I am cutting out as much as I can and paying off as much as I can. I will say we are down to one credit card with a high balance. We have an offer to take a personal loan from a bank for 4 to 5 years with less interest and about the same amount I am paying on the cc. To me it seems smarted to take the loan have a fixed amount and know it will get paid in a certain time.
My husband just says keep paying what you are paying and send more when you can.
What is your opinion? I am working really hard at this with out a lot of help from my DH……
Financially it makes sense to take the loan with the lower interest rate and pay off the credit card completely. You would save money and have your debt paid off in a set amount of time.
The problem with this approach is that you now have a credit card with a zero balance and if you haven’t learned any self-discipline with your spending over the years you (or your husband) will probably rack up significant debt on the card while you are paying on the bank loan. At the end of the five years you might have the same amount of debt on your credit card because you didn’t change your habits.
The other problem I see is that when you are currently paying off your credit card there is an incentive not to use it. Seeing your balance decrease every month is a motivating! It is harder to add to the balance by charging your purchases when you are working so hard to decrease your balance.
The second problem I see is that your husband wants to keep paying on the credit card. Since he hasn’t been much help in getting out of debt, squashing his idea of paying off the credit card as you go might be enough to keep him out of the debt free picture all together. If he feels alienated from the process what incentive does he have to participate in reducing your debt?
Also it is never a good idea to make a large financial decision (especially when you are signing loan paperwork) when you and your spouse do not agree on the solution. It’s bad… very bad.
You can actually use a handy credit card pay off calculator on the BankRate website to help you create a plan for getting out of debt in a certain time frame. You enter the balance, interest rate and desired months until you are debt free and it will tell you how much you need to pay each month. If you are committed to paying this amount every month then you will be debt free in a certain number of years (or months).
So while financially it might make more sense to take the loan, I think continuing to pay off the credit card might be a better idea in your situation. Let us know what you decide!
Readers, what do you think. Would you take the loan or keep paying on the card?