I have a large debt that I’d like to pay off. Most of my debt is in credit cards with high rates. I have excellent credit and would like to know the best way to pay these off as quickly as possible with the lowest rate.
I have been approved for a loan at my credit union for the full amount but the interest rate is 12%. Is that a good deal or should I look around for something better?
If you have excellent credit, the best way to pay them off is by doing rotating balance transfers.
Step 1
Apply for a credit card that offers good introductory balance transfer rates. I recently got 0% for 6 months from one vendor.
Step 2
Transfer your balances, to the extent possible, to those cards.
Step 3
Cut up your old cards. Don’t cancel them all at once, as that can mess up your credit rating.
Step 4
Buy what you need with CASH, CHECK, or DEBIT. Don’t run up more debt.
Step 5
Pay those cards off. Work up a plan to pay as much as you can every month.
Step 6
When your new, low APR promo offer expires, repeat cycle, transferring the debt to another card with a promo rate.
By the way, 12% is probably typical right now for “good credit” and unsecured lines of credit, but you can do better. Heck, one of my credit cards has a non-promo rate of 9.75%…
Oh, and by the way, if someone gives you a debt consolidation loan and then codes it as such rather than as an unsecured personal loan, that may negatively impact your credit.
“Debt consolidation” is considered “high risk” behavior by some folks in the finance industry.
Thanks for the tip Jonathan, I have thought about debt consolidation and did not know that.