Credit Card or Loan

wisebazza

Could someone please advise whats the best route to take.
I have 2 credit cards amounting to about 7k, and are making the min payment, about £180pm.

A/ Would it be cheaper to get a loan to pay these off, then just have the loan to deal with?

B/ Or try and pay a little extra each month on each of the cards (No savings to bail out)

ianprice_2

I would get a loan, because the interest rate would probably be cheaper I guess? Your bank may be able to help you and give you an idea of how much you would pay fo the loan (compared to the credit card)

I'm paying a loan back and credit cards doh!

Tixy

Depends on the APRs on your cards. On whether you could get a loan and a what APR. How flexible you need your payments to be able to be (if some months you can afford to pay off a lump sum then it might be better to stick with cards unless you can find a loan that allows overpayments).

Might be worth looking at the snowball calculator first to see how quickly you can pay them off by increasing your monthly payments to £200 per month (or whatever you can afford) - http://www.makesenseofcards.com/soacalc.html

drew2k9

i'd go with B every time.

no sense in borrowing a larger amount of money to pay off existing debts, if you can afford even a bit more than the minimum then do it, and start by paying more off the card with the higher rate of APR, and keep paying minimum on the other one.

MFWannabe

Hi
You would be better off trying to get another 0% or low life of balance credit card to transfer these debts to. Depends how much your current APR's are and your income?

12bdebt3

If you ask banks for £7,500+ the APR seems to halve to get a loan.

The 2 main advantages of having a loan over a credit card that I can think of off the top of my head:

1. The interest rate is normally cheaper than a credit card on a loan of that size.

2. Once you pay off some of the credit card then that credit becomes available and you might be tempted to spend it. When you have a loan there is no available credit for you so no temptation.

pamelamalcolm

I think the best idea is to get a loan.

drew2k9

arrontdep wrote: »

If you ask banks for £7,500+ the APR seems to halve to get a loan.

The 2 main advantages of having a loan over a credit card that I can think of off the top of my head:

1. The interest rate is normally cheaper than a credit card on a loan of that size.

2. Once you pay off some of the credit card then that credit becomes available and you might be tempted to spend it. When you have a loan there is no available credit for you so no temptation.

but the loan is to pay off the credit cards is it not? then that credit WILL become available again, and the OP will have the debt of the loan, and the opportunity to double their debt as the credit cards will be available to spend on again.

bad idea getting a loan i think. stick to paying off what you have now, don't try the quick fix, getting debt to get rid of debt doesn't make any sense!

telboyo

arrontdep wrote: »

If you ask banks for £7,500+ the APR seems to halve to get a loan.

The 2 main advantages of having a loan over a credit card that I can think of off the top of my head:

1. The interest rate is normally cheaper than a credit card on a loan of that size.

2. Once you pay off some of the credit card then that credit becomes available and you might be tempted to spend it. When you have a loan there is no available credit for you so no temptation.

The problem with number 2 is that you will still have he CC and after a few months of taking the loan out and clearing the card you say "I'll just buy this now and pay it all back next month", before you know it, like magic really you have 2 full credit cards and half of the loan repayments to make.

Tixy

arrontdep wrote: »

If you ask banks for £7,500+ the APR seems to halve to get a loan.

The 2 main advantages of having a loan over a credit card that I can think of off the top of my head:

1. The interest rate is normally cheaper than a credit card on a loan of that size.

2. Once you pay off some of the credit card then that credit becomes available and you might be tempted to spend it. When you have a loan there is no available credit for you so no temptation.

One advantage of a credit card is if you have a flexible income or flexible amount available for debt repayments. With a card you can pay any large sums directly to the balance (eg if you receive a bonus from work) and equally if you have a bad month with unexpected expenditure you can just pay the minimum payment that month. Most personal loans these days don't allow for overpayments.

JohnVolker75

That really determines on what you think you can handle. On one hand, a Loan will eliminate the constant recurring payments and possibly have a smaller interest rate. On the other hand, paying CC payments is a much smaller outlook in the long run. Would you rather worry every month to scramble up £180pm, and not have to worry about 7k being held over your head, or the other way around? either way, you will have to generate the money somehow. it just depends on how you want to look at it.