I am a credit card holder and I usually receive offers for low interest loans in my mail from banks. Interest rates of these loan offers range from .68% to .99% per month with 2 to 3 year terms. I am almost tempted to avail of these offers to pay off a credit card balance with a regular monthly interest rate of 3.5% per month. At first glance, it seemed like a no-brainer, but is it? When I look at the fine print, I realized that the low interest rate is computed as a percentage of the total loan amount and not on the basis of declining loan balance. The interest amount, therefore, is a fixed monthly amount for the duration of the term. In most cases, the interest for a 2-year loan of this type is just equal to the regular interest that you will incur if you pay the 3.5% interest loan in 6 months. Is it better to take advantage of this offer and be tied to a 2 or 3 year term or just pay the 3.5% per month loan in six months?
Whatever they say, the interest is always to the advantage of the credit card company. For me, the regular interest rate is just fine although I control my spending because you lose money when you pay with an interest on the purchases. And for the 6 months versus 2 years term of loans, the shorter the term, the better because the interest is definitely smaller when you compute the total. Remember that you also pay for the time (duration of the loan) so when the term is longer then you definitely pay more.
My take on interest is interesting. This is because it represents only a small percentage of the principal. The Achilles heel with regard to loan repayments is the principal. Many people find it hard to repay the principal even if there is no interest. I am looking forward to developing a suitable microfinance model to address this issue.
That interest rate is within a comfortable range. If I were to decide I will go for the 2 to 3 years plan. Let the total accruing interest be added to the principal and dividend by the total number of months. Then I'll be paying the monthly equivalent every thirty days
Practically anything that is taken via credit card, the interest rate is soaring. Especially when you fail to pay your monthly installment payment. You will be sorry later to find it out that you are charged exorbitantly. As I was reading your declaration, it seems that you know what really happens when you use that credit card to secure a loan. Better follow you notion or hunch not to get into credit via credit card facility.
I don't think there is any problem even if you avail the offers by eCommerce companies supported by bank provided you pay them back within stipulated time. Actually the customer is a looser only if he fails to repay his dues in time. However one should be careful that he/she does not invest on unnecessary items.
Long slow payments like EMI's are in a long run a loss on the customer side. We end up paying more than what we initially bargained for. That is why I prefer to pay the bulk on spot and postpone the use of credit cards or EMI system in which you have a headache of pendings over months or years.
Currently I have loan on various banks. I am paying my loan through easy monthly installments. I am paying 9-22 percent interest rates. The bank that charges high interest rates will be lowering their interest rates as I continue to pay back my loan and that bank that charges low interest rates have flat interest rates.
I suggest you should opt for variable interest rate which comes down if the interest is reduced on a later stage and the way the banks are cutting down on interest rates globally you too will get the benefit. By the way can you switch your bank with lower interest rate if that is allowed in your country?
