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Personal Loans To Pay Debts, When And When Not To

Looking for a loan to pay off another one may seem like a bad idea. The reality is that it can help you solve some debt problems, when should you turn to them?

The first step is to make a list of all your debts, how much you pay each month, how much they charge you in interest, when you will finish paying them and if they charge you other commissions, annuities or additional expenses.

The next step is to review how much you can pay per month without affecting your other expenses and if at any time you could allocate a greater amount.

When To Request A Personel Loan To Pay Debts?

If you are looking for options to finish paying all your debts, you can use a personal loan under the following conditions:

If it helps you to consolidate all the loans you have into one and the monthly payment is within reach of your pocket and does not limit the rest of your expenses.
When the new loan has better conditions than the previous ones, for example a fixed interest rate, instead of a variable or simple interest, instead of compound interest.
If with the new loan you save all the commissions, annuities or insurance of the different loans, that money can be used to increase the monthly payment.
As long as you pay off the rest of your loans and only keep it.

And When Not To?

Under other conditions, a personal loan can be counterproductive, because it involves new debt:

If with this new loan you do not finish paying off all the debts, because you are adding only one more.
If you exceed your monthly payment capacity, since it will be very difficult for you to fulfill this new responsibility in time.
If the interest rate is much higher or charges you commissions for opening or managing the account.

Manage Your Debts

Consider that the more debt you have, the more difficult it is for you to reach other financial goals, such as having something saved for emergencies or going on vacation with the family. Therefore, there are some recommendations:

Avoid requesting several credits at the same time. Having several credits will only put you in trouble each month, and if an unforeseen event occurs, you will not be able to face it with your own money and you will have to look for another credit, which will only worsen the situation.
Cancel the cards until you finish paying. If the credit cards have already gotten out of control, it is best to cancel them and prepare a payment plan for you to pay them off, once you are debt free, evaluate which ones are really necessary.
Make a payment plan and stick to it. There are several ways to deal with debts, whether you pay the smallest first and work your way up until you finish with the largest, or vice versa, pay the highest and most interest-bearing first, and then move on to the smallest. The important thing is that you make a plan and follow it to the end.

The Savvy Explorer