If your credit card debt is growing, and it is getting harder for you to pay your minimum balances, you might be ready to find a way out of this debt. If this is where you are with your finances, have you considered a personal loan? You can get a personal loan to pay off all the bills you have, and this can be a good idea. As you consider this option, here are a few things to know.
The Definition of an Installment Loan
There are many loan types available to choose from, and an installment loan is a popular option. With this type of loan, you borrow a lump sum of money and repay it over time. The time might be a year or longer. The lender may charge an upfront fee for the money, and you will pay interest on it. When you make the final payment, you pay off the loan and owe nothing.
How to Use the Proceeds
When you apply for the line of credit, you should add up your credit card bills first to make sure you get a loan large enough to pay them off. Once you receive the proceeds, use the money to pay your balances down to zero. When you do this, you may still owe the same amount of money, but you would no longer owe it to multiple creditors; you would have just one.
The Effects It Has on Your Credit and Financial Situation
Using an installment loan for this purpose is a great tool, and it may provide you with benefits for your credit and financial situation. Here are some examples:
- You will have one payment to make each month instead of many.
- You will know exactly when you will become debt-free.
- Paying off your credit cards will increase your credit score almost instantly.
- Paying off an installment loan on time each month helps you build positive payment history, which also increases your credit score.
There are plenty of other benefits of consolidating the debts you have through a loan like this, and a lender can help you learn about the other advantages.
As you see, using an installment loan to consolidate credit card bills is the right move in many situations. If you are ready to apply for an installment loan, gather up your information and documents and fill out an application with a loan lender.