I know this might be a basic question, but I have around 5k in credit card debt with a whopping 29% APR. Recently, I received an offer for a personal loan of 5k at a 13% APR. Do you think it would be a good move to use the loan to pay off my credit card debt? I’m considering getting a new card with a lower APR, but I’m hesitant because my current credit card is my oldest with a 9-year history.
Goodbye,
Concerned Spender
Response from THE MONEY MINDER:
"Hello There,"
Congratulations on taking the first step towards tackling your credit card debt by considering a personal loan offer. It’s not always an easy decision to make, but addressing the issue head-on is a proactive move towards financial stability. In your situation, the idea of using a personal loan with a lower APR to pay off your high-interest credit card debt definitely makes financial sense. By opting for the loan at 13% APR instead of continuing to pay 29% on your credit card, you could potentially save a significant amount in interest charges over time.
Regarding your concern about the credit card being your oldest line of credit at 9 years, it’s important to weigh the pros and cons. Closing an older credit account can impact your credit score, particularly in the short term, as it may reduce the average age of your accounts. However, if you are confident in your ability to manage the new loan responsibly and avoid accumulating more credit card debt in the future, the positive impact of paying off your high-interest debt and improving your credit utilization ratio could outweigh the potential slight dip in your credit score.
Overall, using the personal loan to pay off your credit card debt is a strategic move that can help you save money on interest and work towards becoming debt-free. Remember to continue making on-time payments on the loan and avoid falling back into old spending habits. All the best from THE MONEY MINDER as you take control of your finances and work towards a brighter financial future.
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