PostHeaderIcon Unsecured credit card debt or unsecured loan?

I have received an offer for an unsecured loan to consolidate my debt. It states interest rates as low as 7.99 percent. Which I doubt I would get. It also says no fees at all. This is from Discover and it is a loan for a set amount of months.

I have a number of credit cards that I refinanced years ago that have set rates for 3-5% for the life of the loan. If this consolidation loan is approved for me between 7.99 – 9.99% is that better in the long run than keeping the credit cards at the 3-5% rates?
I pay more when I can but most months I can only pay minimums. I know that can drag the credit cards out forever. Even if the loan payment is higher than all my credit card minimums I know that I would make it. I always make payments but tend to only make minimums. I think the consolidation loan is better for the way I pay my bills. I just don’t know if the numbers are better.
I was asking because I wasn’t sure if in the long run paying 9% on a loan that had a fixed pay off date of 24 months was better than paying 3-5% on these cards that say will take 23 years to pay off at minimums. I am not doing this to charge up my cards again. I have cards with zero balances I could do that on if tat was my plan. I am trying to pay off debt not get deeper into it. I know the percents are different but one is a fixed term and the other is not. That’s all.

3 Responses to “Unsecured credit card debt or unsecured loan?”

  • tudorjason says:

    You should keep the balances on the cards. 3-5% is less than 7.99-9.99%. You will pay less in interest overtime with the cards.

    Also, you probably wouldn’t be approved for the loan anyway. They typically demand excellent credit.

    If you haven’t tried to make any changes with your budget/lifestyle, you should give it a try so that you can pay more than just the minimum every month. Can you change your cell-phone plan? Are you eating out a lot? Stuff like that.

  • cainvest1 says:

    If your cards are set for the life of the loan at 3 to 5% why would you take out another loan to pay them off at a higher rate? So you can charge again??

    Your plan makes no sense. You can get serious about paying down the cards without taking out a higher cost loan. There is no reason you can’t select ONE card (the highest rate card or the one with the lowest balance) and double or triple up on the payment each month until it is gone. Then go to the next card.

  • G. Whilikers says:

    If you were to keep your cards and pay *them* at a pace that finished them off in 24 months you would pay half as much total interest as you would at the loan’s higher APR. So if you have the resources to take on that loan, all you need is the discipline to make consistent payments on the loans you already have. Pick a monthly payment you can stick with and divide that among the credit card bills without wavering, you’ll finish in a predictable amount of time.

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