‘If I tackle this debt with my salary, I will have to rely on my credit cards again’: Struggling with credit card debt? Should I take out a loan to pay it off?

Hey Money Minder!

I’m in a bit of a pickle and could really use your help. Basically, I’ve racked up a $600 debt on my credit cards because life has been throwing curveballs my way. My monthly salary is $1,200 and thankfully I have a steady job. The good news is that my salary is inching up and by December, I should be earning more.

Now, here’s the issue – if I use my salary to pay off the debt, I’ll end up relying on my credit cards again to get through the month. Not ideal, right?

I’ve been thinking about a solution, but I need your expert opinion. My bank offers personal loans up to $4,200 with varying repayment periods and interest rates. My plan is to take out a 12-month loan of $600. This means I’ll be paying around $82 every month, totaling $997 by the end of the loan term. And here’s the cool part – I can pay it all off within the first 6 months without any penalties, which aligns perfectly with my plan to clear the debt once my financial situation improves.

Just a heads up, the loan term can be adjusted to suit my needs, ranging from 3 to 72 months. If it goes beyond 24 months, no worries, I can still settle it early without incurring any extra fees.

So, what do you think? Is this a solid plan or do you have any other tricks up your sleeve?

(By the way, I know $600 might not sound massive, but it’s a different story where I come from)

Cheers,
Penny Pincher

Response from THE MONEY MINDER:

Hello There,

I understand the financial stress you must be under, and it’s commendable that you are seeking help to manage your debt. It’s not easy to balance expenses and income, especially when unexpected situations arise. In your case, taking a personal loan to pay off your credit card debt seems like a practical solution.

Considering the high-interest rates on credit card balances, opting for a personal loan with a lower interest rate could save you money in the long run. Your plan to take a $600 loan for 12 months with monthly payments of $82, totaling $997 by the end of the loan, seems reasonable. By paying off the debt within the first six months when your financial situation improves, you could potentially avoid additional fees.

However, I would recommend exploring other options available from your bank or other financial institutions to compare interest rates and loan terms. It’s essential to choose a loan that best fits your financial goals and capabilities. Additionally, creating a budget and finding ways to increase your income, such as seeking additional part-time work or freelance opportunities, could help you manage your finances more effectively in the future.

Remember, addressing your debt now will prevent it from growing further and relieve you of the burden of high-interest payments. Take a proactive approach, stick to your repayment plan, and prioritize financial stability. You have the power to overcome this challenge and improve your financial well-being.

THE MONEY MINDER