Could a personal loan help you pay off more debt by 2023?

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If you’re hoping to get out of debt, read this.

Important points

  • Paying off debt can be challenging, and this is especially true when your debt has a high interest rate.
  • A personal loan can help lower the cost of your debt and make repayment easier.

If you’re hoping to be debt-free by 2023 — or at least make a big dent in your debt –– you don’t have much time left to work toward that goal. And there is one possible step you could take that could make paying back your balance a lot easier (depending on your situation). You could take out a personal loan.

Borrowing more money may seem counterintuitive when trying to get out of debt. But under certain circumstances it could be exactly the right step. Here’s why.

How a personal loan could help you pay off your debt faster

Taking out a personal loan could actually help you pay off more debt by 2023 if Your personal loan is at a lower interest rate than the debt you are currently trying to pay off.

Discover: These personal loans are best for debt consolidation

More: Pre-qualify for a personal loan without hurting your credit score

You see, if you have high-interest debt (like credit cards), chances are very good that a large chunk of every payment you make is just eaten up by interest. You can only repay very little of the capital because your financing costs are so high. All those payments you work hard to send to your creditors may do very little to get you any closer to your goal of becoming debt free.

If you can qualify for a low-interest personal loan, you can convert that debt from a high-interest rate to a low-interest rate. For example, instead of paying 17% annual interest on a credit card (or more), you could pay 8% or 10% or any interest rate on your personal loan. You then use the proceeds from your personal loan to pay off that expensive credit card debt.

For example, if you owe $4,000 on one card and $5,000 on another, a $9,000 personal loan could put you off both of those credits. You would only have to pay one debt and at a lower interest rate.

Once you lower your rate, much more of your monthly payment should be used to actually lower your balance so you can get out of debt sooner. This can help you make much more progress on your debt settlement methods over the rest of the year and into the next.

Is this step right for you?

Refinancing your high-interest debt may be the right move if you can qualify for a new loan at a lower interest rate and if it doesn’t extend your payback period too much. Not only can you use your new low-interest personal loan to lower the interest rate on credit cards, but you can also use it to pay for any type of expensive debt you have, such as debt. B. Payday loans or medical debt.

You can shop around and see what interest rate you can qualify for without hurting your credit score to see if this approach works. You should also be sure that you can comfortably make the payments on your new personal loan and that you’re living on a budget so you don’t charge your credit cards after the repayment.

When you get a new loan with a low interest rate and you can trust that you will be responsible for paying it back, there is no reason not to press ahead with this strategy as soon as possible so that you can pay off the maximum amount of your debt by 2023.

The Best Personal Loans of Rise for 2022

Our team of independent experts scoured the fine print to find the handpicked personal loans that offer competitive interest rates and low fees. Start reviewing The Ascent’s best personal loans for 2022.

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