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Reading The Fine Print: The Pros And Cons Of A Personal Loan

Finance

Many Americans are in a battle with their credit card debt and are stuck in a vicious cycle of seemingly never-ending payments. Holding large credit card balances, in which you may be struggling to keep up with, not only impacts your cash flow, credit score and overall financial health, it also can affect your physical well-being if it is causing you stress. While it may seem impossible to dig yourself out of all of this debt, there are ways you can conquer and win the credit card debt battle.


Taking out a personal loan can be a good way to pay off your credit card debt, but you should also be aware of the pitfalls. Here is some insight into understanding what a personal loan is, as well as the pros and cons that come along with it.

What Does it Mean When You Pay Off Credit Card Debt With a Personal Loan:

Paying off credit card debt with a personal loan typically falls under the category of a “credit card consolidation loan." Credit card consolidation loans are term loans in which the borrower will have a repayment plan, and the debt will be paid within a definitive time frame with a set interest rate. Having a set interest rate and time frame can be helpful in keeping track of how much interest you are actually paying for the duration of the loan as opposed to carrying credit card balances. Carrying a credit card balance each month could cost you more in interest than you may have anticipated if you only pay the minimum amount required.

"Consolidating your high-interest credit cards into a personal loan with a lower interest rate could save you a significant amount of money in the long run"

The Pros in Paying Off Credit Card Debt With a Personal Loan:
Obtain a Lower Interest Rate:

While it's not guaranteed, you may be able to get a lower interest rate than you currently have on your credit cards. Consolidating your high-interest credit cards into a personal loan with a lower interest rate could save you a significant amount of money in the long run. Having a fixed interest rate for the duration of the loan will keep your monthly payments the same each month and will help you better budget and keep track of you expenses each month.

One Single Monthly Payment

If you hold numerous credit cards with high balances, consolidating them all into one personal loan will give you a single balance under one interest rate. Not only does this make managing your credit card debt simple, but it can also help you keep better track of your finances as well as making on-time payments. Having a single monthly payment may be beneficial to those who may be prone to financial procrastination and have a hard time managing their finances. It could also be a good opportunity to “turn over a new leaf" and embrace financial literacy as well as embark on a journey to a debt-free life.

Quicker pay-off time

Unlike credit cards, a personal loan can be paid off in a shorter amount of time. Credit cards do not have a set repayment period. When only paying the minimum amount required on credit cards, you could be facing decades of payments, leaving you with double or even triple the original balance. Try comparing how long it will take you to pay off a personal loan as opposed to sticking to making monthly minimum payments. Making a comparison will be easy to do because every credit card company is required by the Credit Card Accountability, Responsibility, and Disclosure Act (CARD) to have an explanation on statements as to how long it will take you to pay off the credit card debt if you just make the minimum payments. Having this information may not only be an eye-opener but can help you make your decision on opting for a personal loan.

The Cons of paying off credit card debt with a personal loan:
Interest Rate Could Be Higher

Typically the interest rates on personal loans are lower than the interest rates associated with credit cards. However, the interest rate you are given will depend on whether or not you have good credit. If your credit is less than desirable, then you may not getter a better interest rate deal. Even those who are considered to have good credit may not get an interest rate that would make sense to opt for a consolidation loan. It's always important to do your homework and make comparisons to decide what will work best for your individual financial situation.

Monthly Payment May Not Work Within Your Budget

You may very well be able to obtain a personal loan to pay off your credit cards. However, you have to make sure that the monthly amount fits within your budget. If you don't think you can swing the monthly payment on your current budget, see where you can make cuts to your expenses that will work and make sense.

If the payments are not affordable, then you may have to seek other options in paying off your credit card debt. For example, you may have to take on a side-job to bring in more income to pay more than your minimum balance or cut back on expenses such as dining out and cable bills.

"If your credit is less than desirable, then you may not getter a better interest rate deal. Even those who are considered to have good credit may not get an interest rate that would make sense to opt for a consolidation loan"

Fees May Be Involved

Before signing on the dotted line, make sure you read the fine print. Some personal loans may have origination fees that may add a substantial amount to the loan. Make sure that the fees do not outweigh the benefit of consolidating your credit card balances.

If you decide to opt for a personal loan to pay off your credit cards, it's extremely important to understand how you got into credit card debt in the first place. Get to the root of the problem, so it doesn't happen again. If your credit card debt was due to impulse buying and poor spending habits and you don't take action to correct the behavior, then taking out a personal loan to pay off your credit cards will only be a temporary fix. Create a budget to keep track of how much you have coming in vs. how much is going out for expenses. Whether you have credit card debt or not, Budgeting is a great tool for everyone, and by utilizing a budget, you will be on your way to a debt-free future!

3 min read
Health

4 Tips to Not Lose Friendships Over Your Mental Health

Life can be messy, and you might be wondering if you should involve your friends with your mental health ups-and-downs. You might be afraid because your friends are undereducated and misinformed about people living with mental health issues. They might be in the dark.

You've heard them whisper, "She's off her meds." As if a pill will solve everything when it is more complicated than that to be truly healthy. Your friends might have said that if you took better care of yourself, you wouldn't have problems. They might have insinuated that your issues are a wet blanket.

It's time to address your mental health without losing friendships.

Mental health is a chronic condition not unlike diabetes or hundreds of other medical conditions. You can ask for support beyond your medication and attending regular therapy appointments.

We are all in need of a friend's help from time to time. Here are four tips when you're feeling low, out of sorts, or on the edge:

1. Be Selective

You're looking for your friends' support and you're looking to be understood. You're not looking for hundreds of people to validate your latest post, you are looking for one brave friend who can be steady for you during a storm. Be aware that people might not see your mental health challenges through the same lens as you do. They haven't lived it.

The friend who you turn to for support might not be your best friend, instead they might be the best person during difficult times. Like a friend of mine called the 'fixer', he had been groomed to be the number-one emergency contact since he was a kid. He was a better guy, a more likable guy during tragedies.

All of your friends might show up when you call them on the first day of a crisis, but there's a chance they might have left the building before all the dust settles. An emotional crisis can last months not just a few hours and very few friends are built to stand-by you for a long time. Involving the right person is key.

2. Be a Planner

Once you've selected the most compassionate, dependable friend to be your contact and possibly help you out during an emergency, you'll want to plan.

Tell them about your medical history and how you manage your condition currently. Share the name and phone number of your health care professional that you see for therapy and medication and give an accurate list of any medicines that you take.

Listen to their concerns and answers their questions. Holding back information can affect whether your friend can truly help you and whether or not they feel a part of your team.

3. Be Committed

Telling a friend about your challenges does not mean that you've hired a personal garbage collector — person to pick-up and take out your trash. Instead, once you've involved a friend in your quest for stability, you will be held accountable to follow the plan that your health care provider and your friends and family outlined.

You should be honest when you fall short of following the plan whether it be not taking your medication or not seeing your therapist or avoiding stress.

4. Be Charlie Brown

Acknowledge that you, too, will be there for your friend.

Thank your friend in writing and out loud after they have helped you get your life back on track. Promise them that you will be there when they need you. You have the unique experience of understanding how people need help from friends and you will be the best helper to your friend.

The friend who helped you through this storm will likely face some kind of challenges in the coming days. Demonstrating that you will be there for your friend is the best way to ensure that they will show up for you.

If you are feeling alone and thinking about harming yourself, please call this hotline: 1-800-950-NAMI or visit NAMI's website.

You are not alone.