Can Taking Out Loans Help You Pay off Debt?
It’s a scenario that unfortunately too many people are now familiar with—you’re trying to buy a home, or have incurred medical expenses, your student loans are all waiting to be paid off, and somehow your credit card debt has ballooned into an obscene number. This can be a very stressful situation and tackling it can be quite overwhelming. You may have seen ads for personal loans and thought to yourself, “Can taking on new debt help eliminate the debt I already have?”
In short, the answer is “YES,” but only if you’re smart about it.
Managing debt is unique to every person’s situation. What makes financial sense for one person isn’t going to be the same for another. But one way that taking out a personal loan—say, through a fast online loan—can help is by giving you one payment to manage. A lot of times people can begin to wrack up fees and penalties on the debt they owe, simply because of late payments that are made when trying to juggle them all. In this sense, securing a loan with a lower interest rate that you might now be paying on high-interest credit cards is a smart move.
Another positive to moving debt from multiple sources—especially credit cards where the debt is considered “revolving”—is that personal loan debt is much healthier for your credit score. In the long run, the “installment debt” that personal loans are considered to be can help you build back up your credit score while streamlining payments at the same time.