3 reasons to take out a personal loan to pay off credit credits
There are several good reasons to consider using a loan to pay off credit cards:
- You could save money by lowering your interest rate. If you can get approved for a loan with a lower interest rate than your credit card, you may be able to save money on interest while repaying the debt.
- You’ll have a fixed payment schedule. Credit card debt can be difficult to pay off if you only make minimum payments or continue using your credit card. With a fixed-rate installment loan, you’ll know exactly how much you’ll pay each month and how many months it will take to pay off the debt.
- Your credit scores may increase. The amount of revolving debt you have relative to your credit limits on revolving accounts (e.g., credit cards and lines of credit) is an important credit-scoring factor. How much installment loan debt you have is also a factor, but it’s not as important. Therefore, if you use an installment loan to pay off a revolving account, and keep that account open, your credit scores may increase.
The danger of getting a loan to pay off credit cards
While saving money, sticking to a schedule, and improving your credit scores are all desirable outcomes, there’s a potential downside as well. People who struggle with controlling credit card spending and continue to use the card may find themselves deep in credit card debt again, plus have their new loan to repay.
If that might be a concern, it could be best to close the credit card after paying it off. While this may negate some credit score-related benefits, it could be better for your overall finances.
Is a RISE personal loan a good fit?
A personal loan from RISE may be a good fit for a credit card consolidation loan if the interest rate of the RISE loan is lower than your credit card debt interest rate. A RISE personal loan also offers a fixed payment schedule and could lower your total revolving debt amount if you use it to pay off your credit card debt which could improve your credit score. RISE encourages you to get out of debt as soon as possible. We believe a brighter financial future starts with access to affordable credit.
Additionally, RISE reports your payments to a credit bureau, so your on-time payments may help you build a good credit history. We also have the Credit Score Plus program, which you can use to check and monitor your TransUnion® New Account credit score for free.
A RISE loan will likely have a higher interest rate than you’re currently paying on your credit card. As a result, this may be a costly option and isn’t a good solution for everyone.
Compare the interest rate of your current debt and the interest rate for a RISE installment loan to determine the potential cost and weigh the pros and cons before applying.