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People get into debt for various reasons, including lack of income issues, not having an emergency fund and overspending. If you got into debt, the longer you take to pay off that debt, the more it costs you. If you have been paying just a minimum payment on your credit card debts, it will take a ridiculously long time to pay your debt. It would also cost you a lot in interest charges. If you just cannot seem to get a handle on your debts, and you would like to get rid of that debts quicker, an unsecured personal loan with a much lower interest rate than that on your existing debts might be a better option. Here is a look at how an unsecured loan can help you pay off debt quicker.
How an unsecured loan can help you pay off debt quicker
Using a personal loan to pay off debt quicker
When you make just a minimum payment on your credit card debts, it would take much longer to pay off those debts. You will also pay more money in interest charges. In short, paying only the minimum amount each month keeps you in debt longer and costs you more money just in interest charges.
If you pay twice the amount of the minimum payment requirements, you could get repayment period of your debt cut in half. However, if you cannot afford to pay more than the minimum payment, you will need to either increase your income or reduce your expenses so you can find a way to pay more than the minimum payment each month. If cutting back on expenses is not possible and you cannot find ways to increase your income, taking out an unsecured personal loan with a much lower interest rate than what you are paying now on your current debts might be a great option.
Especially, if you have credit card debt with a high-interest rate, taking out an unsecured loan with a much lower interest rate might be a better option. If you qualify for a loan with an interest rate that is much lower than your credit cards’ rates, then it would make sense to use the funds to pay off your credit card debts quicker and then pay off the personal loan at a lower rate.
So, if you can get a personal loan with a lower APR than you are paying more on the principal instead of interest. Plus, you can make more than the minimum monthly repayment. By putting more money towards your monthly repayment, you will reduce the repayment period of your debt, meaning you can clear the debt quicker.
Using an unsecured loan to consolidate your current debts
Many Americans who got into debt several months or years ago can use unsecured loans as a way to consolidate their debts and reduce their interest rates. If you can get an unsecured loan, you can use it to pay off your multiple credit card debts quicker and it’ll be easier to manage because you are only going to be making one payment a month instead of several.
For example, if you have multiple credit card debts, add the interest rates on all the credit cards up, and divide the sum by the numbers of credit cards to get the average credit card interest rate. If you are able to get an unsecured personal loan at a much lower rate than the average interest rate on your multiple credit cards, it would be easier for you to repay those debts faster.
So, if you would like to get rid of debt quicker, taking an unsecured personal loan to consolidate your current debts is the best option.
How to get an unsecured personal loan?
Your credit score is an important factor that lenders will take into considerations when determining your eligibility and the interest rate on your loan. If you have a good credit score, then you could get a loan from a bank or credit union.
But if you cannot get a personal loan from a bank or credit union because your credit score is not so hot, another option might be to apply for an unsecured personal loan online. Your goal is to lower your interest rate by as much as possible.
If your credit is not so good, there are still options. There are many companies willing to consolidate your debt. Look for a company that has a low-interest rate and a good reputation like Accredited Debt Relief.
Need to improve your credit? Check out 5 Steps to Improving Your Credit Score
Taking out an unsecured loan might be a viable option to pay off your current debt quicker, but it is important to understand that you could get into more debt if you borrow a much larger amount than what you need to clear the current debt. Try to work with a reputable lender when considering an unsecured personal loan.
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