Paying off credit card with loan? Good idea??

SmartMonkey

Hi,
I have a €4000 on my credit card (AIB Visa) and am paying it off on the min direct debit (5%). Would I be better getting a loan (say 3000 over 12 months) and throwing that at Visa? (Math is not my strong suite:o)

bladespin

Definately, the difference in interest rates alone would make it worth doing.

(Same boat, paddling like mad)

homer911

Just make sure you cut up the credit card until the loan is paid off!

Toots

If you're looking for a loan to clear your CC it may well be a condition of the loan that you surrender your credit card, or else drastically reduce the limit. If you're only making the minimum payment on it now, then a loan would be the most cost effective way of managing it.

Long Onion

It is a question of degree - with the CC you only have to make the minimum payment, with the loan, you have to make your monthly repaments which will definately be higher.

From the point of view of sound economics, it would be best to take the loan and clear the card - €4k over 3 yrs @ 9%APR v's €4k on CC @ 19% APR. In so far as this is the case, it is a no-brainer.

Bearing this in mind, the reason that many of us get into bother with our cards is that we don't clear the balance each month and spend more than we can afford to. To answer the question you need to look at your own situation and how you ended up with the balance in the first place - if it is because you live beyond your means and can't resist that iphone/handbag/etc - then take the loan and cut up and cancel the CC (N.B. cancellation is important to avoid the government duty being applied again, you not realising and then ending up indebted again).

If, however, you feel the issue is that you can't make the minimum payment on the CC, then it is unlikely that you will be able to do so on the loan. In this case, I would advise you not to take the loan, to cancel the card and set up a DD or s/o to your card account for the mimimum plus €x according to your affordability, thus reducing the amount owed (albeit slowly) and keeoing your credit rating intact.

Obviously the latter option is the least economical, but unfortunately, the length of the road to least expenditure is usually determined by the extent of your disposeable income.

VB1962

"It is a question of degree - with the CC you only have to make the minimum payment, with the loan, you have to make your monthly repaments which will definately be higher.

From the point of view of sound economics, it would be best to take the loan and clear the card - €4k over 3 yrs @ 9%APR v's €4k on CC @ 19% APR. In so far as this is the case, it is a no-brainer.

Bearing this in mind, the reason that many of us get into bother with our cards is that we don't clear the balance each month and spend more than we can afford to. To answer the question you need to look at your own situation and how you ended up with the balance in the first place - if it is because you live beyond your means and can't resist that iphone/handbag/etc - then take the loan and cut up and cancel the CC (N.B. cancellation is important to avoid the government duty being applied again, you not realising and then ending up indebted again).

If, however, you feel the issue is that you can't make the minimum payment on the CC, then it is unlikely that you will be able to do so on the loan. In this case, I would advise you not to take the loan, to cancel the card and set up a DD or s/o to your card account for the mimimum plus €x according to your affordability, thus reducing the amount owed (albeit slowly) and keeoing your credit rating intact.

Obviously the latter option is the least economical, but unfortunately, the length of the road to least expenditure is usually determined by the extent of your disposeable income. "


Quoting LONG ONION

+1
This is soooooooo on the money - please take this advice.