Pay Off Debt with a Personal Loan

How to Use a Personal Loan to Pay Off Debt Faster

By Civic Federal Credit Union
3 min read
February 03, 2022
How to Use a Personal Loan to Pay Off Debt Faster

Managing debt can be exhausting with the multiple payments and different due dates. Juggling high-interest credit card debt or student loans can also be an expensive burden. A well-known strategy can help you simplify your debt and help you pay it off faster: debt consolidation using a personal loan.

What is debt consolidation?

This is when you work with a credit union or bank to replace your multiple debt obligations and payments with one lower, affordable, and easy-to-remember payment. You bring all of your debt together to produce one single payment.

Which debt can I use it for?

Debt consolidation can be used for all kinds of debt including car or truck loans, credit cards, and even student loans.

What is a personal loan?

This type of loan gives you a one-time cash payment to use. Civic and most other lenders will deposit the money into your checking account. In the case of debt consolidation, you or your lender can pay off your multiple debts, leaving you with one lower and affordable payment for your personal loan.

How debt consolidation with a personal loan can help you pay off debt faster:

  • Gives you one payment instead of multiple payments and due dates. This allows you to focus on one payment and one goal: the payoff.
  • Lowers your rate to create one, affordable payment. Civic has rates as low as 5.25% APR, likely significantly lower compared to your existing high-rate debt such as credit cards which can be as high as 18 – 24 percent.
  • Has no pre-payment penalty fees. You are able to pay more than the payment amount to knock down your loan amount faster.
  • Provides a fixed rate that will not change during the term of your loan. This will help you manage the debt with a plan, knowing the rate will not fluctuate or change the amount you owe. The amount will stay constant and predictable [perfect for working towards a payoff].

Ideas to accelerate your payoff plan:

Civic has no penalties for paying off your loan early (we’ll actually celebrate your achievement!). This may be in contrast to traditional lenders, so make sure to work with a financial services firm that does not charge you penalties to pay your loan off early.

Once you simplify your existing debt into one payment, the goal shifts to paying it off. These ideas can help you put more money towards your loan and help pay it off even faster.

  • Find a side hustle to earn extra month that you can add to your available funds to pay this loan off.
  • Consider a part-time job and put all of your earnings towards the payoff plan.
  • Take stock of items you own to know if it makes sense to sell them (a never-used kayak, a gaming system you don’t use anymore, or other things that may need a second life with someone else).
  • Decrease your expenses by choosing one or two streaming services instead of three, four or five.
  • Spend wisely on food, clothing and mobile phone features and extras.

Reset your debt

A debt consolidation using a personal loan will simplify your payments into one, affordable amount and give you a simple plan to pay it off. Are you ready to reset your debt?

Disclaimer: You + Money blog posts are provided for informational purposes only and not intended to replace the advice of a financial, legal or accounting advisor.

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