Can You Pay Off a Loan With a Credit Card
If y'all are considering this pick, you need to do the math and brand certain you're actually saving money. Otherwise, you lot might just be shifting your debt from i place to some other.
Credit cards! What tin can't they do? They let you shop online. They tin open locked doors. And they tin build up your credit if you use them properly. Just can they be used to pay off a personal loan? And even if you can use them to pay off a personal loan, should y'all?
These are the questions y'all volition have answered over the class of the next few minutes you spend reading this weblog post.
Here'southward how credit cards work.
You probably understand on a basic level that a credit card is an object that lets you lot buy something now and then pay for it later. What you may not realize is that every time you use a credit carte du jour, you're essentially taking out a loan.
Every time you use a card to make a buy or to take out a cash advance, you are adding money to your carte's residual. That rest and then earns interest until it is paid off. Yous tin spend up to your credit limit, only paying off your balances means that y'all can re-use that infinite on your menu. This model is chosen a "revolving balance."
Unlike most loans, standard credit cards come up with a 30-solar day grace menstruation. That ways interest won't showtime accruing until one month after the amount is added to your card. So if you pay your bill in full before that grace catamenia expires, instead of just paying the monthly minimum corporeality, you're substantially getting an involvement-free loan.
And it'south a loan that builds up your credit score! If your credit score isn't practiced enough to qualify for a regular credit card you lot can get a secured credit bill of fare by putting down some cash as collateral. The rates volition probably be meliorate than the rates for a bad credit loan—even if the right loan tin canalsohelp build your credit score.
But tin a credit menu be used to pay off a personal loan?
Yeah, a credit menu can pay off a personal loan.
Well, at least in some cases.
"Yous can use a credit bill of fare to pay off a personal loan," advised personal finance author and credit card expert Ben Luthi. "Some credit card issuers will allow yous to do information technology directly through your online business relationship like whatsoever other balance transfer.
"If your issuer won't allow you to do it straight through their balance transfer tool, you tin request credit card convenience checks instead. Some issuers fifty-fifty send these out unsolicited. You can write the check to your personal loan company or write information technology to yourself and eolith information technology into your checking business relationship so brand the payment."
Essentially, if you take a standard credit card, and you lot want to utilise it to pay for a standard personal loan, you'll probably exist able to practise then—every bit long every bit the loan amount is within your credit limit.
(For data nearly personal loans in full general, check out the OppU article What is a Personal Loan?)
Brand sure you're actually saving coin.
Equally too many scientists at the outset of that horror movie should have reminded themselves: But because y'all tin do something, doesn't mean you lot should. So should you pay off your personal loans with a credit card?
Information technology depends. Obviously, there are upsides, like the fact that your personal loan will be paid off. Only as nosotros said above, since a credit carte du jour is essentially a loan, is that really an upside at all?
And so there are the drawbacks …
"The main drawback to doing this is that you'll typically pay a balance transfer fee, which can exist anywhere from 1% to five%, depending on the card and if at that place'southward a promotional offer," warned Luthi. "Besides, credit cards charge a lot higher interest rates than some of the best personal loans, and so I'd only recommend considering information technology if your personal loan interest rate is higher than your credit carte du jour interest rate."
If you have a credit card and are dealing with loftier-interest debt from a no credit check loan like a payday loan or title loans, then transferring that debt to your card will nearly certainly save you money. But with traditional loans, it may not work out as well.
When paying downwardly debt, you need a plan.
Sha'Kreshia Lewis, CEO of Humble Hustle Finance shared her ain story of using a credit carte to pay off a personal loan: "Y'all can employ a credit card to pay off a personal loan but information technology may not be the wisest thing to practise. It is important to counterbalance your options and run your numbers before making a decision.
"Speaking from personal experience, I used my credit carte du jour to pay off my last couple of payments on my personal loan. The balance on my credit carte was at $0 and I paid the credit bill of fare off earlier the calendar month ended. I saved on interest considering I paid the loan off earlier term and I paid the credit card off before whatever interest accrued.
"Information technology made a huge positive bear upon on my credit because the loan was paid off in full. The credit bill of fare company did non report it to the credit bureau that my balance went up because I paid it off before their next report date came around."
Every bit Luthi said, it pretty much comes downwards to whether you'll exist saving money or not. If you tin use your credit card to pay off the loan without paying whatever boosted involvement or fees, why not? Just otherwise, it'due south not going to be a good idea.
We'll go out you with this terminal bit of communication from Lewis: "Be financially disciplined. One late payment could have y'all deeper in debt than yous were before. It may make more sense to refinance a loan with a lower charge per unit than to put information technology on a credit card with higher interest."
Commodity contributors
Sha'Kreshia Lewis is an AP Clerk in the oil and gas industry. After 6+ years experience in the financial field, she has prepare out on her own to passionately help others. She is the founder and CEO of Humble Hustle Finance, a financial platform educating emerging adults on the importance of money management.
Ben Luthi (@benluthi) is a personal finance and travel writer who loves to assistance people make better financial decisions. His work has appeared in U.S. News, Time, United states of america Today, NerdWallet, and more than.
Source: https://www.opploans.com/oppu/articles/can-you-pay-off-a-personal-loan-with-a-credit-card/#:~:text=Yes%2C%20a%20credit%20card%20can%20pay%20off%20a%20personal%20loan.&text=%E2%80%9CSome%20credit%20card%20issuers%20will,like%20any%20other%20balance%20transfer.
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