Should you take a loan to pay off your credit card dues?
A high interest rate on credit cards, as high as 40-50% per annum, along with late payment fees, is very difficult to handle for any individual
Many people land into huge debt due to non-payment of credit card dues on time. Though credit cards are a great option to use when you are in need of cash and don’t have that much money with you right away. But only, when it is used wisely. A high interest rate on credit cards, as high as 40-50% per annum, along with late payment fees, is very difficult to handle for any individual.
Is it advisable to take a loan?
Rishi Mehra, founder of Wishfin and personal finance expert believes if a person is unable to pay his/her credit card dues, one should take a fresh loan at a lower interest rate and immediately pay off the debt.
Answering one of the callers (Hasmukh Joshipura) from Gujarat over his pending credit card dues and personal loans on Money9 Helpline, Mehra suggested he should immediately pay off his credit card dues first.
Credit cards charge a higher rate of interest (between 40 to 50%) which over a period will multiply and accumulate into a large debt. He advised Joshipura who also had an IDFC ELSS fund and LIC ‘s endowment plan, to check online with the IDFC ELSS fund or with the bank if they have an option to provide him a 75% loan on that.
“You can take that loan and pay off your credit card dues. First, get done with your credit card pending amount, and then you can focus on your personal loan,” Mehra responded to the caller.
Mehra also said that one can even look at liquidating investments like FDs, to pay off the credit card dues. However one should avoid liquidating capital market investments like mutual funds or any other investment in haste.
Credit card defaulters
Like any other type of loan, credit cards also have defaulters. If a customer fails to make even the minimum payment amount to the credit card company for six months in a row, he/she will be put on the defaulter list and their credit card account will be immediately deactivated.
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