Debt vs Loan | Debt Revive

Comparing Debt Resolution to Personal Loans

What to understand about each solution

When you compare the two most popular solutions to tackle credit card debt, which are resolution plans and personal loans, comparing the two to see what's best will depend on your financial goals, credit health, and overall current financial situation. Here's a clear breakdown to help you understand which solution may be better for you.

When a Personal Loan Might Be Better

You have a good to excellent credit rating
You can qualify for a low interest loan (typically under 15%)
You want to consolidate multiple debts into one
You can commit consistent monthly payments and would not have to rely on credit cards
You want to avoid hurting your credit rating

When Debt Resolution Might Be Better

You're struggling to make minimum payments
You have high interest credit card debt (20% +)
You've fallen behind on payments or are close to falling behind
You don't qualify for personal loans or have already been denied for loans
You're okay with a temporary credit score drop to reduce your total debt and get out of debt ASAP

Quick Example Scenario for You

Say you owe $30,000 in credit card debt and have an average interest rate of 24% and you can only afford a monthly payment of $600.

1.) You have a Personal Loan offer at 15% interest over 5 years for $30,000

Monthly Payment: $715
Total Paid: $42,900
Interest Paid: $12,900

2.) You have a Debt Resolution offer to handle your $30,000 with a 48 month term.

Monthly Payment: $498.91
Total Paid: $23,947.68
Savings Difference from Loan Offer: $18,952.32

Conclusion: While it's great to receive a personal loan at a competitive interest rate, it can be difficult to obtain such an offer. If you do, and you're able to save money per month, and easily afford it without having to rely on credit cards moving forward, then definitely take the personal loan.

If you're not receiving loan offers, or receive loan offers at high interest rates that don't allow you to save money, or your monthly payment is the same as what you pay for your credit cards currently, if you're struggling making payments with the cards, then don't accept the loan, as that will only make matters worse. Eventually, you will have to rely on the credit cards again, and then you'll have the loan payment and credit card payments again. Debt Resolution isn't as bad of a choice as you may think, as it's designed to save you money per month, which allows you to get away from relying on credit cards.