Using a Personal Loan to Pay Pandemic Debt
In a perfect world, you shouldn’t have to take out a loan when you are already struggling with debt. However, the pandemic created tough situations for everyone, and sometimes borrowing more money is the only way out of a bad situation. Most people are stuck paying significant amounts of money due to pandemic debts. At the end of the day, you will find that taking out another loan with a lower interest rate might be the only solution.
When Taking Out a Personal Loan Is a Good Idea for Paying Off Debts
While taking out a personal loan to pay off your outstanding debts means trading one kind of loan for another, this strategy can give you a lot of relief when executed wisely. This is a great idea if you qualify for a personal loan with affordable interest rates. Personal loans generally come with interest rates that are way lower than those of credit cards. This means that your interest rate savings can be significant.
The Personal Loan Can Make Your Debts More Manageable
If you are juggling several credit cards with different payments and interest rates, it can be difficult to keep track of your repayments. This can make it difficult to come up with an effective debt repayment plan. With a single personal loan, you can do away with multiple payments and combine them into a single monthly repayment – and hopefully with a much lower interest rate.
Before you can take out a debt consolidation personal loan, you should consider using a debt repayment calculator to find out how much sooner you can pay off your debt if you get a loan with a lower interest rate.
Think about this hypothetical situation. Imagine you have $10,000 in credit card debts, with an interest rate of 17%, and $14,000 on a second card with a 21% interest rate. You can only afford to pay $200 towards each credit card monthly, with a total of $400 each month. At that rate, you won’t even be able to pay the interest. This means you will never be able to pay back all the money you owe. If you are able to secure a personal loan of $24,000 with an interest rate of 5%, you will be able to start paying off more than just the interest rate with your $400 monthly payments.
One of the things that can make it impossible to pay off your debts on time is a high monthly repayment amount. If you are struggling to pay off your credit card because you are spending more than you earn, a personal loan with lower monthly repayments will be a great idea. That way, you will be able to make repayments and still remain with some money to use for monthly expenses.
You can use a personal loan to make your debt more manageable. However, you should play around with a Priority Plus Financial debt repayment calculator to determine if taking out a personal loan will help your situation.