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Using a personal loan to pay off an existing debt

| Oct 20, 2016 | Debt Relief |

People in North Carolina who have a lot of debt may have heard about person loans and wondered whether they are a good idea. While using a loan to consolidate one’s debt can be beneficial for some, it is not always a wise solution for everyone. It largely depends on a person’s discipline and spending habits.

According to CBS News, people who are more financially responsible may fare better taking out a debt consolidation loan. The rates for these types of loans are typically lower than standard credit card percentage rates. Although, what rate a person qualifies for will depend on things such as how much debt he or she has compared to their income, and their credit score.

However, for people who do not have the will power to stop spending after taking out the loan, the results can be less than stellar. In fact, one study found that 87.5 percent of people who took out debt consolidation loans had incurred additional debt one year later. In fact, more than 35 percent had more debt after only three months. Interestingly, another study found that there appears to be no correlation between taking out a debt consolidation loan and filing for bankruptcy.

Another advantage to a debt consolidation loan is that the debt will likely be paid off in a shorter amount of time, explains NerdWallet. Only making minimum payments on a credit card balance means that it can be many years before the full balance is eventually paid off. However, personal loans divide the balance up over a set time period so people can have their debt paid off much faster. Plus, they will have the peace of mind of knowing that their payments have a definite end date.