2006-12-27 05:50:16 · 15 answers · asked by sugar1973 2 in Business & Finance ➔ Personal Finance
In my opinion (former personal financial consultant and MBA) it is advisable to take out a loan to pay off your credit cards if the following are true:
1. The loan is from a reputable financial institution such as a U.S. bank or credit union.
2. The interest rate on the loan is significantly less than the rate on the credit cards.
3. There is an acceptable repayment period and you can schedule automatic payments either as deductions from your existing account with the bank or direct deposits from a paycheck, etc.
Many banks and credit unions offer "debt consolidation" counseling at no cost. They also offer specific debt consolidation loans with reasonable payments and schedules for payment.
There are also other commercial debt consolidation firms that advertise debt consolidation services but may add fees or charge for their services in some other way. Be careful to examine the entire agreement before signing up with one of these.
Also, if you own a home, you may be able to get a "home equity line of credit" from your bank or credit union. This type of loan is based on the equity in your home. Under certain conditions the interest on these loans may be tax deductible.
2006-12-27 06:17:25 · answer #1 · answered by cvc45137 1 · 0⤊ 0⤋
Debt consolidation loans are not uncommon, and even desirable under some circumstances. The determinign factors should be:
1) what your new monthly payments would be versus your old monthly payments;
2) how long you'll be making the loan payments as opposed to how long you would be making the credit card payments;
3) the interest rate of the loan versus the collective interest rates of the credit cards;
4) what collateral (if any) is required for the loan (i.e. house, car, etc)
The other thing to keep in mind is that most loans do not have any flexibility in the payments (such as "minimum payment") and there is often a penalty for paying off the loan early if you're trying to.
Learn as much as you can before signing anything.
2006-12-27 13:58:36 · answer #2 · answered by Anonymous · 1⤊ 0⤋
Only if you are really behind and they are hurting your credit badly. If not, then just keep paying on them. Keep paying on them can help your credit rating. Paying them off and getting a new loan might actually hurt your rating for a while.
The only way most banks would give a loan for that is if you use something for collateral (usually mortgage). This is NOT a wise move.
Your best bet would be to actually pay them something (even a little bit helps) and/or seek out the debt counseling places (that do not push you into debt consolidation loans) they really do work for a lot of people.
2006-12-27 14:22:33 · answer #3 · answered by joannaserah 6 · 0⤊ 0⤋
Doing this won't solve your problem, just moves it. Pay off the credit card as fast as possible. It sounds like you need a budget. Put all extra money per pay on to the credit card, you may be surprised how fast it gets paid off.
Read: The Total Money Makeover by Dave Ramsey
2006-12-27 14:42:59 · answer #4 · answered by mldjay 5 · 0⤊ 0⤋
No.
Often you can take loan against your home at lower Interest rate & pay off the Cards.
Problem is, since you got into trouble running up debt in the first place, why do you think paying off the cards now will be the end of it ?
All that will happen, is you run up more debt on the Cards, and then they foreclose on your home ...
Cut the cards up instead. Once you stop spending you will be supprised how quick you pay them off.
2006-12-27 14:02:18 · answer #5 · answered by Steve B 7 · 0⤊ 1⤋
Theres a decent way to go out about take out a 0% credit card to pay it off, but make sure you meet the repayments on th 0% and you could clear your debt but make sure you budget properly to make the payments because you wont need a credit card if you dont spend more than you earn. Try cutting other expenses like cutting your cable for a few months, or mobile phones switch it off etc just to get back on track.
2006-12-27 14:00:28 · answer #6 · answered by Ermmm 2 · 0⤊ 1⤋
If I were you I´d get financial advice, maybe if some bank can give you a loan that has less interest that the credit card then it might be the better option.
Credit cards are money eaters, GET RID OF IT:!!!
2006-12-27 13:56:31 · answer #7 · answered by Ganymede 3 · 1⤊ 0⤋
If the interest rate on the loan is less than your credit cards, it is definitely the better option.
2006-12-27 14:12:09 · answer #8 · answered by Venice Girl 6 · 0⤊ 0⤋
Take out a 0% interest loan on your life insurance policy, OR take out a 2nd mortgage on your house. Any other types of loans wont work.
2006-12-27 13:52:09 · answer #9 · answered by Anonymous · 0⤊ 1⤋
don't use equity in your house!!! second mortgages are a terrible way to pay your unsecured debt because you are essentially making it secured debt. That means you'll never be able to sell your house until the market appreciates to a point where the balance that you have paid down is less than the appreciated rate.
The best thing to do is transfer balances to lower interest cards until you have them paid down. the key is to create a payment schedule and stick to it. Don't use the cards that you transferred the balances. Lastly, if you get a tax return, use the entire thing to pay down that balance.
Good Luck!!
2006-12-27 13:55:12 · answer #10 · answered by bzqqsq 3 · 2⤊ 1⤋