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Is it quicker paying off a personal line of credit or a credit card? |
Are the minimum monthly payments the same and which one pays off the principle quicker by just making the minimum payment based on the interest rate being about the same? Don't look at the minimum. Pay off your debt asap. If you are paying the same interest rate and the principle is the same....then it doesn't matter if it's a LOC or a Credit card. The minimum payment for most credit cards is so low that it will take years to pay up your debt. LOC payments are generally structured to pay off debt sooner. But, if you make the same payment (above the minimum) for the same dollars owed, for the same interest rate, for the same terms and conditions, the payoff is identical. The kicker can be how average daily balance affects the two different debts and many LOCs handle this differently than revolving credit cards. Considering interest rate being equal, the answer is determined by 2 factors: (1) percentage of minimum payment required. On the average credit card companies require you to pay from 2-4% of the statement closing balance as a minimum payment each month. Line of credit however, requires an average of 3-6% monthly; (2) interest charges. Minimum payment are designed so that consumers pay only the "interest charge portion" and would therefore make you pay the debt up to 20 years! So, rule of thumb, pay as much as you can, and get out of debt fast! |
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