Loan to pay off credit card

  • Posted by a hidden member.
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    Aug 18, 2010 9:53 PM GMT
    I was speaking to my bank today about my credit card, and they suggested applying for a loan to pay off the credit card, saying that it will work out cheaper as the APR will be lower. Is this a good or bad idea?
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    Aug 19, 2010 1:30 AM GMT
    if it lowers your rate of interest and pays the total off sooner, thats very good. just control spending so you become debt free not shifting it and still run up the credit cards....


    also make sure of any hidden fees that may be added to the bank loan....
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    Aug 19, 2010 1:35 AM GMT
    robb9591 saidif it lowers your rate of interest and pays the total off sooner, thats very good. just control spending so you become debt free not shifting it and still run up the credit cards....


    also make sure of any hidden fees that may be added to the bank loan....


    This is the same advice I would have given. Especially the part about making sure that you are not just moving debt around. Use this strategy as part of the plan to pay off your debt. Why pay someone (interest) just to carry a credit card balance?

    Actually do the math and see what it would cost you to pay off the debt on the credit card and compare it to how much it will cost to pay off with debt using the credit card. Depending on the size of the debt and the interest rate you could be saving hundreds or thousands of dollars over the period you are paying off the debt. Use this money that you would save as motivation to get debt free.

    Sometimes people pay hundreds or thousands of dollars in interest and fees just to carry a credit card balance. Ouch. What else could you do with that $500 (or whatever) this year?
  • HankFit247

    Posts: 205

    Aug 19, 2010 1:39 AM GMT
    robb9591's advice is Spot On.

    Provided the CC has no annual fee, don't close the account. Just cut it in half, so you can't physically use it. Keeping the account open will help your FICO score. If it does have an annual fee, negotiate for No Annual Fee the month before it 'hits'. No Go, close the account.

    Secondly, don't pay off CC in 1 lump sum. Divy the loan up across 3/4 payments (buy cashiers checks from your bank so that the funds are aleady spoken for...)

    Later you can call your CC co, and 'ask to lower the interest rate' if they say no, then 'threaten to close the account.'

    Moral to the story: Showing access to Revolving Credit, while not actually using the card helps your FICO.
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    Aug 19, 2010 1:45 AM GMT
    BH_nexus saidI was speaking to my bank today about my credit card, and they suggested applying for a loan to pay off the credit card, saying that it will work out cheaper as the APR will be lower. Is this a good or bad idea?


    booze-pouring-fail.jpg
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    Aug 19, 2010 1:47 AM GMT
    In addition to the above, confirm whether the rate for the personal loan is fixed or variable (prime +). If it's variable and good now, it could rise during the life and you could end up worse off.
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    Aug 19, 2010 1:54 AM GMT
    I went from 29% on my CC to 11% fixed by doing this, and it automatically deducts from my bank account every month on a pay day so I never even see the money (so I don't miss it).

    Only have $1400 more to go, and 2 more months rent free (gotta love long term job assignments where they pay my rent!)

    But like the others said, don't just shift it to the loan and then re-max out your card. I don't even take that card out with me anymore. I take my debit and one credit card (in case of major emergencies) and only use my debit. If I don't have the money, i don't spend it.

    Took me 4 years of charging up my CC to figure that one out.
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    Aug 19, 2010 7:57 AM GMT
    Thanks guys great advice