Loan versus credit card

Jaybee5

All,

I'm after a bit of advice/experience to help me decide how best to treat my credit card debt.

I have just under £19k on an MBNA CC (Limit = £19.1). I'm paying approx £350 per month but not really scratching the surface of the debt as i'm on a whopping 20% APR. I can manage these payments ok but can't really go above this amount.

I have received a loan offer from Tesco for £19k at 11.6% APR. Payments over 7 years = £325.

Does the loan seem a better option to everyone at this lower rate or are there any obvious pitfalls i'm just not picking up on?

Thanks all!

CLAPTON

debt at 11.6% is better than debt at 20%
however, if getting the loan allows the CC debt to rise again then its a bad idea

loopy.magic

Bit of a no brainer I would say, grab that loan offer while you can. I believe you will have a small cooling off period of time to change your mind.

The fact that you've been 'offered' this loan should mean you have a pretty good credit score, use the cooling off period for the loan to consider an alternative which is to switch the debt to a life time low interest credit card. Assuming you do have a good credit score should mean you can find and successfully apply for one of these.

Dabooka

Depends if you're going to cancel the card, or rack it up again. The boards are littered with posts by people who have allowed that to happen and end in real trouble.

Jaybee5

My credit score is pretty good. I have some big debts but I never default and earn well so I guess its all relative. I think you're right - if I sign the credit agreement on the loan I need to cut up the credit card at the same time. I'll look into the low interest credit cards too - thanks loopy.

CHR15

Jaybee5 wrote: »

I'll look into the low interest credit cards too - thanks loopy.

Why look at ANY cards?? You are only going to be £25 a month better off than you are now (although in a better position to clear the debt)

Avoid cards altogether, a loan doesn't change the past. You did manage to get £19k in debt with cards.

Cut it up and forget about paying extra money for everything you buy. Focus on ridding yourself of the debt.

loopy.magic

He should look into them for the simple reason that some life time balance transfer deals on credit cards have a lower interest rate then personal loans. It's just an idea worth considering.

Of course the point is well made that discipline and resisting temptation to spend on cards is key. However the first step is to lower as much as possible the interest you're paying.

Jaybee5

Fair point CHR15 - I too thought that the life time balance transfer deals may be a better option than a loan as I often get bonuses that I can use to reduce the debt which I didn't think possible with a loan. I've already reduced my debts by £6k in just under 3 years so doing my best.

I loved your point about 'paying extra for everything you buy' - thats absolutely spot on and worth me keeping in mind!