Are the “personal loans” from banks good in the case of paying off credit cards?
Question by Seeker2008: Are the “personal loans” from banks good in the case of paying off credit cards?
You know those things like you get from the Discover Card company and lots of other credit card companies and banks that say they’ll loan you xx,xxx amount of money at x or xx % interest to use to pay off other credit cards? Are these worth it, or just another ploy to make money? Naturally, I know the bank is going to try to make money, either way.
I have two credit cards with a balance. One has about $ 7,700 charged on it, but is technically a no interest card until July of 2011. The other has a $ 5,700 balance on it from a single charge due to some dental work that I had done to improve my smile and basically invest in myself so I would be more confident and have that out of the way. That one has about $ 50+ worth of interest every month, unfortunately.
Currently, on both of these cards I exceed the “minimum payment” by far, usually paying a few hundred per month on each. c instead of going back and forth between two credit card payments. Or is it better to just pay them off as-is, on the cards? Has anyone ever completed one of these kinds of personal loans?
Right now I’m just curious about it and haven’t applied for one or anything. I have excellent credit and pretty good income, but I would imagine that the catch-22 would be that it is “too high of an amount to approve” for the loan (given the economic times, they would probably cite that I have “high balances on one or more cards” as an excuse – even if the loan is to pay off the cards and they would know that ahead of time) Even though that would be completely counteractive to their offer.
Has anyone done it?
Best answer:
Answer by Ernesto
If you can guarantee that the total interest from the debt consolidation is lower than your two separate cards, then maybe it would be better. However this kind of credit was notoriously at the middle of the credit crisis and spent 20 years swindling customers up to 2006 with fraudulent claims about interest rates (fixed for the first two years then fluctuating).
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Tags: Balance, Banks, credit cards, Discover Card, excellent credit, Interest Payment, minimum payment, Paying, personal loans, Single Charge
Personal loans tend to carry a high rate. Even if you could get approved for such a high amount, the interest may not be that much lower. Get these paid off ASAP.
If you have something you could use as collateral, you may be able to get a better rate than a signature loan.
The money they “loan” you is a cash advance. The interest is probably on the order of 25%. So if your credit card interest is lower (and it usually is), you’re better off not “borrowing” the money. You’re just converting a (relatively) low interest debt into a higher interest debt.
If you want to pay the cards faster, make whatever payment you’re going to make, then add the interest. So on that second card, add $ 50 every month. On the first one, just pay as much as you can. Payng that one off with money you have to pay interest on is going backwards.
(You have to pay off the “loan” every month, and the minimum amount will be a LOT larger that the combined minimums on your two cards.)
That was a long question *Smile*
Ok, there is no point in taking out a loan to pay off the $ 7700 zero interest card. Well not untill the zero interest period ends. Because it will just cost a lot of money.
You do not state the interest on your other card, but with the figures you stated you are paying about 9%.
I would very much doubt you could get (what is called a consolidation loan) for less than 9%.
The best plan is to just pay of the minimum every month on your zero interest card, and pay what you would normally have over paid, onto the card that is charging you interest. That way you save interest charges.
The first thing that you need to do, is to check how much interest you’re paying on your cards, because you’ll later need to compare this sum with the interest that’s being requested by the bank offering the personal loan. The amount of interest that’s charged for personal loans varies greatly, will depend mostly on your present FICO score.
If your credit rating’s not in great shape, then it’s likely that the interest on a personal loan will be higher than it is on your credit cards, but if you get behind on your credit card payments then the penalties build up fast, and so does the compounded interest.
no bank is going to give you an unsecured loan to pay off credit cards – especially for $ 13,000+
you are in serious trouble when that zero int rate disappears – even at ONLY 18%, you are looking at $ 115/month in interest that will start adding on and if your min pmt is 3% of the balance, that equates to $ 230 a month, and your balance only decreasing by $ 115 a month – adding the other card to that – you are probably looking at $ 350 a month in MINUMUM payments, which will take you many, many years to pay off