Loan To Pay Off Credit Card Debt

I recently got my tax refund in the amount of $3,000. we have a car loan with about $5,400 remaining and $5,400 in credit card debt. we want to pay everything off so that we can purchase a house next year and want to improve our credit score. which should I pay off?

go with the one with the higher interest rate.

2007-05-07 06:27:23 by Stan J

"Should I take out a loan to pay off credit card debt?" Credit Expert John Ulzheimer ( www.johnulzheimer.com ) answers your personal ...

I have about $10,000 in credit debt on 3 credit cards. I don't know much about loans so can you walk me through the process? Would I be better off just paying the loan? How does this work?


Any advice is appreciated. Thank you

Debt consolidation loans, when available, often have interest rates that are dramatically lower than credit card interest rates (This is in large part due to the fact that credit card interest rates tend to be so high). If you're going to bother with a consolidation loan, the interest rate should be lower than the credit card rates.

The process--and what may be available--however, varies from bank to bank. You should talk to your bank, and see what options they have. Some offer loans. Some offer a new, low-interest credit card for balance transferal. The latter can be sticky. Some banks even have investment and/or credit counselors, which can be a good resource. If you have more than one bank, shop around. If you happen to belong to a credit union, they often have better deals for their members than regular banks have for their customers.

It's important to note that when people clear their credit card balances, they often use that as an excuse to spend more--even if they still have the debt. If you avoid this pitfall, a debt consolidation loan with a lower interest rate can be a good way to save money in the long run. Obviously, you should be paying more than the minimum due if at all possible (regardless of whether you're paying to the cards or paying off a loan to consolidate the debt), as much of that goes towards interest.

If you don't end up going the loan route, you can (should) try asking the credit card companies to lower the interest rate on your cards. They may say no, but it never hurts to ask, and can save a considerable amount where large amounts of debt are concerned.

Another tip to reduce debt is to pay more frequently--even if you're ultimately paying the same amount. Credit card interest compounds daily, so paying half of your payment at the middle of the month and half at the end of the month is more effective than paying the entire thing at the end of the month. If you can pay 1/4 (or more) weekly, that's even better.

There are also a number of tricks to paying down balances. Paying down the highest interest debt is the most optimal, but if you need a psychological boost, you can use the debt-snowball method, which puts extra money towards the smallest balance first, paying off an entire card as early as possible, and then rolling the money you were paying towards that card into the next smallest balance. This, while not optimal, can be very helpful for people who feel mired in debt.

2009-08-31 14:47:10 by ::<3::

Price: $9.95 $9.95

I have around $2500 in credit card debt which I want to pay off and have a clean slate..is it wise to take personal loan from a bank to do so? I am a little confused on what is the best way out of this..

Only if you can get a lower interest rate. Calculate out how much you can afford to pay on your card per month, by how many months it would take to pay it off. Then, ask about a loan, what your interest rate would be, and what your payment would be. Figure out which one actually costs more, and last longer.

In theory, a personal loan will have about half the interest rate as a credit card (pending your credit score), but the payments are usually a lot higher. Can you afford to pay $150 per month instead of $50? If you can, and you'll stop spending on the credit card, then it's a good way to go. If $50 a month is stretching your budget (or whatever your payment is), then stick with the credit card. You'll have more leeway for smaller payments than with a personal loan.

Also, think about your liquid credit. If all of your credit is absorbed in this card, you may not have enough to obtain a personal loan. Talk to a banker or financial rep you trust. Ask them to help you weigh the pros and cons.

2008-12-30 08:34:01 by musicfan19

Price: $5.95

I am expecting a student loan refund within the next couple of weeks. It is a Federal Stafford Loan. I am wondering if it would be okay to use it to pay off credit card debt. I would be able to completely eliminate my credit card debt with it, and it would really help lift some extremely high interest rates off my shoulders.

Any input would greatly appreciated!

I would say 'yes' you can. I didn't have to account to the financial aid office on how I spent my student loan refunds but I would like to tell you to keep this in mind. Credit card debt is an unsecured debt that if you had to----you could file bankruptcy on the debt if your income was within reason and what is allowed depending on the state you live in. However, STUDENT LOAN debt can never be discharged in bankruptcy.... I shouldn't say never, but it is very, very, very hard to do. It's as if your stuck paying for student loans until your old or die, haha... So why would you wanna borrow more money that your basically never going to get out of paying and paying it on a debt like credit cards? So I just don't think you should take your student loan to pay for a debt like that. But the one thing you didn't say was how MUCH credit card debt you had? If it is only like $500 - $1000, I would say go for it and pay the debt off.... Then, CUT UP that credit card or those credit cards and don't use them again... Credit cards will get you no where you wanna be... If you keep using them, they will only bring you many sleepless nights... Although I gave a long response, I really think the answer comes down to the amount of debt owed.... If you can pay it off without a large chunk of student loans... I say go for it, you will sleep better in the end... But don't be 'borrowing from Peter to pay Paul.' This won't solve anything in the end.... Your just shifting debts from one place to another and in the end............. don't forget------- They have to be repaid!!!!!!

2009-11-02 18:00:07 by jaycrazy

This asumes that the balance and the interest rate are the same

It depends a lot actually. Better for what?

Both are generally unsecured and are the same amount of risk for other creditors. If you're looking to do something big (tuition, home improvements, etc.) I would put it on personal loan.

The plus side to that is that you do pay off the loan in a set amount of time because it's a set amount per payment. That is different from the credit card because you can pay whatever amount you want if it's at least the minimum. Interest rates on credit cards are also able to fluctuate more that personal loans allowing for problems if they go up.

2008-02-17 13:50:39 by Kevin W