While there is talk in Washington of trying to create new regulations about exactly how much credit card companies can charge you in interest fees, the fact remains that some credit card companies just seem out to get their customers in trouble. The interest rate on some credit cards, especially if you miss a payment, can skyrocket. You can find yourself with an interest rate that’s quickly approaching 30 percent if you’re not careful.
This, obviously, creates a bit of a problem. You wind up accruing so much in interest charges and late fees that your credit card debt grows and grows rather than shrinking. Eventually, if you’re having trouble making the payments, it will even affect your credit score.
One way to get rid of those high-interest credit card fees is to simply pay off the credit cards. Obviously you can’t just pay it off from your checking account. If you could, you probably wouldn’t have used the credit card in the first place.
A personal loan can be a great way to reduce those fees. You can take out a personal loan from your credit union, bank or other lender for the purpose of paying off other debt. This kind of a personal loan is often known as a “debt consolidation loan.” In many cases, the lender may be willing to send the payments directly to your credit card companies, reducing the possibility that you’d spend the money elsewhere.
There are a number of different types of personal loans out there. There are unsecured personal loans, for example. These kinds of loans don’t use any collateral as a security for the loan. As such, the interest rate on an unsecured personal loan is likely to be higher than some of the other types. Still, it’s also likely to be less, probably much less, than the interest rate on your credit cards.
Secured personal loans may be a better bet, if you can get one. A secured personal loan requires some sort of security – usually a home or property – to back the loan. In the case of a home, this type of loan might be referred to as a “second mortgage” or a “home equity loan.” These loans will have a lower interest rate than an unsecured personal loan, and will save you the most money in fees overall.