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Credit cards: When is it advisable to take a new loan to pay them off? | YOUR MONEY

The use of credit cards can lead many people to spend more and, with it, expose themselves to a high debt at the end of the month, which can end in that only the minimum payment is covered. Jorge Ojeda, professor at the EPE Business School of the UPC, and , an expert in finance and a teacher at Pacífico Business School, tell us if it is appropriate to take on another debt to pay the cards.

According to Ojeda, it is highly recommended to pay credit cards through another debt if they already have a high balance. This because the cards have a high interest rate compared to other credit products.

In that sense, the purchase of debt through another financial entity would be ideal, since the interest rate would be much lower and an order would be kept through a fixed payment schedule. However, the problem with the purchase of debts is that these are usually given by campaigns. That is, the bank has already evaluated and defined who the debt can be bought from

“In the case of credit cards, it is more feasible, since the amount of debt would only change the financial institution and it would not be getting more debt. However, you must have good behavior in card payments, “he said.

In addition, Ojeda pointed out, a preferential loan could also be requested from the entity with which the credit card debt is maintained. In this case, the bank would deliver cash to the customer and, with this, the customer would pay the debt in question. This modality has a slightly higher rate than that which would be obtained through a debt purchase.

“If the client only makes the minimum payment on the credit cards, then only part of the interest is covered, so the debt grows and can become unmanageable. In that case, he chooses to pay it through a new loan, “he indicated.

In the same sense, Carrillo indicated, if you have the power to take a new loan to pay credit cards, this should be done, since the rates are higher in the first financial product, which are above 60% on average.

“A personal loan could have a rate lower than 20% if it is linked to the salary account, you could also take advantage of a debt purchase. Given that rates are projected to rise further in the coming months, this would be an option to consider. (…) Normally these loans are with another financial institution, “he said.

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