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Personal Loans Offer Discipline for the Credit-Phobic

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Feel like you lack the discipline to pay down your credit card debt? One option is to borrow money to pay back the money you borrowed, with a personal loan. NY1's Tara Lynn Wagner filed the following report.

Americans borrow money in all sorts of ways—mortgages, auto loans, student loans and of course, credit card debt. Another product you may not hear about as often, though, is a personal loan.

Unlike a credit card, where you can charge up to a certain limit, with a personal loan you are given a lump sum of money upfront along with a schedule for paying it back. PNC Bank's Daniel D'Amico says this can really help a client budget.

"You know, they pay it back at a specific amount each month at a specific time. They don’t need to worry about what different balance might be at the end of the month. They know what their balances are," D'Amico says.

You'll also know what your interest rate is, since that's locked in, and you'll know exactly when you'll be done paying it off since the loan is given for a set period of time—48 months, 72 months.

Again, that's different from a credit card where you can revolve your debt for decades.

"So there’s no pressure to pay the loan off and if you’re not a disciplined person you can pay down your credit card debt, run it right back up again, and it’s just an endless cycle. So, an installment loan—if you want some discipline, that personal loan could help you with that," says credit card analyst Jeanine Skowronski.

The money can be used for a number of things—to pay off a large medical bill or emergency home repair or, on the brighter side, fund a major purchase like an engagement ring.

"You can get a wonderful gift for a loved one or set up a wonderful wedding or go on a wonderful trip," D'Amico says.

It can also be used to consolidate debt and pay off high interest credit cards, but only if your credit score is high enough to get you a low interest rate.

Skowronski says when you start your research, you'll likely see a range.

"The low end is probably a little bit under 7 percent, but then the high end will be around 36 or 39 percent, which is really high, and your rate can fall anywhere in between there, depending on how good your credit is," Skowronski says.

If you do get a personal loan, consistently making on-time payments can actually boost your credit score, but while there are benefits to this banking product, Skowronski warns it is still a loan, and a loan means debt.

"At the end of the day, a debt is a debt and you always want less debt than more debt. So if you’re going to take these loans out it should be because you need it," Skowronski says.

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