“Debt” is such a naughty word yet it’s spoken probably millions of times a day. That’s because so many people deal with debt- so many people are buried under a mountain of it that they cannot seem to find a way out of. Well, there’s good news: There are personal loans available to help you get out from under your mountain and regain control of your financial life.

Getting a personal loan to pay off debt may not be the best decision for everyone, but it is definitely worth considering. Some factors may make this a bad move, especially if you cannot change your habits in the process. However, if you can get yourself to make good decisions, it can be a great move to make. Take a look at these incredible benefits of making such a drastic move:

Consolidate For Fewer Payments

One of the greatest advantages of using a personal loan to payoff debt is that you can go from paying multiple bills to paying one. Let’s say you have $5,000 in debt and you are paying $100 a month to five of these debts. This means you are paying out $500, a large portion of which may be going straight to interest. With this, you may not get out of debt for years.

However, let’s say you get a loan for $5,000 at 12 percent interest and on a three-year repayment term. This means you will be paying a total of $5,600 back in payments of only $155.56 a month for three years.

Since the interest is already fixed, you know that every single month, money is going towards your principal. And, as long as you make your payments, you will be done in three years. In short, you will be paying out almost $345 less per month. That is a very large difference. And, you are only paying one bill each month instead of the individual five.

Save On Interest

Interest plays a big role in all of this, too. The example I gave above put the personal loan interest rate at only 12 percent. Many loans actually charge less interest than that.

Other creditors that add interest often charge much more. Credit cards can be as around 30 percent, so there is definitely a large difference. Borrowing $5,000 at 12 percent interest brings the overall interest to $600 whereas it would be $1,500 in interest at 30 percent.

In addition to the higher interest, the way interest is charged is very different. For instance, credit cards generally charge compound interest monthly. This means that every month that 30 percent is charged and added to your balance. If you do not pay off the full balance, the next month that interest is charged again, so you often pay interest on top of interest.

With a personal loan, though, the interest is often fixed. In our example, the 12 percent interest is calculated upfront. It is then added to the full loan amount when you take it out. The total with that interest is then spread out over the repayment term.

Here are some options for you, just put in your information, and you may get suggestions about a potential lender for you:

Decrease The Overall Amount You Owe

We just talked about how you can save on interest by using a personal loan to pay off debt, but that really is not the only way you can save money. You can actually decrease the overall personal debt that you owe- through settlements.

I’ll give you a very personal and recent example. Last year, my husband and I experienced some financial trouble like so many other people do. During this time, we had a credit card that never got paid off. Due to a loss of income, we actually were not able to pay on it at all for a while. Unfortunately, the $250 we owed grew to over $800 thanks to compound interest.

Today, I received an email from this credit card company today. They want their money, of course, so they are willing to make a deal. I was offered four repayment methods, three of which decreased my balance. I could make a one-time payment of my original $250 balance over the next couple of weeks and be reported as paid in full. The other two allow me to make monthly payments. While these two do not go all the way down to $250, one of them does take us down to $400 and the other $600, depending on the monthly amount we pay.

We cannot afford the full $250 at once, so I chose the payment plan that will have us paid off at $400, which is still half of the full debt. However, if I could get a loan for that $250, I would be saving us $150 in interest. This would obviously be the more favorable option.

You can get these settlement options

I am willing to bet that if you owe any debt, you have probably received a settlement offer in the mail at some point. Creditors send out a lot of them around tax time because they know that many people have the money to take advantage of at that point.

Creditors want their money, so they are almost always willing to decrease the amount you owe to get you to pay. This is especially true if most of your bill is interest, though even medical creditors offer settlements sometimes. They would rather get some of their money than none of it.

So, if you take advantage of these offers, you might get the full amount down to half or even a fourth of what you owe. Speak to your creditors or gather any settlement offers you have received in the mail. Determine how much you can settle for and add those balances together. If you can get a loan for that amount, you are saving yourself a ton of money.

Even if you can only settle half of your debts, you will be in much better shape than you are when you owe the full amount. Imagine getting out of debt for just a fraction of what you owe.

Improve Your Credit Score

Using a personal loan to pay off debt can improve your credit score in two ways. First off, you are paying down debt. That alone can increase your score tremendously.

The other way is through the loan itself. Opening a loan is increasing the amount of credit you have available. Paying debt off is decreasing what you owe. Add the two of those together and you get a much better credit utilization score- aka the amount of credit you have compared to the amount you use.

When you first take the loan out, you can expect to see a negative effect on your score because at that point you are simply adding another debt. However, once you pay off your debts and those creditors report that to the credit bureaus, you will see a drastic shift in a positive direction. This, of course, is dependent on you not adding any other negative reports to your credit. Also, as you make timely payments on your loan, you are building a good credit payment history and lowering your credit utilization even further.

To summarize, using a personal loan to payoff debt can decrease the debt you owe, decrease your credit utilization, and build a good payment history. Getting all of these positive changes on your credit from one big move is an incredible thing to experience.

Reduce Stress

Let’s just be real: Debt can kill. That may sound dramatic, but debt can cause stress, and stress really can kill. If it doesn’t kill you, it can still have a really horrible impact on your health. Besides things like heart attacks- as if that is not bad enough- stress can actually cause you to gain weight and not be able to lose it. It can cause so many terrible problems and make your life miserable- to list them all would require me to write a book.

Suffice it to say debt is not something you need or want in your life. If you want to live healthier- emotionally, physically, and mentally- ditching debt is absolutely a great step in the right direction. In fact, while I cannot make any medical guarantees due to not attending medical school and all, just check it out for yourself. Get rid of some debt and see what type of impact it has on your health and your overall quality of life.

Keep More Of Your Income

Really, who wants to live paycheck to paycheck? Not I. Not anyone I know, either. It is really terrible to work hard only to watch every single cent go to someone else. I know from experience how terrible it feels to have to tell my kids “No” all of the time because we do not have a few spare bucks.

It’s not fun and it’s no way to live. Paying off debt- especially if you can do it at the same time you cut down monthly bills- can let you keep a lot more of your check.

Free Up Cash

And since you are keeping more of your income, you can do things you actually want to do. Whether you just wish you could afford pizza on Friday nights, you want to go shopping for clothes, you want to take your family on vacation, or you want to buy a home, you need money to do it. How can you do that if you are paying everything out to someone else?

Start Saving And Investing

Part of doing what you want with your money and experiencing financial freedom is having money that is not going to bills and not being spent on other things. The easiest way to do all of this is to have money saved and to have money in investments so that your money is growing.

Using a personal loan to pay off debt- theoretically- gives you the money to do those things. Obviously, money does not just jump into savings and investments. You actually have to put money toward them, but paying off debt frees up cash for you to do so.

Before The Loan

If you are going to use a personal loan to payoff debt, you want to do it effectively. Be aware of mistakes during the process of paying debts. It is a waste of time and money if you do not do it the right way. There are some steps you can take to increase your chances of success.

Make A Plan

First of all, you need a plan. Just diving in and getting a personal loan to payoff debt without knowing what moves to make is like heading across the country without gas, a map, or even knowing what road to start on- it is not a good idea, at all.

Start by taking a look at your credit report and any recent debt notifications you have received. You need to know what you need to pay off.

Talk To Creditors

Next, you need to talk to the people you owe. Tell them you want to pay your debt but need to try to settle for a lower balance. More often than not, they will negotiate. The more you can pay upfront, the better of a discount you will likely get. If you are able to get the full amount you need through a loan, you should get a very good discount.

Determine Your Total

If you are going to get a personal loan to payoff debt, you need to know how much you need. After you have talked to your creditors, tally up the settlement amounts.

Prioritize Debts

Ok, here is an important thing to note: There is a chance that you will not get the full amount you need in your personal loan to payoff debt, so you need to prioritize your debts. These are some things to take into account:

Debts have the biggest impact on your credit in the first two years they are on your report. This means that those that have not made it onto your report yet and those that are recently added should be at the top of the list.

Most debts fall off of your credit report in 7-10 years, so if they are about to come off, you might consider putting them at the bottom of your list. This is not to say you should not pay them off but that they can be taken care of after you have dealt with the once that are hurting you the most.

Some things may not get on your credit but can still affect you in a negative way. For instance, if you owe a previous landlord or apartment complex, that could keep you from renting or even buying in the future. These types of things should be paid off regardless.

Debts with interest that is compounded daily or monthly are going to continue to grow. These should also be somewhere near the top.

Bottom line: Though you should work to payoff all of your debt, if you have to choose which debts to pay off first, always payoff the ones that are hurting you right now and are continually growing first. This takes away the urgency, which can decrease stress and improve your overall quality of life.

Commit

There are two commitments you need to make before you get started.

• To use the personal loan to payoff debt. If you use it for any other reason, you are going to be in a deeper hole. If you are going to get the loan, you really need to use it for its intended purpose

• To repay the loan. Don’t get out of debt only to not repay your loan. For that, you might as well not pay off the debt in the first place

After The Loan

You paid all your debts and now you need to stay out from debts. Also, there are a few things to do once you have gotten the personal loan to pay off debt and actually paid off those debts.

Conclusion

As you can see, getting a personal loan to pay off debt can be a really wise move- if you handle it responsibly, that is. If you are going to do it, though, you need to be ready to make big changes in your life.

For help finding a lender to meet your needs, be sure that you look for a reputable platform that is connected with a good network of lenders. And be sure that you can manage your monthly payments without too hard a time. Borrowing more than you can afford to repay is a sure way to financial ruin.