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Debt Management: Financial Options for Consolidating Debt

If you’ve found yourself mired in multiple debt obligations with no end in sight, there are many options to help you take control of your finances. For example, through debt consolidation, you can combine multiple debts into a single, larger debt with a lower interest rate or lower monthly payment.

Personal loans and credit card balance transfers are two of the most popular loan products you can use for debt consolidation. They each have unique pros and cons, and your choice will depend on your current financial situation.

Read on for a thorough breakdown of these two financial products.

Debt Consolidation through Personal Loan

One of the most common options for consolidating debt is doing it through a personal loan. Different loaning entities offer personal loan options for those who need them—you just have to find the most favorable terms for you. In addition, you can apply for unsecured personal loans in any amount, depending on your needs.


Personal loan pros:

  • Personal loans are flexible, and you can use them for any type of expense, including student debt, medical bills, home renovations, and many others.

  • Personal loans can cover balances up to $100,000.

  • Personal loan terms can be extended up to six years or longer.

  • Personal loans require full repayment within a set schedule, so you don’t have to worry about incurring additional interest.

  • Pre-approval for payment loans can be accomplished without a hard credit pull.

  • Diligent repayment of personal loans will improve your credit score.


Personal loan cons:

  • All personal loans incur interest, usually above 10%.

  • To qualify for a personal loan, you need a relatively high credit score.

Debt Consolidation through Credit Card Balance Transfer

If you’ve accumulated large credit card debt with high interest rates, you can transfer that balance to a new credit card with a much lower interest rate.

Balance transfer pros:

  • Many credit card companies offer a 0% introductory interest rate in the first 12 to 24 months of a balance transfer, allowing borrowers to pay off debt more quickly.

  • When you use a credit card for new purchases, you can avail of reward programs.

Balance transfer cons:

  • Balance transfers incur fees, usually between 3% to 5% of the transfer amount.

  • The transfer amount is limited to your new credit limit.

  • Balance transfer repayment is not very strict, requiring only minimum payments per month. By the time the 0% interest rate period is over, you may still have a substantial amount that will incur interest.

The Best Choice for You

Consolidating your debt will help you pay off the remaining balances much more quickly. Your financial product of choice largely depends on what type of debts you have incurred over time.

A personal loan is the best choice if you need to pay off more than just credit card debt. Its repayment period is much longer and stricter, so it may help instill financial discipline over time. Additionally, personal loans can significantly boost your credit score as long as you complete payments every month.


A credit card balance transfer is perfect if you can take advantage of the introductory 0% interest rate. This way, you can pay off the principal amount without having to worry about anything other than the balance transfer fee.


Conclusion

Debt management can be very challenging, but thankfully, many financial products are available for borrowers who need relief from multiple financial obligations and high interest rates. Consolidating your debt through personal loans or balance transfers can help get your finances in order and ease the burden from your shoulders.

First Finance Company Birmingham offers a variety of personal loans to fit your needs. Our client’s well-being is our number one priority, and we do our best to provide the most affordable payment plans possible. So if you’re looking for personal loans or installment loans in Birmingham, AL, contact us today!


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