Having massive credit card debt is a plague that affects millions of Americans today. While paying off credit card debt every month is the preferable way to avoid large interest payments and penalties, this isn’t a reality for most of us. And using a Visa debit card isn’t always practical either.
If you have looming credit card bills that come in the mail every month there are several tactics you can use to pay off that high interest debt, one of which is getting a personal loan.
Personal loans are financial products that allow the borrower to obtain a sum of cash that can be used for any purpose. Most financial institutions in Sweden, including banks, credit unions and other lenders will service personal loans. The main benefit to personal loans over credit card debt is the ability to replace large, variable monthly payments with fixed installment payments, but this isn’t the only benefit.
- Personal loans are installment loans and not revolving lines of credit. This means that it is easier to pay off debt without incurring new debt.
- In most cases, the interest rate on a personal loan is significantly less than the interest rate on a credit card, which saves you money each month as well as in the long term.
- The payment on a personal loan is structured so that both interest and a portion of the principal balance is paid with the monthly payment instead of simply addressing the interest accrued on the balance, like most credit card minimum payment amounts.
However, not all that glitters is gold. There are some drawbacks to obtaining a personal loan to pay off large credit card debt. A few cons to this solution include:
Personal loan eligibility depends on your credit worthiness. This means that if you have a lower credit score you may not qualify for a large enough loan to pay off all your credit cards.
Some lenders will require you to pledge some of your personal property against the risk of default on the loan. This means that if you default on your loan, the lender will have the right to repossess and liquidate this collateral to offset the amount you still owe.
Even though a personal loan is a closed end installment loan that does not allow you to incur more debt, your newly paid off credit cards are still there for the taking. This means that you can easily get in over your head by maxing out your credit cards again, sticking you with your new installment loan payment as well as huge credit card bills again.
As you can see, taking out a personal loan to pay off huge credit card bills is a great way to get you out of debt sooner in Sweden. But before taking out such a loan you should weigh the pros and the cons carefully and then decide whether or not this is the right product for you. Fortunately there are a lot of financial portals in Sweden, such as Privatlån24, where you can compare different loans, different lenders and different rates.