Bank loan or credit card

loveandlight

Is it better to take out a bank loan to clear credit card debt and then get rid of the credit card or just keep paying down the credit card?

katy_ann

Can you get a 0% balance transfer credit card? Personally I wouldn't take out a consolidation loan to clear a credit card, if you cant get a 0% card then I would just make extra payments to the normal card

Trajal

Depends on the interest rates:

Scenario 1
Get lower % loan - Pay off Credit Card ; Destroy Credit Card - pay off loan = cheaper.

Scenario 2
Get same or higher % loan - Transfer Cred Card debt ; Destroy Credit Card - pay off loan = more expensive.

Scenario 3 - THE NIGHTMARE SCENARIO
Get loan - Pay off credit card ; Don't destroy credit card - Pay off loan, end up putting xthousand back on Credit Card and end up owing huge amounts on both...

Long story short:
If you can get a loan to pay off that credit card, make sure to close the credit card account and destroy the card to remove any temptation otherwise "I might need it" will turn into "I want it" which will turn into misery of years more owing money.

Savings are much cooler than credit.

ValHaller

Pay off the credit card debt where it is. If you lose your job, there is far less money to find each month to keep your record clean.

loveandlight

Thanks guys. I have no intention of consolidating debt. I have a couple of credit cards on high interest rates and a couple at lower rates so from what you say it will be better to transfer the higher rate ones to bank loans at cheaper interest rates. I will transfer them one by one into bank loans instead then so each one gets paid off a lot quicker.

I am paying very high interest rates on the two higher rate cards (24.9%) due to the card companies jacking up the rates on them over time for non use. I won't be able to get any 0% cards due to the amount of debt on the cards even though my credit file is blemish free. I have no problem with cutting the cards up once I get a bank loan as I never use them anyway.

moohound

Don't forget you can refuse a rate hike if you then stop using the card, there is some info here somewhere on it but I am rubbish at posting links.

Trajal

loveandlight wrote: »

Thanks guys. I have no intention of consolidating debt. I have a couple of credit cards on high interest rates and a couple at lower rates so from what you say it will be better to transfer the higher rate ones to bank loans at cheaper interest rates. I will transfer them one by one into bank loans instead then so each one gets paid off a lot quicker.

I am paying very high interest rates on the two higher rate cards (24.9%) due to the card companies jacking up the rates on them over time for non use. I won't be able to get any 0% cards due to the amount of debt on the cards even though my credit file is blemish free. I have no problem with cutting the cards up once I get a bank loan as I never use them anyway.

Sounds good then, get the loan, pay off the cards, cut up the cards (not forgetting to ring the company up to close the accounts!) and pay off the loan.

Done!