Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Ask June: Consolidating Debt Via Credit Card or Loan?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Q: Is it better for me to consolidate our debt on a credit card with an interest rate of 9.9% or to take out a three-year loan at 12% interest? Thank you for your help.

--Timothy, Vidor, Texas

A: Great question! In order to illustrate, I'm going to assume you have $12,000 of credit-card debt and are weighing the two options you highlighted. First off, a three-year, 12% loan would require a monthly payment just under $400. If you can afford that type of payment each and every month, this might be a solid option. I like that this strategy has a definite beginning and end date. However, the risk is that you build back up your credit-card debt that you consolidated and then end up with credit-card debt and your "tried-to-consolidate" loan. That's bad news and often happens. If you fear this scenario, then I would opt for the lower-interest credit card. If you make similar payments of about $400 per month, you'll still end up debt free in three years (or less) and that is just plain good! Plus, you would also save a little over $400 in interest over the higher interest rate consolidation loan. No matter which direction you head, it should all start with a focus on the basics: living within your means. Putting together a budget you can live with is the cornerstone of financial success.

June Lantz Walbert is a CERTIFIED FINANCIAL PLANNER practitioner with USAA Financial Planning Services. She is also a lieu­tenant colonel in the U.S. Army Reserve with 20 years of service. Walbert's basic branch is Air Defense Artillery. She writes a weekly advice column, "Ask June" on Follow June @AskJune_usaa.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP and CERTIFIED FINANCIAL PLANNER in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.  

Views and opinions expressed by members are for informational purposes only and should not be deemed as an endorsement by USAA.

The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 07, 2010, at 8:04 PM, rd80 wrote:

    Great to see USAA contributing to The Fool!

    Russ - a happy 30+ year USAA member

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1392379, ~/Articles/ArticleHandler.aspx, 10/24/2016 6:22:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes