You'll be able to wipe out your credit card debts through a personal loan. However, you need to have a decent credit history to be eligible for a loan.
Problem:
I have 4 credit cards. My total outstanding balance is $18,526. I have purchased a laptop and television recently. I have only $5680 in my checking account. I need this money to run my family. Recently,
I saw an advertisement posted by my credit union. They're offering personal loans to the members. I am hoping that the credit union will charge low interest rate on the loan. I am really expecting to save as much as 11 percent on the interest rate. Do you think that the credit union will agree to give me a loan? If my credit union agrees to give me a loan, then should I accept it?
Solution:
I agree with what you're saying. You can really save a lot of money by taking out a loan from the credit union. However, don't get carried away by the interest rate reduction. There are a few things which you need to keep in mind before obtaining a personal loan from the credit union. You need to find out the other lucrative alternatives to the personal loan.
Request the credit card companies to reduce your interest rate. If you've a moderate credit record, then they may agree to revise the interest rate. Don't make an unrealistic offer to the credit card company. Find out what the other credit card companies are charging upon the consumers. Thereafter, you can request the credit card company to adjust the interest rate accordingly.
In case, the credit card company is not ready to change the interest rate, then you can transfer the balance from the 4 credit cards to single card with low interest rate.
If you fail to get a balance transfer credit card, then you can opt for a credit counseling program. In this program, personal budgeting tips will be provided to you. The credit counselor will try to slash the interest rates on your credit cards.
If you're not interested to take advantage of the aforementioned options, then it's time to know some facts about personal loan.
Fact no 1: The credit union may refuse to give you a loan. Banks and credit unions have tightened the lending standards. So, don't be dejected if the credit union rejects your loan application.
Fact no 2: The credit union may ask you to pledge security against the personal loan. You may be asked to pledge your vehicle or any other asset as collateral against the loan. This implies that you'll have to give up your asset in the event of loan default. The credit union will not have to file a lawsuit against you in order to seize your asset.
Fact 3: Personal loans are usually offered for a short span of time. So, the monthly payment amount may be slightly higher. Calculate your monthly payment from beforehand. Calculate your monthly income and find out if you can afford the required payments. If you can't make payments as per the payment plan, then it is better to not commit to the loan.
The new personal loan will help you eliminate the credit card debts. Once you clear your credit card debts, focus on this personal loan. Make sure you pay the full amount every month. Try to pay off this new debt as early as possible.
Summary: You'll be able to wipe out your credit card debts through a personal loan. However, you need to have a decent credit history to be eligible for a loan.
