Financial steps can often be as unpredictable as the monsoon rains. For Mayank Aggarwal, a young professional working in the IT sector, managing his finances was a constant juggling act. However, a recent setback led him to ponder over a critical question: Is taking a personal loan a wise choice to settle his delayed credit card bills?

Mayank, like many urban professionals, enjoyed the convenience and perks of credit cards. They offered him rewards, cashback benefits, and a seamless payment experience. However, amidst his hectic work schedule and social commitments, he overlooked a couple of credit card payment due dates. As penalties and interest charges piled up, he found himself facing a hefty bill that strained his budget. On the one hand, Mayank could apply for a personal loan to clear the outstanding credit card dues in one go. On the other hand, he hesitated due to concerns about additional debt. What should Mayank do then?

Let’s help Mayank clear his dues and stay away from further straining his financial situation.

The Pros and Cons

Mayank sought insights from financial experts and online resources. He discovered that opting for a personal loan to pay off delayed credit card bills had its pros and cons, each deserving careful consideration.

Also Read: Unable to get a loan? Follow these tips to enhance your loan eligibility

Pros Of Using Personal Loan

By settling the credit card dues with a personal loan, Mayank could consolidate his debts into a single manageable installment, potentially reducing overall interest costs.

* Lower Interest Rates

Personal loan interest rates, especially from top lenders, tend to be lower than credit card interest rates, offering potential savings over time.

* Structured Repayment

Personal loans come with fixed repayment schedules, providing clarity and discipline in managing debt repayments. You will have EMIs, and you can consistently repay your loans making sure you have enough time to manage your debt.

Cons and Cautions

* Additional Debt Burden

Taking a personal loan means acquiring additional debt, which must be repaid diligently to avoid further financial strain.

* Credit Score Impact

Mayank understood that applying for a personal loan and managing it responsibly could positively impact his credit score. However, missed payments or defaults could have adverse effects.

Adhil Shetty, CEO, Bankbazaar.com, says, “Timely payment of credit card bills is crucial, as delayed or missed payments can lower your credit score due to negative score on your credit report. Frequent late payments may indicate financial instability or irresponsibility to lenders, impacting future credit approvals and loan interest rates.”

Loan Terms and Fees

Mayank researched various lenders to compare loan terms, processing fees, prepayment charges, and other hidden costs. Understanding these details was crucial to avoid financial surprises.

The Decision and Its Impact

After weighing the pros and cons, Mayank decided to proceed cautiously. He applied for a personal loan with favourable terms from a reputed bank, ensuring transparency in fees and charges. With the loan amount, he settled his overdue credit card bills promptly, lifting a considerable burden off his shoulders.

However, Mayank didn’t stop there. Recognising the importance of financial discipline, he revamped his budgeting approach, set up reminders for bill payments, and monitored his expenses diligently. Gradually, his credit score improved, reflecting his responsible financial behaviour.

Months passed, and Mayank successfully repaid the personal loan while continuing to use credit cards judiciously. He got to know that while personal loans could offer short-term relief and financial flexibility, prudent financial habits and awareness were paramount to long-term financial well-being.

Mayank’s journey taught him valuable lessons about financial prudence and staying disciplined. As he continued his career journey, Mayank embraced financial empowerment, paving the way for a good credit history and financial stability.