topic Re: Question Concerning a loan offer in Personal Finance

Question Concerning a loan offer

Riemi87 — Tue, 25 Jul 2017 17:02:31 GMT

I have quite a bit of debt (house, car, student loans, credit cards), but no negative credit dings. I am paying it all down and have already reduced it by $5000. I don't use the cards after I pay them except to buy something small to keep them active. AMEX offered me a personal loan at a rate of 14%. I am considering taking it to pay off a credit card with an interest rate of 27% then pay down the loan. Is this something that would be a smart decision since I would save interest or should I just stick with paying down the credit card? I know the new account would hurt, but I am interested in the monetary savings.

According to the loan disclosure my interest would be a little over $1000 for the entire loan. With this card my interest already to date in 2017 is $818.

Thanks in advance for any help with this!

Re: Question Concerning a loan offer

Appleman — Wed, 26 Jul 2017 12:18:57 GMT

I would say go for the loan....

1. It will save you money (13% interest difference!)

2. It will likely improve your credit score. Yes you may lose a bit for a new account, inquiry etc. However, installment loans are scored more favorably than revolving credit card debt. You still owe the same amount but it is viewed in a more positive light. Also, as the % of the loan is paid down, the score will improve.

Please let us know how it works out.

Re: Question Concerning a loan offer

SouthJamaica — Wed, 26 Jul 2017 18:17:18 GMT

@Riemi87 wrote:
I have quite a bit of debt (house, car, student loans, credit cards), but no negative credit dings. I am paying it all down and have already reduced it by $5000. I don't use the cards after I pay them except to buy something small to keep them active. AMEX offered me a personal loan at a rate of 14%. I am considering taking it to pay off a credit card with an interest rate of 27% then pay down the loan. Is this something that would be a smart decision since I would save interest or should I just stick with paying down the credit card? I know the new account would hurt, but I am interested in the monetary savings.

According to the loan disclosure my interest would be a little over $1000 for the entire loan. With this card my interest already to date in 2017 is $818.

Thanks in advance for any help with this!

I guess I would need to know more about the overall situation. Number of cards, credit limits, balances.

Since you already have plenty of installment debt, I don't think the loan's going to help your score, except in terms of what this might or might not mean for your credit card utilization picture.

If you can pay off the credit card soon, without the loan, I would do that. But if paying it off is a long term prospect it would seem to be a sound economic move to get the loan and cut your interest. As you know, 27% interest is murder.

Re: Question Concerning a loan offer

driftless — Wed, 26 Jul 2017 23:00:53 GMT

@SouthJamaica wrote:
I guess I would need to know more about the overall situation. Number of cards, credit limits, balances.

Since you already have plenty of installment debt, I don't think the loan's going to help your score, except in terms of what this might or might not mean for your credit card utilization picture.

If you can pay off the credit card soon, without the loan, I would do that. But if paying it off is a long term prospect it would seem to be a sound economic move to get the loan and cut your interest. As you know, 27% interest is murder.

Depending on the details, a 0% balance transfer may be cheaper yet.