Credit Card Or Personal Loan whats worse?

[staceyo]

I have only just learnt how much a credit card can impact your borrowing capacity. took me awhile....

My question is, on a dollar for dollar value do the banks look at personal loans & credit cards the same?

Reason I ask, is that I'm about to get a personal loan to pay off a credit card, do some reno's on a IP. Then I will release some equity to pay off said personal loan.

But I will also be applying for finance during that time to build a house on a splitter block, but that one should fund itself.

But just don't want to have a short term loan jeopardise my build finance app.
Hope that makes sense... appreciate any opinions. TIA

 

[Jamie M]

Hello

They assign a monthly repayment to each.

The personal loan repayment is taken at what it actually is.

The credit card is taken at 3% of its limit (usually) so on a $5k credit card it's considered a $150 per month liability.

Cheers

Jamie

 

[pinkboy]

Sounds like a few credit file burns in quick succession.

Make sure you don't create a fire.


pinkboy

 

[Peter_Tersteeg]

The credit card is taken at 3% of its limit (usually) so on a $5k credit card it's considered a $150 per month liability.

To expand slightly on Jamie's comment, if the personal loan of $5k will cost less than $150 per month, the personal loan is going to be cheaper than the $5k credit card.

 

[staceyo]

To expand slightly on Jamie's comment, if the personal loan of $5k will cost less than $150 per month, the personal loan is going to be cheaper than the $5k credit card.

Thanks, that's kinda what I was wondering

 

[Melbournian]

I have only just learnt how much a credit card can impact your borrowing capacity. took me awhile....

My question is, on a dollar for dollar value do the banks look at personal loans & credit cards the same?

Reason I ask, is that I'm about to get a personal loan to pay off a credit card, do some reno's on a IP. Then I will release some equity to pay off said personal loan.

But I will also be applying for finance during that time to build a house on a splitter block, but that one should fund itself.

But just don't want to have a short term loan jeopardise my build finance app.
Hope that makes sense... appreciate any opinions. TIA

Why take a personal loan? just apply like an ANZ or NAB cc balance transfer 0% with 15-18 months interest free. I believe ANZ is fee free as well fro the 1st year.

short term loan would affect it greatly. with credit cards - as long as you can document that the card is closed - it should be fine.

 

[Peter_Tersteeg]

It's hard to be more specific because we don't know what a personal loan would cost.

Why take a personal loan? just apply like an ANZ or NAB cc balance transfer 0% with 15-18 months interest free. I believe ANZ is fee free as well fro the 1st year.

short term loan would affect it greatly. with credit cards - as long as you can document that the card is closed - it should be fine.

That's going to improve cash flow for the interest free period, but it's not going to improve serviceability. Lenders will still use the card limit even if it is interest free.

 

[Rolf Latham]

Why take a personal loan? just apply like an ANZ or NAB cc balance transfer 0% with 15-18 months interest free. I believe ANZ is fee free as well fro the 1st year.

short term loan would affect it greatly. with credit cards - as long as you can document that the card is closed - it should be fine.

Credit score could become problematic with this sort of thing .............

reality is that for those that dont need such loans, they already have a decent score anyways

saving a few bucks here and there and fluxing serviceability may not be the best approach for some

ta

rolf

 

[Mick C]

Personal loans impacts your credit file a lot more compared to a CC.
In term of serviceability - CC is taken at 3% limit and PL is taken as current repayment.

So choose btw serviceability or a low credit score...are you applying for a high LVR loan or will you be applying for a high LVR loan in the future ( 90-97%)

 

[tobe]

0 interest cards still require a monthly payment of 3% of the balance, so the cashflow result is the same.

 

[cheekykoon]

I have only just learnt how much a credit card can impact your borrowing capacity. took me awhile....

My question is, on a dollar for dollar value do the banks look at personal loans & credit cards the same?

Reason I ask, is that I'm about to get a personal loan to pay off a credit card, do some reno's on a IP. Then I will release some equity to pay off said personal loan.

But I will also be applying for finance during that time to build a house on a splitter block, but that one should fund itself.

But just don't want to have a short term loan jeopardise my build finance app.
Hope that makes sense... appreciate any opinions. TIA

Hi Stacey, makes perfect sense in this low interest rate environment. Take a spreadsheet and calculate the savings made with each method. When you apply for balance transfer, make sure you can pay the 3% and the full repayment in total at a later stage, else, it would dent your credit score. Normally a 6 months short term balance transfer is not going to affect you much in terms if credit score. A personal loan is going to hurt you more. What I do is strike up some relationships with 4 or more banks to roll credit through balance transfers. Cheap money. Of course things can get nasty when there is a turn of event but I make sure I can do the full repayment on time every time. Keep some reserves for rainy days and use cheap credit to expand.

 

[techie]

What are your thoughts on using social / peer funding? I believe its just a soft credit check

 

[Melbournian]

Credit score could become problematic with this sort of thing .............

reality is that for those that dont need such loans, they already have a decent score anyways

saving a few bucks here and there and fluxing serviceability may not be the best approach for some

ta

rolf

true - i should try to get a loan now. my broker mentioned as long as you can prove that the credit card is closed - which you have it shouldn't be a problem

i remember being blacklisted by a few banks 7 years ago as i was closing quite a few of my home loans within 1 year or opening them.