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Happy Monday blog family and to my community! One of the most rewarding aspects about this website is being able to help my friends and family get their financial affairs in order.
To be honest, I had hesitation at first putting this website up because while I have a talent for key aspects in this industry, I never enjoy giving financial advice that has risk potential. Mostly out of fear that "what if I am wrong this time?".
It is my own fear that I deal with but the more I ponder on it, the more it shows proof of my caring for them and their finances and my due diligence is valuable to them.
Money is a private and sensitive topic for anyone to discuss; yet, the majority of the population are seeking help and want such valuable advice!
It is good for you to discuss finances with those close to you. I always encourage men to discuss their finances with their spouses! We are guilty at times, especially if we handle the budgeting, to keep our finances secret. Usually it is because we don't like to fail and when budgets go into the red, it proves we are no longer Superman.
Now that we are warmed up, let's briefly discuss whether one should get a loan to payoff credit cards. Many of you know but some readers out there checking this website this website for the first time may not know, that credit cards charge a Revolving Rate. This means a rate is consistently calculated...DAILY!
How on earth can anyone pay a credit card charging 18% or more APR? These types of loans are not fixed liked an automobile where rates are usually from 4-6% annually. At least with fixed rate loans the interest payment steadily declines as the principal payment increases.
If it weren't for revolving debt, financial firms wouldn't make their money-well large sums of money. Oddly enough, when you walk into your bank [true story], a banker is asked if one should pay off a credit card or get a consumer loan to pay it off.
The banker who has a conflict of interest obviously will usually say something along the lines of "One should continue to payoff the credit card making more than minimum payment." I've even heard some say, paying it off will harm your credit score. Get a free copy of your credit score with a company I trust, Credit Sesame.
If you are disciplined enough to NOT USE your credit card and you have a substantial balance that is difficult to payoff, then I do recommend you get a consumer loan to pay off the debt.
Why you ask?
Well, it boils down to interest payments. If you have Credit Card "A" that is charging you 18% APR compared to Consumer Loan "B" with a fixed interest rate of 6%, which loan do you think you can pay off first? Most likely the 6% rate loan assuming the borrowed amount was roughly the same amount.
Also, with Consumer Loan "B" the payments are fixed unlike credit cards which help you manage a better forecasted budget. But I must stress the importance of NOT USING your credit cards while these loan payments are being made.
If you happen to be thinking about such options with a banker, then here are some things that do decide your credit score in this video below.
Sometimes particular situations warrant you the chance to payoff your credit card with a loan. In cases like these, I personally use SoFi. Yes, I have used this company in the past because of the staff's professionalism and courtesy. Most importantly, the turn around time to process and receive the deposit was the same day. This isn't to say, you will get the same day turn around.
If you happen to have a credit score with some bruises on it, then take a few minutes to discuss this with the Credit Assistance Network. They are rated A+ by the Better Business Bureau and can provide a FREE CREDIT ANALYSIS.
Another great resource to use is Lending Tree. You can shop rates from the convenience of your home or office.
BEFORE YOU TAKE OUT A LOAN, I WANT TO ENCOURAGE YOU TO TAKE MY ONLINE COURSE "4 WAYS TO PAYOFF DEBT".
This course is designed to walk you through a process known as Debt Stacking. Some refer to it as Debt Snowball. This course sells for $19.99 but if you use promo code DOLLAROTTER10 you can take it for $9.99 or less depending on the specials running by Udemy.com.
Remember when it comes to debt, be sure you are discussing strategies and talking to your spouse or significant other about it so you can get on the same page and start tackling this amount down quickly.
Money moves in three ways, Up, Down or Sideways. Be sure you are taking the steps to move your money Up.