Financial Assistance needed>Car as Collateral?
So I have some credit card debt, it's all good debt...I didn't just buy things I wanted but things that I need. well now I want to get out of this debt but I have high interest rate that keeps kicking my butt further into debt and I can't even make a dent. All I can afford is my minimum payments each month.
I contacted my local bank about debt consolidation today and they recommended that I get a secure line of credit by putting my car up for collateral. I'm not sure what the pros/cons are on this? Of course the big con would be I lose my car if I don't make a payment. But I've never been late on the important payments that I need to make. And I'm in a financially better place where I'll never be late on any payments anymore...
So I just need some advice......
Do I just keep making minimum payments and maybe pay $50 extra here and there when I can.....with a 25.99% interest rate...
or do I put my car up for collateral, with a lower interest rate? I also don't plan on using my credit cards, for a very long time, until I can pay the balance each month. Like I said, they helped me survive but now they are drowning me ....
Thanks
nobody else responded, so i guess i will.
have you asked your credit card coompany to reduce your rate? sometimes they will, especially if they know you're thinking about cutting up the card.
if that's not an option, then definitely get the loan and pay off the debt ASAP. just make sure you're absolutely clear on the terms. under what circumstances will you lose your car? if you're a week late on one payment? or if you miss three payments in a row?
obviously, you're not intending to miss payments. but i doubt that you were intending to rack up all that debt at 25.99% either, so....
the other option, i guess, is to suck it up and sell the car and just pay the debt outright.
Yes, I asked them to lower the rate and the monthly payment bill but they won't , they told me to call back in 6 months and ask.
And I can't sell the car, I have to use it daily to visit clients.
Thanks....
Credit cards are a revolving debt with a variable rate of interest that is usually high. Auto loans are installment loans of a fixed duration and the rate is typically better because they are a secured loan.
As far as refinancing your car to pay-off credit cards goes, you need to weigh the pros and cons. Pros are lower rate and fixed payment and term. Cons are that if you default you lose your car and your car may not last for the term of the loan but you still have the debt, and you might end up being upside down in your car loan. And I'm sure there are other pros and cons to consider but if you can save enough monthly it may be worth it because you will never pay-off as credit card if you make just the minimum payment.
Chances are that no one will make you an unsecured loan to pay-off revolving debt.
You don't say what country you're from (the rules are different) but I'd go for the secured line of credit (you didn't mention the interest rate on that but if its significantly lower you will save a ton of interest). The only thing with a LOC is that you only have to pay the interest each month so unless you commit yourself to making payments on the principal too (more like a loan) you'll never pay off the LOC. The upside is that if you do start tackling the principal then you have that LOC for emergencies.
If you really want to improve your credit - see about getting it as a consolidation loan (you may still have to use your car as collateral depending on your circumstances) where you pay it off in a couple/few years - cut up the credit card and be debt free.
I live in the United States. I tried to get another consolidated loan with an unsecure line of credit but they denied me. They said the only way is to use my car as collateral for a secure line of credit and low monthly payment....I'm not sure what the interest rate is yet, I'm supposed to talk to them today. I just needed more information today...I googled it but not much came up...Thanks you guys
