Bank offering loan instead of credit card

wheewheelysneakycat

Hi,

Every time I phone up my bank about anything they offer me a loan instead of my credit card. They say the loan will be cheaper to pay off because the interest would be lower. I have so far refused on the basis of general cynicism and suspicion. Now I am wondering whether I should go for the loan. But there must be disadvantages. What are they? I suppose it's only worthwhile if I would definitely pay it off by the end of the loan period. Can anyone share any thoughts? How do I work out whether it's worth it?

Fiddlestick

wheewheelysneakycat wrote: »

Hi,

Every time I phone up my bank about anything they offer me a loan instead of my credit card. They say the loan will be cheaper to pay off because the interest would be lower. I have so far refused on the basis of general cynicism and suspicion. Now I am wondering whether I should go for the loan. But there must be disadvantages. What are they? I suppose it's only worthwhile if I would definitely pay it off by the end of the loan period. Can anyone share any thoughts? How do I work out whether it's worth it?

There isn't nearly enough information here for anyone to help you.

Obviously a credit card is revolving credit whereas a loan is a fixed-term credit agreement, but quite apart from that we would need to know:

a) How much you are looking to borrow
b) What APR is being offered
c) Over what sort of term
d) What you need the money for
e) What your income is

Without the above, it's going to be nigh-on impossible for anyone to tell you if the loan is "worth" it or not.

wheewheelysneakycat

Hi Fiddlestick,

Thanks for your reply. I appreciate people can't tell me whether it's worth it or not without more specifics - I was more looking for help on what things I should be thinking about in order for me to work out whether it's worth it. What factors should people take into account when deciding between a credit card or a loan? That sort of thing.

masterlumps

wheewheelysneakycat wrote: »

Hi Fiddlestick,

Thanks for your reply. I appreciate people can't tell me whether it's worth it or not without more specifics - I was more looking for help on what things I should be thinking about in order for me to work out whether it's worth it. What factors should people take into account when deciding between a credit card or a loan? That sort of thing.

Fiddlestick wrote: »

There isn't nearly enough information here for anyone to help you.

Obviously a credit card is revolving credit whereas a loan is a fixed-term credit agreement, but quite apart from that we would need to know:

a) How much you are looking to borrow
b) What APR is being offered
c) Over what sort of term
d) What you need the money for
e) What your income is

Without the above, it's going to be nigh-on impossible for anyone to tell you if the loan is "worth" it or not.

these are the factors

david39

You should also consider that the loan would be for a fixed term with rigid monthly payments.
Overpaying the loan (by extra on the payments or a lump sum) would not appreciably reduce the amount you pay as the interest is loaded onto the loan at the time it is set up.
The interest will be at a fixed rate.
There is also the danger that, having cleared the debt off your cards, you might then start using them again and rebuilding another debt alongside the one you have just transferred to the loan.

In the case of cards, you can alter the payments from the minimum payment upwards, so you can pay off the debt as soon as you are able. With interest being added monthly, albeit generally at a higher rate than a loan, then you can significantly reduce the interest you pay by paying it off more quickly.

Finally, in the case of cards, it is possible to balance-transfer loans between cards and get very low interest rates, although you do have to factor in the one-off charge that is made at the time of transfer - remember that if they say it is a 3% charge for a transfer on a 6-month deal then that effectively is a 6% per annum charge.

MikeR71

You wil start paying interest on a loan straight away. But on a credit card you have usually a month or so before they add the interest.

CLAPTON

presumably you have credit card debt that you don't pay in full each month

what you need to be thinking about is how to pay back this debt and live within your means

work out a proper budget and look to reduce your CC debt each month until its gone
then start to save so you are never in debt again (except mortgage)
a good format is
http://www.makesenseofcards.com/soacalc.html