Credit card debt can be a source of stress and a strain on your monthly budget. On top of that, it can be difficult to keep track of, particularly if you have balances on multiple cards with different payment dates and interest rates.
A personal loan may help you get your credit card debt under control. You can use a personal loan for debt consolidation, which may allow you to roll your credit card debts into one monthly payment and potentially save money on interest. Here's how it works.
How consolidating debt with a personal loan works
Consolidating debt with a personal loan starts with choosing the right loan and applying. Research personal loans, look into requirements and consider how they might match up with your creditworthiness.
If you’re approved for a personal loan, you could use the money to pay off your credit card debt. Some lenders offer debt consolidation loans, which are a type of personal loan. Rather than depositing the money directly into your account, the lender may pay the credit card balances directly.
How much debt you can consolidate depends on the amount of personal loan you qualify for. If you’re approved for a loan that’s greater than or equal to your credit card debt, you can roll all your debts into one monthly payment. If the loan is smaller than your total credit card debt, you’ll only be able to consolidate some of your debt. However, it’s crucial to be mindful of the interest rates involved. If you consolidate debt with a personal loan at a higher interest rate than what you already have, you could end up paying more in the long run.
You then begin making monthly payments on your loan. Many personal loans offer fixed rates. So, if you consistently make on-time payments, your monthly payment will be the same for the loan term.
Reasons to use a personal loan to consolidate credit card debt
Consolidating debt with a personal loan can simplify your monthly payments and may be able to help you save on interest.
A single monthly payment
If you qualify for a large enough loan, you may be able to consolidate all your credit card debt into a single, convenient monthly payment. That means fewer bills and balances to keep track of, and just one payment to manage each billing cycle.
You may save money
Depending on your interest rate on your current debts and the term of your personal loan, you may save money on interest.
Remember that qualifying for a lower interest rate may mean lower monthly payments, but depending on the length of the term, you may end up paying more in interest overall.
Deciding whether using a personal loan to pay off credit card debt is right for you
Everyone's financial situation is different. Whether it makes sense to consolidate debt with a personal loan depends on whether you can qualify for a loan and how the interest rate compares to your current debts. Remember – even if the interest rate is lower, if you’re making payments over a longer period, you may end up paying more in interest.
Consider all your options, do the math, look at your monthly budget and see if consolidating debt with a personal loan is right for you.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
