Benefits Of Using A Personal Loan To Consolidate Debt

If you have decent credit right now but would like to have better credit, and if you owe a lot of money on credit card debts, you should consider taking out a personal loan. This type of loan is a non-collateral loan type that allows you to borrow money on just a signature. The interest rates are typically fairly good when compared to other loan options you might consider, and using the money to pay off your credit cards could offer the following benefits.

You Will Go Down to One Payment Per Month

The first benefit of any type of debt-consolidation plan is the difference in the number of payments you must make every month. If you consolidate, you end up with just one payment instead of several or dozens, depending on your own situation. If you have to make five payments a month, for example, this takes time to make these, and there is a chance you might forget to make one. If so, you will end up with late fees and extra charges, and it could harm your credit. Making one payment is so much simpler, and this is the top reason people love using consolidation plans for eliminating credit cards.

Paying Off Credit Cards Will Increase Your Credit Score

When you do this, there is a result that will benefit you greatly. This result is the increase in your credit score that you will see within a few weeks of paying off your credit cards. As soon as you pay them off and the lenders report the balances to the credit bureaus, your score will increase. This happens because you now have a lot of credit you are not using, and this changes the ratios used to calculate your credit score. Even though you still owe the same amount of money, it changes your score because of the way you are using your credit.

Paying Off a Personal Loan Will Increase Your Credit Score

The last thing to know is that your score will also increase from paying off this loan. Each month, the lender will report your payment and balance to the credit bureaus, and this will build your payment history, which will help increase your score.

As you can see, using the proceeds from a personal loan is not only a good way to pay off credit card debts, but is also a great way to build credit. If you would like to apply for a personal loan, contact a lender that offers them.