Hi, I have an outstanding debt of around $10000 in credit card debt. Now I am want to find the best possible way to pay my debt, better my poor credit score and to lower my monthly payments.
Should I attempt to get an unsecured personal loan or get a line of credit. Does anyone know the major differences and which is better to fit my needs? Thank you for your time.
Dennis
2007-03-06 09:58:53 · 4 answers · asked by Dennis 2 in Business & Finance ➔ Credit
A personal loan works like a car loan without the car. You receive a fixed amount and make fixed payments for a set amount of time.
A line of credit works like the credit cards, but is usually secured by an asset such as your house. You are given a credit limit and you can borrow up to that amount and pay anywhere from the minimum to the full amount each month.
I recommend against both. Simply moving the debt around doesn't get anyone out of debt. If you can pay of the loan without incurring new debt on the cards. you can pay off the cards directly.
2007-03-06 11:44:19 · answer #1 · answered by STEVEN F 7 · 1⤊ 0⤋
A personal loan (also called a signature loan) gives the lender no security that they will be paid back. They also cannot verify that you will do with the money what you say you will. They are looking at your debt as both the large credit card bills AND the personal loan. You usually need very good credit to qualify for these loans.
A line of credit is secured by collateral, usually your home. You use the credit as needed, and as you repay part of what you borrowed, it is available to borrow again. It is a little easier to qualify, but if something happens to your income, you could lose your house.
If you have a house to secure the line of credit, another option is refinancing. You may be able to get a better interest rate than a line of credit, the lender will make sure your cc bills are paid at closing, and you get all the interest tax deductible.
2007-03-06 10:11:42 · answer #2 · answered by Brian G 6 · 0⤊ 0⤋
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2016-09-28 03:23:51 · answer #3 · answered by Katharine 3 · 0⤊ 0⤋
Line of credit may be taken against your house. The payments are tax deductible, a good thing. Interest rate is likely reasonable. You don't pay, they take your house. You may not qualify for an unsecured personal loan. Interest rate will be higher.
2007-03-06 10:04:41 · answer #4 · answered by Venita Peyton 6 · 0⤊ 0⤋