Moving card debt to personal loan or new 0% cards?

By Barry Paperno

Dear Speaking of Credit,
I currently own a debt of $7000. A few months back I transferred this debt over
to a couple of new CC – Slate and Citi – both of which offered me 0% APR for
fifteen and twenty two months, respectively. Meanwhile my bank, Wells Fargo,
offers me a $7000 personal loan @ 14% APR 36 months, montly payments $240.

Obviously personal loans are tempting and present both pros and cons.
My question being as to your view regarding personal loans and would
it be better in this case to pay down these debts monthly over their
respective 0% APR periods so as to keep them open and continue to
show activity, timely monthly payments etc vs paying them all off in one
shot which clearly shows you took the loan out to consolidate debt? -Carl

Dear Carl,
First, I’m going to figure you have good credit scores to be offered those good deals. And for those scores to be good with $7,000 of (I’m assuming) card debt, your low credit card utilization must be the result of a large amount of available credit. You’re clearly doing a good job of managing your credit, and looking before you leap, as you’re doing here, is being smart.

To provide the best answer to your question it would be good to know something about your financial plans over the next couple of years, e.g. buying a car, house or retiring. This would tell me if your credit score is highly important, which would be the case if you’re buying a home, or if you’re looking to reduce your debt, increase your cash flow, etc. Personally, I’m a big fan of saving money on interest, as long as your credit score stays as high as necessary to obtain financing at the best rates when you need it.

Since you seem to be able to get those good rates and terms, my suggestion would be to take advantage of that zero percent money for as long as you can. That is, do so unless you’re in a cash flow crunch and need to reduce the minimum monthly payments, e.g. consolidating to a lower monthly payment than those 0% cards will require. If you can take advantage of that free 15-22 month funding, then when those promotional periods run out consolidate the debt into a personal installment loan at an interest and monthly payment rate that makes sense for you.

Are you concerned about letting those card or loan offers get away? I wouldn’t, figuring that if you’re being offered those great deals now, they will also be available after 15-22 months, as long as your scores remain high. Which they should do, since there is nothing about making minimum payments on those cards that should hurt your score (from where it is presently), other than the slight temporary drop anytime you open a new card or loan. Still, though, don’t do any of this if you’re planning to buy a house in the next 6 months.

Lastly, there’s nothing in the scoring that considers whether you have consolidated your debt. So, don’t give that a second thought.

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