Hello guys, I have $9,300 in credit card debt spread over two cards:
Capital One Venture one: $4,800 at 24% APR
BoA Balance Transfer Card: $4,500 at 0% APR until December, then likely around 24% APR
I’m pre-approved for a $9,500 debt consolidation loan from my credit union at 9.99% APR for 60 months.
I’m leaning toward using this loan to pay off my credit cards. I find it easier to manage one monthly payment instead of two, and having a fixed repayment term set by the bank helps me stay organized.
My main concern is whether the 9.99% APR on the loan will cost me significantly more than my current credit card rates. If the difference is small, I’d prefer the loan for simplicity. Any advice on whether this is a good move or if there’s a better option? Thanks!
Consolidating your high-interest loans into a personal loan at 9.99% APR may help you save money on interest while streamlining your payments. Just be sure you have the financial capacity to easily handle the terms of the new loan.
There are a lot of factors that affect your credit score, but here’s what I’d do: I’d throw everything you can at getting the car paid off sooner for cash flow purposes. Then take the terms of the consolidation loan and see how much it’s going to cost you in interest to pay in full. Compare that to the math of paying minimums on the higher balance cards, knocking out the lowest, and snowballing the payments.
Without knowing specifics, it’s impossible to give proper guidance, but that’s the process to arrive at which option will be cheaper. That option might not be the one you want, though, because it may only be a marginal savings and leave you very little wiggle room in your budget. But that’s going to be determined by the terms of the consolidation loan.
Paying down revolving debt has a positive effect on your credit score, Opening a new line of credit (consolidation loan) will initially have a negative effect, but as it’s paid down, that will also have a positive effect. There are several good credit simulators associated with credit cards, see if yours has that feature.