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Think twice before taking out a personal loan to consolidate debt

Many Florida residents dread thinking about their finances. You may be among the many people who hesitate before opening your mailbox because of the bills that are likely stacked inside, and you may avoid phone calls because it could be a creditor looking to collect. Though you are not alone in facing these difficulties, you certainly want to find a way out of the distress for yourself.

You may have recently begun looking into ways to better handle your debt, and you may feel overwhelmed by the options. Some methods may seem appealing, but you may also understand that some come with the chance of making matters worse. For instance, you may be considering taking out a personal loan to consolidate your credit card debt, but is it really the best option?

Personal loans are still debt

Taking out a personal loan may allow you to have all of your debt in one basket, so to speak. However, if you have been having financial troubles for some time, it is likely that your credit score is not at its best. As a result, your personal loan could come with an interest rate of more than 30%, which could quickly add up and potentially make your financial matters worse.

Additionally, if you are hoping that your personal loan will help manage your credit card debt, you may want to remember that even credit cards can have their perks. For example, the interest rate on your credit cards may be much lower than what a personal loan would involve. Plus, you may have cards that offer certain benefits like cash back or points, which you cannot get with a personal loan.

Higher payments

In addition to higher interest rates, a personal loan will likely come with a higher monthly payment. These loans usually have to be repaid in a shorter amount of time than other debts, which means that you will likely have a higher monthly payment in order to pay it back on schedule. You may also face various fees for taking out a personal loan.

Other options

If you are struggling with credit card debt and other financial liabilities, you may not enjoy learning that certain options may not be as helpful as you thought. However, you are not out of luck. Bankruptcy is a proven debt relief method that could help qualifying individuals get back on track. If you are interested in gaining information on this option, you may wish to discuss your specific circumstances with an attorney.

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