to increase steeply if your credit is average or poor when you apply for Personal Loan to pay off credit card dues. Even if you are later able to service the present loan successfully, your ability to access loans at a future date may be severely curtailed as your credit history would reflect the previous defaults. A clean credit history can also help in negotiating cheaper interest rates later.
You Can Ask Your Bank To Grant Overdraft Facilities
You can avail the facility of overdraft, if you have an account with the bank and especially if the loan amount applied is not very large. Banks generally offer their worthy account holders an overdraft facility which may again be lighter on your finance than a personal loan.
Search For The Best Loan Deal
This refers to applying for a loan with the lowest interest rate. If you would like to pay EMI on personal loans for a longer duration, then opt for a loan which gives you the flexibility to pay in that manner. Hence; browse around to get the best deals on your personal loan. There are literally lot of personal loan providers offering attractive offers to lure customers.
Think Of Other Alternatives Of To Pay Off Your Credit Card Dues
While there will be temptation to seek bank loan for paying off credit card payments hence; accessing personal loans to fulfill such desires can mess up your finances since you will add another repayment component that would go out of your monthly salary.
Consequences Of Not Being Able To Repay Loan On Time
Getting into “Loan default” category can have serious consequences. Being aware of the consequences can itself make you a disciplined borrower and help you work within your means. Not able to repay the loan can impact your CIBIL score also; prevents you from borrowing in future.
Competitive Interest Rates
As personal loans to pay off credit card dues are unsecured loans therefore; carry higher rate of interest. This is because you need not keep any asset as collateral. Hence; the nature of this loan also makes it that much more difficult to obtain as compared to getting a secured loan disbursed into your account. Browse around for best rate of interest moreover; you may either apply for a fixed rate or a variable rate when it comes to choosing the type of loan.
You Can Negotiate For The Best Rate
Banks as well as private financial lenders are always competing among themselves for lending to the borrowers. So negotiate hard to get a better rate on your loan application. Remember this, even a fraction of a percentage could mean a considerable reduction in your repayment amount.
Read Your Loan Agreement Carefully
You should always read the loan document in its entirety, including the fine print to know all the charges, fees and penalties for non repayment. This will help you not to be caught off-guard later. Do not rely blindly on the bank relationship manager who might not make you aware of some important details.
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