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Paying off a loan with a low-interest credit card can be a great opportunity to not only save money but to also be debt-free fast. However, if done wrong, it can have the potential to add more to your already existing debt and can possibly even become a financial nightmare.
Before you apply
If you happen to have qualified for a credit card that has 0% interest rate, you may use this opportunity to pay off your existing loan using the balance transfer facility of the card. Do understand that this is in no way getting rid of your original debt. You are just transferring it to the credit card to get rid of the usually hefty interest rates that are attached to the original debt.
Zero interest rate credit cards can offer the benefit of potential savings but it may not always be the case. For instance, if your old loan is not really charged that much interest in the first place, it may just be way too much trouble for you to have to do a balance transfer to pay it in full. In addition, there are fees that will be attached to balance transfers so, you should be careful in checking that doing so will not end up costing you more. Otherwise, sticking to your original loan term will make better sense.
You must work on not adding any more to your credit limit when using your credit card for loan payment. The last thing you want is to accrue more interest on new purchases on top of the already large sum you have transferred over that also needs to be paid off.
Do remember that the card is not going to stay at zero interest forever. The special rate will eventually expire. This is why you need to get all the repayments done before then. Otherwise, the usual credit card interest rate will kick in, which is usually very high, and you will end up having to pay considerably more in the process.
Are you curious if you can pay off your loan with a credit card? Well most lenders in reality don’t accept credit cards to settle your loan. Sometimes, paying a loan with a credit card may depend on the situation of the lender and the borrower. So if you’re asking if it’s possible to pay a loan with a credit card then the answer is yes. Yes, it is possible but it depends on the situation. It can pay off a personal loan if you’re credit card issuer allows you to do it through your online account like bank transfer. It is quite possible if you have a standard credit card and will use it to pay a standard personal loan as long as your loan amount is within your credit limit. But it is only recommended to use credit card for paying a loan if your personal loan interest rate is higher than your credit card interest rate. You apply for a loan through online it might not a big deal to online lenders if you’ll pay them through credit card, wire transfer, or a debit card.
Paying Off Your Loan with a Credit Card
Sometimes we get desperate to pay off our loans and think of a solution that we thought could save us from our debt. But in reality, it may only make things worse. Try to think that when you have an outstanding loan to repay it has its own interest and then you try to think that paying off your loan with a credit card is the best solution. A credit card also carries interest rates on cash withdrawals and high fees because they are not intended to be used as ATM debit cards. So technically using credit card as a payment to your loan will only put you into deeper debt.
So in case you’re having difficulty to manage your funds and repay your loan it is better to talk to your lender and explain your side although it’s not pleasing to hear that you can’t repay your loan in time maybe you can gain your lender’s sympathy if you make an effort to settle your loan and show them that you are willing to pay them.