What's the better option?

[marathonmama24]

As part of our rebuilding journey, my husband and I are looking for a way to get rid of our high interest debt. He thinks it would be better to open a new credit card with a lower interest rate (ours is currently 16.90%), and transfer the balance to the new card. I think it would be better to try to get a personal loan from a bank to pay off that debt, and then pay them off. After all, in my opinion, we don't NEED another credit card, per say, unless we sock drawer it.

Thoughts? Any help would be appreciated!

[Anonymous]

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@marathonmama24 wrote:

As part of our rebuilding journey, my husband and I are looking for a way to get rid of our high interest debt. He thinks it would be better to open a new credit card with a lower interest rate (ours is currently 16.90%), and transfer the balance to the new card. I think it would be better to try to get a personal loan from a bank to pay off that debt, and then pay them off. After all, in my opinion, we don't NEED another credit card, per say, unless we sock drawer it.

Thoughts? Any help would be appreciated!

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You'll generally get a lower rate on a PL, and the balance would no longer effect your UTI. As long as you are disciplined enough not to run the balance back up, the Personal Loan is the smarter choice, IMO - IF you can get it.

[RobertEG]

Concur.

Usually a lower rate on installment loans, and it shifts the debt from revolving, which hurts your % util, to installment debt, which is not included in % util.

[CH-7-Mission-Accomplished]

How much do you need in order to pay off your high rate cards?  What are your credit scores?

If you get a 0% card (Discover is offering 0% for 18 months), and you can pay off your debt in the time that the 0% lasts, that is the better option in terms of saving money.

My local credit union charges 10% - 12% right now for personal loans up to 15K.  

Your scores would not drop from increased utilization with a new 0% card because your balances would be the same and your total available credit would be greater.  You would take some hit for the new inquiry, new account and lowered AAofA, but this will evaporate quickly.

I twice refinanced my credit card debt into mortgage refinances and HELOC's and both times I ran up all the debt again.  The only thing that saved my backside was that the homes appreciated much faster.  Ultimately after selling the homes, I still ran up the debt again and wound up in BK7 number 2.

If you are addicted to using credit cards, it can be a real problem to have them paid to zero and be able to use them again.