#creditcarddebt #loanrepayment #financialadvice
## Is a Loan to Pay Off Credit Card Debt a Bad Idea?
### Understanding Your Options
When faced with a large amount of credit card debt, it can feel overwhelming trying to figure out the best course of action. One option that may be presented to you is to take out a loan to pay off your credit cards. While this can seem like a quick fix, it’s essential to weigh the pros and cons before making a decision.
### Evaluating the Loan Offer
In your specific situation, you mentioned receiving an offer from Flatrock Funding for a loan to pay off your $40,000 credit card debt at a lower interest rate of 3.25%. Currently, you are paying 17.20% interest on your credit cards, which means a significant portion of your payments is going towards interest rather than paying down the principal balance.
### Pros of Taking Out a Loan
– Lower Interest Rate: By taking out a loan at a lower interest rate, you could potentially save money in the long run by reducing the amount of interest you pay.
– Fixed Monthly Payments: A loan typically comes with fixed monthly payments, making it easier to budget and plan for repayment.
– Simplified Debt Management: Consolidating your credit card debt into one loan can simplify your debt management and potentially improve your credit score.
### Cons of Taking Out a Loan
– Risk of Default: If you are unable to make the monthly payments on the loan, you run the risk of defaulting, which can have serious consequences on your credit score and financial standing.
– Closing Credit Cards: Closing your credit card accounts may negatively impact your credit utilization ratio, which can also affect your credit score.
– Additional Debt: Taking out a loan to pay off your credit cards does not address the root cause of the debt, potentially leading to accumulating more debt in the future.
### Final Thoughts
Before deciding to take out a loan to pay off your credit card debt, it’s crucial to consider all your options and determine the best course of action for your financial situation. Seeking advice from a financial advisor or credit counselor can help you make an informed decision and create a plan to achieve financial stability.
In the meantime, exploring opportunities for additional income, such as getting a second job, can also help you pay down your debt more quickly. Remember that your financial well-being is worth investing time and effort into finding the right solution for your credit card debt.
> 38,000 at 3.25% interest
That almost sounds too good to be true. Is there a catch?
I don’t have credit card debt, and I would take out that loan if it were offered to me.
If those are actually the terms of the loan, take every penny they’ll loan you.
most people do that and think they have actually done something instead viewing it as simply just moving debt from one pocket to another and then they just keep on overspending resulting in the huge personal loan and then more cc debt. you have to change your lifestyle and make more and spend less.
Read their reviews it’s bad. They want you to ruin your credit first
https://www.trustpilot.com/review/flatrockfunding.com
There is no shot you are getting an unsecured personal loan for 3.25%. This has to be a scam.
If you shred your cards and stop buying things then it is worth it to take a lower interest loan.
99% of people can’t do that, they use credit cards because they are so convenient, and start buying more as soon as they are allowed 3.
40000 credit card debt is bad
40000 low interest debt and 40000 credit card debt is very bad.
If you take a loan so you can use your credit cards again you will only continue to dig deeper into debt
When you call or actually contact them, they’re going to offer a much worse rate than 3.25%.
Read the fine print there is not a chance that the interest rate is 3.25% other than maybe for some short period and it likely tacks on fees
I can’t think of a single instance where some miracle fix or at least the equivalent of a financial dam was dropped in my lap a cold-call/knock/snail mail to me.
Except when they replaced my driveway and that was only because I could see their work down the block.
Like others have said, there’s usually some catch because their whole model is casting a wide net to see who bites. What’s likely to happen is they’ll pull your credit to approve a loan, the rate which won’t be what they promise, but is still hopefully beneath your CC rates. This new loan balance/debt-to-income will demolish your credit in the short term because the dumb system we have here where sudden payoffs and closing accounts negatively affects your credit. Then the reality of paying back that loan will bury it.
Chances are they’ll lock you into sweet terms now, predatory later, and you’ll be playing the game of “can I pay this off with a lesser interest rate before the time is up.”
My wife and I considered this about eight years ago with about $15k in debt. Not equating to your scenario, but the only practical solution was to minimize every last superfluous expense and then some, then pay off the cards. Took us about 2 years. We’ve been interest-free and banking those points ever since.
As others have said, the paper from “Flatrock” is most likely a scam or not actually 3.25% when you call, I would be VERY cautious on that / not consider it at all.
Consolidating debt can be good if you do it properly, but most just rack it back up on the credit cards because they are now paid off in turn doubling your debt.
I don’t know your financial situation, but my suggestion would be to get everything on paper to see it and come up with a budget then throw all of your leftover at the credit card debt knocking out the smallest first using the snowball method (assuming it’s not just one card with 40k on it).
I would look into opening a card with a 0% intro APR on balance transfers. Roll over up to the limit of that card. Pay down as much as you can during the promo. Then get a personal loan to payoff the rest.
DO NOT add to the credit card balance unless you are 100% sure you can pay it off each cycle.
Also, that loan and terms seem too good to be true, so I would look elsewhere for a debt consolidation or personal loan.
If your score is good you should qualify for a new card that offers zero percent for a fixed fee.
You may be able to do a balance transfer to another credit card company, many have incentives where they give you 0% interest for 1 year. Focus on paying off the load aggressively while you can take advantage of that. If you can’t transfer the whole balance you may be able to transfer some of it.
My guess would be if it is true then you have to pay it off within say six months. If you bust the promotion period then the interest would be backdated from the beginning of the loan. I had to get some foundation repair done. I financed for 0% for one year but if I passed the year and it wasn’t paid off it reverted back to 29%. We paid it off within the year.
What did you spend 40k on in 6 months, that seems extremely beyond one’s means when out of work.
Also what is your income situation now?
not theoretically, but this sounds shady. but yes it’s a legit advantageous move to pay off a high interest loan with a lower interest loan. the only major pitfall, which is quite prevalent, is for people to then turn around and rack up another 40 grand in credit card debt with the financial alleviation rather than use it to get out of debt.
It’s obviously a good idea, but are you sure it’s not 3.25%/month?
40k of consumer debt- at what point is bankruptcy viable? That’s a crazy amount.
https://www.trustpilot.com/review/flatrockfunding.com
Please check out the reviews, everyone says this is a scam. You should try a bank or credit union.
If 3.25% is APR, that must be a scam! Currently almost all HYSA have rate above 4%.
yeah, this is a horrible company. You agree to pay them $38,000 at a low interest rate but in exchange, you stop paying on the credit cards. Then when you are in default, they negotiate with the CC companies to pay a much lower amount. Say $10k. So they pay them the $10k, then collect the full $38k from you, meanwhile your credit is ruined for 7 years
wow 40k crazy how did you rack that up?? with him bieng out work?? hows ur credit ? another loan to cover other loans not a great idea
Consolidating debt to one place with lower interest is great option.
I took out $20k personal loan due to unexpected major home repair and rate was little over 7% and 3.25% sounds unsecured/ scam.
I’m in the process of rebuilding my credit after being a dumb college student who lives solely on credit cards. I used Happy Money and secured an interest rate of 13% on a $10,000 loan. I know that isn’t great but I’m very happy i did it. Super easy to do, they set me up with a loan from a bank in Michigan if memory serves and the money auto leaves my account at the same time every month. I end up paying in interest/fees an extra $75 a month but it was better than the interest rates I had. I pay about $480 a month for a period of 24 months. I was told it was stupid and a bad idea and I should just bite down and debt snowball it. But i’m honestly extremely happy I did it this way. I’d recommend Happy Money personally, extremely easy process.
I think everyone has covered the 3.25%
Don’t close the cards. Negative impact to credit. If any of them have an annual fee then close those ones. The rest. Make sure they’re 100% paid off. Lock them in a safe. Don’t have a safe. Get one for all your important documents. Keep one card to use for essentials like gas and groceries but must be paid off monthly. Points or cash back whichever you prefer but you have to use credit to have good credit.
As far as consolidation. Do it. Either through a second mortgage home equity loan or personal loan. Check local banks or credit unions. They will have better rates the. Anything advertised online.
Try to have that debt paid off in the next 3 years if not sooner. Someone else covered it but you don’t want to get something so much lower on a loan to only rack up more debt. I’ve seen it happen so much. I’m in the mortgage industry for the last 10 years.
keep chipping away until you can get a loan from a reputable place like SoFi, need credit above 600 but that will land you around 18%. you’d need like a 12% or better to make it worthwhile from my quick math