Credit cards are the new fashion statement these days, and everyone right from the young earner to the experienced entrepreneur wants one. Due to this huge surge of demand seen in India, not only have many new credit card companies emerged, but now there are a lot many varieties of credit cards available in the market for every income group.
But one thing that has not changed with the wide availability of credit cards is the fact that everyone can apply for one, however only a few can manage their credit card responsibly, and that is exactly what we will be talking about in this article.
So without further ado, let’s get started.
The Credit Card Problem
If you take a quick glance at the credit card market in India, to the untrained eye, it appears that the market has no problem at all. However, if you look closely, you will come to realize that although more people are opting for credit cards these days, a decreasing number of people are actually able to manage their credit line responsibly.
And irresponsible management of your credit line can lead to serious problems starting all the way from attracting unnecessary fines and charges to going under debt.
Now the topic of how you can better manage your credit card deserves an article of its own, and thus in today’s article, we will share with you why using a personal loan to pay off your credit card debt is a smart idea, in case you are already in debt.
What Is a Personal Loan?
One of the first and most important things we need to understand is the meaning of a personal loan. In simple terms, a personal loan is a financial instrument through which you can borrow a certain amount of money, usually in the range of ₹10,000 to ₹500,000, and use it for your personal expenditures. One of the main differences between a traditional loan and a personal loan is the fact that for personal loans, you do not need to inform the lender where you will be spending the money, in contrast to let’s assume a car loan where the amount can only be used to purchase a car.
Along with this, most personal loans in India arrive with a flexible repayment system and competitive rates of interest, meaning that you can avail the benefits of a personal loan without burning a hole in your pocket.
Why Should You Use a Personal Loan to Pay off Your Credit Card Debt?
Now that you have a better idea of what a personal loan actually is let us better understand 3 reasons as to why you should use a personal loan to pay off your credit card dues.
- Lower Rate of Interest
If you have been using a credit card for some time now, you are well aware of the fact that most credit cards in India are famous for the high rate of interest they charge. While most of them advertise their products as being interest-free, the fact remains that most credit cards are interest-free till a certain number of days (generally for 48 days or 60 days since the date of invoice) and after that a daily interest rate of upto 32% is charged. This means that if you miss your credit card payment, even by one day, you will be charged a huge rate of interest, and it will surely burn a hole in your pocket.
On the other hand, most personal loans in India start with an interest rate of 1% from lenders like MoneyView, Dhani, Tata Capital etc, which is not only highly competitive but also the lowest in the market by a great margin. Thus by taking a personal loan, you can use the money to pay off your credit card debt while paying a lower interest rate as compared to a standard credit card.
- Flexible Repayment Plans
If you have been using a credit card for some time now, you are well aware of the fact that they are basically short term loans provided to you by a bank or NBFC, and as with all short-form loans, these generally arrive with a fixed repayment plan. Generally, most credit cards in India follow a 30-day billing cycle, followed by a 15-day repayment period starting from the date of invoice, after which a high-interest rate is charged on the total amount due every day.
On the other hand, most personal loans in India arrive with a flexible repayment plan meaning that the lender will offer you the option of customizing both the EMI amount as well as the date on which you will make the EMI payment. This not only reduces your financial stress but also makes it easier for you to better manage your personal finances.
- Instant Disbursal
Last but not least, most personal loans in India arrive with instant disbursal, which guarantees that you will have the loan amount in your account within 24 to 48 hours of your application getting approved. An instant disbursement process ensures that you get the money in your account when you need it the most because, as we pointed out above, you generally have a very small window of time to pay off your credit card debt once the invoice is raised.
Use Personal Loans With Caution
Now that you are well aware of the most significant reasons as to why you should use a personal loan to pay off credit card debt, it is our professional responsibility to inform you that all forms of loans are a financial commitment at their core, and thus you need to plan ahead before you apply for one.
Along with this, similar to other loans in the market, personal loans too come with a high negative impact on your credit score lest you miss the EMI repayment or you miss too many EMIs in a row. Additionally, to ensure that you get approved for the personal loan you need, you need to make sure that you have a credit score of above 750 on a scale of 900 across all credit rating agencies in India.
We hope that this article will help you decide whether you should take a personal loan to pay off your credit card, and thus we encourage you to go ahead and apply today for the personal loan you deserve. Happy repayment!