Watching Your Wallet: Using personal loans to manage debt

FRESNO, Calif. (KFSN) -- As economic pressures fuel a surge in personal loans, experts say the so-called flexible financial tool is only a solution to debt if used responsibly.

"If you use it well, you can knock out that credit problem," says Rod Griffin, Senior Director of Consumer Education and Advocacy for Experian. "If you don't, you can put yourself into deeper difficulty."

According to Experian, 38% of U.S. consumers now have a personal loan, and the total number of personal loans on credit reports has reached 67.5 million.

That's a 7% increase from the year prior.

"That number is growing as well, so we're seeing more interest in personal loans," Griffin said. "We're seeing them used to effectively consolidate credit card debt in many cases."

Griffin says most of these personal loans are to pay off credit card debt.

"Credit card debt, as we know, is growing," he said. "We know that interest rates are now often in excess of 23%, 24%, 25% on a credit card, and so a personal loan with an interest rate less than 20% in high teens will reduce your payment."

The risk is that you'll start to use the credit card again to make other purchases.

"It can be a great tool," Griffin said. "It can save you money if you use it well. You need to be careful of that temptation to use the credit card because that will defeat the purpose."

You also want to consider the impact any hard inquiries have on your credit score before applying for any forms of new credit.

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