credit cards versus loans

yobysteecs

I have an existing loan and existing credit card, both have roughly same amount on them, i'm going to pay one of them off in full with savings. The credit card has a lower rate than the loan due to it being a balance transfer therefore financially that would be best option, however how does this affect my credit rating ? i.e What i mean is, does the credit rating look on you more preferably if you have debt on either a loan or a credit card ?? or doesnt it matter ?

advice would be appreciated.

Cheers

dylanuk

I'm not really sure how it affects your credit rating - if it would affect it that much anyway.

I do agree that you should pay off (and this is a golden rule of thumb) the highest rate balance first - so your loan.

Also, the other benefit of leaving the debt on the credit card is you'll have more options to balance transfer again to another deal.

The only downside is loans tend to be fixed rate, so if you can't transfer again at the end of your current credit card offer you'll be on a variable rate which could get jacked up.

I'd be thinking how likely you are of getting a low rate for life balance transfer credit card for when your current deal ends on the credit card.

If you know you're unlikely to get another deal, think about how much your standard interest rate is going to be - if it's a lot higher than the loan, maybe paying off the credit card is best?

Lots of variables really, so it's hard to say.

CannyJock

yobysteecs wrote: »

does the credit rating look on you more preferably if you have debt on either a loan or a credit card ?? or doesnt it matter ?

Makes little difference. I'd do whichever saves you most in interest.

Bear in mind though, that once a credit card is repaid in full, you can still continue to "use it" each month and pay in full to avoid further interest while continuing to report a good ongoing payment history to help build your credit rating.