What's smarter: Balance Transfer of Personal Loan?

[RyinLA]

When trying to pay down multiple high interest credit card debts efficiently, is it better to take a low interest personal loan, or transfer your balances to a lower interest credit card? Ultimately, which one would be best for your credit score? It seems like using the loan and keeping the cards open (but not using them) would benefit your credit score, albeit adding another account to your credit profile. Or does transferring to one card but reducing your open credit accounts work better?

[nanootwilson]

I read an article a couple of months ago (online) about credit scores and it said that making regular, on time payments on an outstanding loan (car, personal, mortgage) raises your credit score. That might be a good option and a wise addition if you only have credit cards on your credit report.

However, from a strictly dollars & cents perspective, I would choose the option with the lower interest rate.

Keep in mind - this tip was based on an online article - more research would be prudent.

nanootwilson

[Aaron Stroud]

I'd recommend going with the lowest rate you can get, but...

...Consolidating your debt with a personal loan might have a slight positive impact on your credit score. However, the best thing you can do for credit score is to let some time pass. A couple of years will do wonders for a low credit score if you pay your bills on time.

[steve22]

Taking out a personal loan could be a "positive move" for those consumers looking to consolidate their debt, an industry expert has revealed. Thank you for the information......

[Jason830]

I would take Aaron's advice here. Lowest rate seems like the plan.

[Julie Rains]

I'll add that it would be good to go with the rate that is lowest over time -- some rates might fluctuate b/c the rate is based on prime plus 1 for example or a low rate expires after a year. I'm not answering the question (directly) but a steady rate will enable you to pay down your debt faster than a fluctuating (higher) one.

[Dani]

The fine print of those offers usually states that are charged about 3% of the total balance up front for the transfer. If you are late even once, they can raise the teaser rate to 18% or some other ridiculous rate. I agree with others - stick with what you've got and make regular, large payments.

[Faanaraj]

Yes,

I agree with you...

[olena99]

Many balance transfers are subject to a transaction fee.
This varies from 1-5% of transferred debt - sometimes with a maximum capped amount, but otherwise an uncapped percentage.

[nkthen]

First, find out how much loan you have by adding all of them.

Then, speak to different banks and ask them for their interest rates if you transfer all the different loans to that bank.

Next, choose the one with the cheapest rate, or the bank you are comfortable with. Consolidate all your loans/debts to just one bank.

That's debt consolidation and one of the biggest benefits is that you save on your monthly interest payment.