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Paying off Credit Card or Consolidating - The Bills.com Blog
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Paying off Credit Card or Consolidating
Friday, Jan 2, 2009
Question: Am I better off in the long run paying off a credit card with a personal loan or just by paying extra each month on the card?
Answer: Thank you for visiting Bills.com. Here is an answer to your Credit question - which is really a question about relative interest rates (and cash flow) and also credit rating.First, relating to the cost of the debt you are best going with the strategy that has the lowest cost of the debt which is represented by the interest rate. Typically (but not always, since you could have zero percent teaser rates, or low introductory rates) it is best to consolidate debt with a mortgage refinance, since mortgage rates are at historic lows and since mortgage interest is tax deductible. You can apply for a mortgage refinance consolidation loan here:
Mortgage Refinance Quote
Ideally, however, you should pay as much as you can to pay down debt and get debt free as quickly as you can. It is almost always your highest return on your money (and you'll sleep better at night) to get debt free.
Now,
onto credit impact. If you refi, and pay off your credit cards, it typically helps your credit rating as your unsecured debt balance goes to zero and your credit utilization on those accounts goes to zero (just don't run them back up!) If, however, you balance transfer or take out a new loan that is maxed out or has a high utilization (over 50% of your limits)... you will want to pay them down asap to improve your credit.
It is important to understand how your credit score is calculated. Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.),
It is important to understand how your credit score is calculated. Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.),
the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history. All items remain on your credit report for up to 7 years. A bankruptcy may remain on your credit report for up to 10 years.
We hope that this helped you to Find, Learn, & Save!
If you want a free debt consolidation quote, you can go here:
Debt Relief Savings Quote
We hope that this helped you to Find, Learn, & Save!
_________________________________
Your friends at www.bills.com
We hope that this helped you to Find, Learn, & Save!
If you want a free debt consolidation quote, you can go here:
Debt Relief Savings Quote
We hope that this helped you to Find, Learn, & Save!
_________________________________
Your friends at www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Sandy Brooks on Monday 5th January 2009 10:52
I am on a very low fixed income, & live in a subsidized apartment. How can I get my credit card interest down to a reasonable amount? Is it true that people whose only income is SS don't have to pay their debts?
2. Posted by Scott Sampford on Monday 5th January 2009 11:02
No, that is not true. You are still responsible to pay the debt back, although you might be able to negotiate the interest rates down on your accounts. The only way to do that is to speak to your credit card companies. If that does not work, you could always explore the credit counseling option. Credit counseling is basically a service that will negotiate the interest rates for your accounts and will also manage all the payments for you. You can read more at http://www.bills.com/credit-counseling/.
3. Posted by Bill on Monday 5th January 2009 11:03
You have a few options on getting your payments lowered: 1. you can call your lenders and ask to get put on their hardship program (which will usually lower interest and monthly payment); 2. you can sign up for credit counseling; 3. you can enroll in a debt settlement program. You can always apply for a free debt help quote here: Debt Relief Savings Quote Your second question: if you are on fixed income do you not have to pay your debts is an incorrect statement. You still 'have' an obligation to pay your debts, but you cannot have your wages levied if you stop paying and your creditor sues you. This essentially means that it is very difficult for a creditor to legally come after you in the event of default. I hope that helps. bill