A debt is a debt whether it be in the form of personal loans or credit cards. If you can’t get rid of it, make sure you find a way to make it affordable to pay it off.
It seems like a lot of people are undecided when it comes to choosing the right kind of debt. Debt is a choice that we mostly bring into our lives. Sure, there are times when we have to rack up debts cause we don’t have any other way out. But swiping a credit card to buy a 60 inch TV doesn’t necessarily qualify as not having a way out. Those kind of debts are what I like to call “debt of choice” as opposed to “debt of need.” A debt of need is the one that you end up racking simply because there are no other way out. For example, medical expenses. If you are ill and end up staying in the hospital or going into surgery, well the debt you will end up racking isn’t a debt of choice, it had to be done unlike the debt you pile up when buying a brand new car to show off or the 60 inch TV.
I guess I kind of went off topic there for a little bit with my rant. Lets get back to the topic. Is it ok to take out personal loans to pay off other debts? Absolutely. Here is a little experience that I would like to share with you. Hopefully, this will give you an idea why personal loans through banks can be a great way to pay off credit card debt and bring your monthly bills down to half.
A year ago my 15 year old daughter had to get braces (I am sure most of you are going through that right now, if not you will). It seems like braces have become a fashion statement among teens lately. Well, my daughter sure wanted it but in her case it wasn’t just for cosmetic reasons (beautiful teeth), her jaw bone had to be fixed and of course that’s where braces come in handy. Well, I went ahead and had the braces put on her. The cost: $5,000.
I tend to wait till the very last minute to figure things out, I ended up paying with my credit card. $5,000 dollars swiped from a credit card that charged me an interest rate of a whooping 19%, imagine that. After a while my minimum payments alone started killing me. That’s when I decided to take the other route. My rescue came in the form of a personal loan. I went and applied for a personal loan at the local bank and I was approved for $5,000 (the balance I carried on my credit card) for a cool interest rate of 6%. Well, I took the amount that I took out on personal loan and paid off my credit card. Now I pay half what i was paying in interest to credit cards and once in a while I can make more than I really have to for my minimum payments.
To sum it up:
- I had $5,000 balance on my credit card (debt of need since it had to be done)
- Credit card interest rate was a whooping 19%
- I took out a personal loan for $5,000 and paid off the balance on my credit card
- My interest rate on personal loan equals 6%, way better than my credit card
- Result: either more money in the pocket or pay off the debt early
Well, that is my story. Not having a debt is almost impossible in today’s society. Whether we are planning on buying a new car, buying a house, getting medical care, trivabet etc. debt automatically seems to crawl up on our personal lives. The only thing we can do is to figure out how we can make the debt work for us rather than against us. Remember to figure out a way for your debt to work for you not the other way around. That is when things start going wrong. This is why I say, if you can’t get rid of a debt make sure you find a way to make it affordable to pay it off.