Should I take out a payday loan to cancel the credit card?

Should I take out a payday loan to cancel the credit card?

Applying for a loan to settle the debt owed to the issuer of the credit card is an option to catch up with the payment, when you do not have the money to pay the total consumption. However, it is not always the best solution. The aspects you have to consider.

The credit card is one of the most commonly used financial tools to make payments when it comes to high amounts of money or cash availability is not available at the moment. But just as it often works as a “lifeguard,” it can also play against us.

Its excessive or inappropriate use can cause us significant debts to the point that we end up paying only the minimum payment (the smallest amount requested by the entity and not the total monthly payment), being caught in constant indebtedness. It is common for the high default interest charged by card issuers to make the debt an unpayable snowball, making the situation regularize, on many occasions, after years.

Although we never recommend reaching this instance

Although we never recommend reaching this instance

there are different alternatives to address this problem. What can you do about it in case you find yourself in this situation?

A possible solution is to make the minimum payment of the credit card until you can pay off the total debt, knowing that, over time, the amount to be paid will increase due to the interest incurred. Another option is to request a payday loan to get money and thus cancel the total balance of the card at one time. The goal is to replace this debt with a cheaper one.

When should it be done?

When should it be done?

The minimum payment is an irresistible temptation that can be very expensive. Therefore, we recommend that before incurring new expenses, analyze the possibility of taking a loan. When applying for a payday loan to cancel the debt you have with the credit card, it must be clear that the purpose of this operation is to cancel the amount owed in a single payment, assuming a new debt, but cheaper.

In this way, it is possible to access loans with lower rates and longer terms to minimize the percentage of the monthly personal budget that should be used to pay the last debt, compared to the one originally had.

Likewise, before making the decision to apply for a loan, we suggest you read the “fine print” carefully to make sure this tool is really a solution, and not a problem. For that, you have to pay attention to the Total Financial Cost (CFT), which represents the real cost of your loan. This is the final percentage you will pay as a refund of the credit you requested.

What loan options does the market offer?

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There are different types of credits that you can use in this situation. We tell you what they are, how they work, their pros and cons, and what you can do about it:

1. Apply for a loan specially designed for debt cancellation. It is an interesting alternative if you have more than one debt with several financial institutions at the same time. Through this loan, the client accesses quality financing to cancel other debts. For example, the debt consolidation loans of Good Financial have optimal conditions as they provide the benefit of paying lower interest over longer term.

2. Request a credit from the bank that issued the card with which you borrowed. The same entity sometimes offers payday loans that you can ask for in order to pay the debt. The issuer of the credit card will be interested in finding a solution to the problem, so he will try to facilitate the process for you to access the requested loan with low monthly installments for a longer term. However, this option may not be entirely convenient, since increasing the period of time to pay off the credit, your debt may increase and you end up paying more money in the long run.

3. Opt for a traditional payday loan. Banks provide conventional lines of credit with terms of up to 5 years. The counterpoint is that the requirements requested are usually more difficult to meet, with strict evaluations. Unlike the previous options, there is a greater chance of your request being rejected.

4. Apply for a loan quickly and easily online. We know that having a card debt is an urgent problem that requires an imminent solution. Fintech offers online credits that process applications quickly, facilitating approval and disbursement of money in a short time. However, it is necessary to clarify that many of them have rates above 400% so they end up being inconvenient.

Faced with this, Good Financial secured loans with rates from 24% in UVA are positioned as the healthiest option for those who do not want to incur an unpayable debt. Its technological solutions optimize loan application management processes, in order to provide better credit conditions to users who can access the service from their cell phones or computers.

It is important that you know that these alternatives are always subject to approval by financial institutions. This means that you should check with each one your particular situation to determine if the loan is suitable or not for you and under what conditions you should take it.

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