Loan To Pay Off Credit Card Debt?

Discussion in Loans started by MLNewkirk • Aug 15, 2015.

  1. MLNewkirk

    MLNewkirkNew Member

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    I have 3 credit cards that I am having a very tough time keeping up with. Basically, the interest is so high and late fees are even worse that my cards are constantly maxed out. I haven't even used them! I thought about getting a loan to pay them off and to consolidate my payments as well. Has anyone done this? Would you recommend that I try this out?
     
  2. Theo

    TheoWell-Known Member

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    You should consider it then at least the interest will be fixed. Perhaps there is a balance transfer you could do instead as well? I know most companies will try to fix a rate for you and some can stop the interest rate rather than add on charges if you show them just cause and aren't spending.
     
  3. Lushlala

    LushlalaWell-Known Member

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    I'm really sorry to hear that you're in this situation. BUT I'm a little confused. I have never known credit cards to accumulate interest if you've not used them at all? I thought the interest and late fees didn't kick in until you'd started using them? At least that's always been my experience. Like Theo says, maybe you could see if you could get them to fix the interest, but not all of them will agree to it.

    If you're eligible for it, you could also see if you could consolidate them and transfer to a card with zero interest for the first 12 months. To be honest, without trying to preach, I'd discourage against credit cards. But if you must go that way, I'd say stick to just one and cut up the other two. It should be fairly easy, especially as you say you don't even use them. I speak from experience and as we speak, I've sworn off credit cards.
     
  4. MLNewkirk

    MLNewkirkNew Member

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    Thank you Theo and Lushlala for your input! I will definitely check into finding one with a fixed interest. And I'm with you, Lushlala, on getting another credit card. I absolutely refuse to do so. I feel like if I do, then the hole that I'm in will only get deeper. As for interest accumulation, I've talked to a friend about it and she was confused by it as well but for some reason the interest just piling up. But I think it may because of the late fees or even my bank. Or the way that my bank does things. It's the late fees the kill me because they not only zero the card but it goes negative as if were to go negative in a regular bank account. I try to make my payments on time but I have been having difficultly bringing in a steady income. I've applied for so many jobs but all I get out of them are rejection letters.
     
  5. Lushlala

    LushlalaWell-Known Member

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    It sounds like a horrible place you find yourself in, and yes, I can see why you'd shy away from getting another credit card. But I'd equally be wary of getting a loan to consolidate the cards. The credit card I meant was the type that you pay zero interest usually for the first 6-12 months, only from the standpoint that your current debt would in essence be frozen in place and not get any bigger. I do wish you the best of luck getting this sorted. I know how desperate things can get when you can't find a job.
     
  6. purplepen88

    purplepen88Active Member

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    If I were you I would get a line of credit from the bank to pay off the credit cards. The interest rate on a line of credit is considerably lower than on credit cards which are around 19%. With a line of credit you can just pay the interest on it each month or you can pay more but at least you have that option. No need to pay more interest charges than necessary. Good luck to you.
     
  7. Corzhens

    CorzhensWell-Known Member

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    I think it is a smart move to get a loan in order to pay off the credit card balances. But be sure that the loan has a lower interest rate so you can save even a little. My sister had that problem before when her spending got out of hand and her credit card balance reached the sky. What she did was to take out a loan using their car as collateral. She had paid all her debts in 2 year's time.
     
  8. Onionman

    OnionmanActive Member

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    Yes, definitely seek out cheaper forms of credit to pay off more expensive ones. If you don't you'll simply going to be on a downward spiral with this. I'm assuming that you will still be able to get a loan at a decent rate of interest? Hopefully your credit is still decent enough. Bottom line: keep it simple, get a line of credit and preferably not another credit card (even 0% interest cards have hidden considerations that a lot of people don't factor in), and put in place some proper disciplines.

    And don't just look at your debt situation, look at your whole approach to money. Money doesn't necessarily get rid of money problems. In other words, even when you do clear up these debts it doesn't mean that the approach to money that got you into the situation in the first place won't get you back into it again in the future.
     
  9. mccanono

    mccanonoMember

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    I would definitely recommend applying for a loan instead to pay-off all your credit card balances as I am also in a somehow similar situation. One of the advantages of doing so is that you'll be able to avoid incurring late fees. Additionally, if you find a good institution to get a loan from, the interest rate is usually lower than those with credit card companies. You'll also have the flexibility to choose on how long you want to pay for the loan. So yeah, go ahead and don't be afraid. :)
     
  10. Lushlala

    LushlalaWell-Known Member

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    In my honest opinion, getting a loan would only work if you were to consolidate your debts and ensured you could stick to the boundaries. You really have to be disciplined and remember the reason for which you secured the loan in the first place. Sadly, some people aren't, and end up back at square one. That's the reason I'd opt for a zero% interest credit card like Egg, where you wouldn't pay interest for 12 months.
     
  11. remnant

    remnantActive Member

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    While its a good idea to pay off a credit card debt due to the high interest rate, I wouldn't recommend anyone to solicit for a loan to pay for the same. It would be better to dispose off redundant assets in the house or elsewhere and then sell or auction them to pay for the same. In case one has to borrow a loan from a bank to pay for this, choose one that offers interest free loans.
     
  12. oportosanto

    oportosantoNew Member

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    Credit cards are something crazy and that is why we need to keep a close eye on them. Look at the situation you mention, you need to get a loan to pay off credit cards. So the thing is, why not get a loan in the first place so that we can buy what we need? If we do that I believe we can control interest rates better.
     
  13. Pat

    PatWell-Known Member

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    It does sound like getting a loan to pay off the cards and only have one card and one payment that you can control is a good move. Hope it works out for you. Try to use cash till you get back on your feet.
     
  14. Zyni

    ZyniWell-Known Member

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    Once you end up in this hole, it is very difficult to climb out. They keep adding fees (as well as charging interest on those fees) and can even up your interest rate (just when you need it the least). You might want to try a debt consolidation program, after doing lots of research to make sure it's legit.

    If you can still get a low interest loan that would be my choice. Make sure you can afford the payment, which should be do-able, since it's probably less than the total of all your cards. Use it to immediately pay off those credit cards and make sure that you have cancelled them once you pay them off, so you don't end up owing any recurring fees (annual fee, etc.).

    I would suggest that you don't just make payments on the credit cards with your loan, or you might just end up back where you started. Pay them off and be done. Then make sure your loan payments are on time, so you can begin to rebuild your credit.

    Best wishes.
     
  15. Jamille

    JamilleActive Member

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    In this situation, getting a loan to consolidate the balances of three credit cards seems like a smart option most specially if the interest rates are lower than what you are paying presently. A new loan will mean fixed payment on the principal and interest whereas if you go on with your credit cards, minimum payments are just good enough to offset the monthly interest charges. The scheme, however, will only work for you if you cancel and stop using your credit cards. Some people fall deeper into the debt trap when they treat the freed up balance as available credit and start spending based on this assumption. If you let that happen, you'll end up in a worse financial situation.
     
  16. Natasha0717

    Natasha0717Active Member

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    Do you mean you haven't used them in a while because you owe too much on them? Or do you mean you haven't used them at all. Because if you haven't even used them, I don't see how there could be late fees or anything like that...you shouldn't owe anything on them. I've never owned a credit card myself. A long time ago, my Mom told me I should never be allowed to have one, so I never got one. :D:D Even now, after all these years, I just never got one.

    My credit in general isn't all that great, I owe on some small loans and stuff...nothing big-time, but I guess my Mom saw wayyyy ahead of time that I was not the kind of person who should ever have a credit card. I wish you luck.....but first make sure if you even owe money on them at all, especially if you've never used them.
     
  17. luckycharm

    luckycharmActive Member

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    I think you are in the right track. Taking a bank loan would be a wise option in that scenario. If you are already trapped in a credit card debt it is like a sword hanging above your head. So if I were you I would have taken a loan and cleared the credit card dues first. They impose high interest on credit card debts and sometimes it would beyond our imagination.

    So if you are eligible for a bank loan, go and get it. Public banks are quite liberal in terms of an early closure. So whenever you got extra cash you can deposit towards loan. But private banks often charge some minor penalty on early closure, but if you look at the big picture it would be beneficial for you when compared to credit card interest.
     
  18. Ray1

    Ray1Well-Known Member

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    If you have not used your credit card then there shouldn't be any problem for you or even if you have used your credit card there shouldn't be any problem for you as long you have repaid your dues within stipulated time. They do not charge any interest for use of credit card if you repay within given time. The only charges applicable are their annual fee. I suggest you should have one or at most 2 credit cards because managing too many without a purpose is not suggested.