There are many reasons why people opt for a personal loan – manage wedding expenses, pay huge hospitalization bills, pay for your higher education when you cannot get a student loan or renovate your home. Due to the flexible nature of personal loans, it can be taken for a variety of reasons. However, more and more people are now consolidating all their debts into a single one and are choosing personal loans for that matter. Some want to get rid of credit card debts. Since credit cards have a much higher interest amongst any other form of loan – unsecured or secured; people often take a personal loan to repay their credit cards.

There are any reasons why a personal loan can be a boon when you use it to pay off debts:

•Personal loans are flexible – Due to the highly flexible nature of personal loans, you are able to consolidate all loans together into one single loan. If you have multiple credit card debts and are looking for a way to payoff them all at once to get rid of huge interest rates, personal loans are an ideal choice. Credit cards have the highest interest rates that are calculated on an average daily balance basis. Paying credit cards off by means of personal loans will save you on hefty interest charges on your credit cards.

•No Collateral required - Unlike home loans or car loans, personal loans are unsecured and do not require any collateral. Which makes it easier for people to apply for a personal loan and use it to repay their debts. The downside is a higher interest rate for personal loans as without collateral, banks charge a higher rate.

•Easy repayment – Personal loans can be repaid in easy monthly installments that are affordable.

•Longer Loan Tenure – If you are unable to manage a high EMI as that goes out of your monthly budget, you can always opt for longer loan tenure.

•Get Debt-free Quickly – By opting to pay a fixed amount every month with a fixed rate of interest, you will be able to repay your personal loan faster than a credit card debt.

Getting a personal loan to pay off other debts also has some cons:

•High Interest rates – Personal loans are unsecured loans and also have high interest rates that are second to credit card rates. Unless and until you are trying to pay off a credit card debt, opting for a personal loan may not prove to be beneficial to you in terms of interest rates.

•Longer Tenure = More Interest – Opting for a longer tenure in personal loans to lower your monthly EMI will cost you. If you extend a three year personal loan to a five year one, you will be paying more interest over the two extended years. Therefore, opt for a tenure that best suits you since a longer tenure will make you pay additional interest.

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