Could a Personal Loan Help You Pay Off More Debt by 2023?

If you're hoping to become debt-free, you should read this. 

If you're hoping to become debt-free by 2023 -- or at least make a big dent in your debt -- you don't have long left to work on this goal. And, there's one potential move you could make that may make paying down your balance a lot easier (depending on your situation). You could take out a personal loan.

Borrowing more money may seem counterintuitive when you're trying to get out of debt. But, in some circumstances, it could be exactly the right move. Here's why. 

How a personal loan could help you repay your debt faster

Taking out a personal loan could actually help you pay off more of your debt by 2023 if your personal loan is at a lower rate than the debt you are currently trying to pay down.

See, if you have high-interest debt (like credit cards), chances are very good that a huge portion of every payment you are making is just being eaten up by interest. You may pay down very little of the principal because your financing charges are so high. So, all those payments you are working hard to send to your creditors may be doing very little as far as helping you progress toward your goal of becoming debt-free. 

If you can qualify for a low interest personal loan, you can change that debt from having a high interest rate into having a low rate. For example, instead of paying 17% annual interest on a credit card (or more), you could pay 8% or 10% or whatever rate you can qualify for on your personal loan. You then use the proceeds of your personal loan to pay off that expensive credit card debt.  

If, for instance, you owe $4,000 on one card and $5,000 on another, a $9,000 personal loan could free you from both of those loans. You'd have just one debt to pay and at a lower interest rate.  

Once you've reduced your rate, much more of your monthly payment should go toward actually lowering your balance so that you can become debt-free sooner. This can help you make a lot more progress on your debt payoff methods over the rest of this year and into next year. 

Is making this move right for you?

Refinancing your high-interest debt can be the right move if you can qualify for a new loan at a lower rate and if you won't extend your payoff timeline too much by doing so. You can use your new low interest personal loan not just to reduce the rate on credit cards, but on any kind of expensive debt you have, such as payday loans or medical debt. 

You can shop around and find out what rate you can qualify for without affecting your credit score to find out if this approach will work. You'll also want to be sure you can comfortably make the payments on your new personal loan, and that you're living on a budget so you don't end up charging more on your credit cards after paying them off. 

If you can get a new low-rate loan and can count on yourself to be responsible with repayment, there's no reason not to move forward with this strategy ASAP so you can pay off the maximum amount of your debt by 2023.