I was reading an article where a personal finance consultant used a personal loan from Upstart to pay off some credit card debt. I was curious what everyone thought of that idea.
For my particular case, I'm torn 50/50. (First I had to admit my mistake & big 'oops' moment realizing I have about 10k in credit card debt now... yikes.) I know the absolute #1 way to fix this is to budget and change spending patterns, which I'm already doing. The concept of a personal loan intrigues me though as another way to combat this debt. I know there are pros (lower interest rate for one) and cons (like another ding to my credit score). Here's my example:
- Card 1- 1135 owed 26.24%
- Card 2- 2925 owed 25.74%
- Card 3- 1230 owed 26.15%
- Card 4- 810 owed 22.15%
- Card 5- 900 owed no interest till 9/20
- Card 6- 991 owed 25.14%
- Card 7- 1430 owed 25.99%
I should clarify that these are all the household cards. The total payments on these is about $350 a month. Now I looked at Upstart's options for my situation.
- Loan 1- $10,000 5 year 18.4%
- Loan 2- $12,500 5 year 18.95%
I included a sort of balloon amount as an "in case" on option 2. Both options are lower than the $350/month payments we already make at $247 and $313.
What would you do in this case, fellow Penny Hoarders? Would you take one of the loans to ensure a lower interest rate? Or would you tackle the current card usage with the avalanche or snowball method?