credit card debt or loan?

[bond]

If I need to borrow a large amount of money, say for home improvements, say �15000, is it better to have a loan, or to just put the debt on a credit card? The interest rate on the credit card is much lower than most loans, but does it look bad or worse if it's on the credit card, ie affect your credit rating more etc? or is there no difference between the two (aside the interest rate)? Thanks.

[Ethel]

Your credit rating is adversly affected if you fail to keep up repayments on any type of loan or if you make a lot of applications for credit in a short space of time.

Bear in mind also that the repayments on the credit card are likely to be much higher each month - the usual is at least 2% of the outstanding balance.

That would be at least �300 on �15000. And then interest will be added on the balance.

If the interest rate is higher than 2% (in this example) you will owe more every month and the minimum repayment will increase.

If you take out a loan the repayments can be spread over a much longer period and will be less each month - but you will pay massive penalties if you want to settle in full early.

As an example, a loan over 7 years at 5.6% (Northern Rock ) would be �215 per month.

Perhaps a secured loan (a second mortgage) would be a good option as the interest rates are usually lower.

If you have a credit card with a very low (preferably 0%) interest rate, pay with that and pay off as much as you can each month. The more the better. Be prepared to switch to a loan (or another card) if the interest rate goes up.

[dzug]

You would be very lucky indeed to get a CC with a credit limit of �15000, so you may actually kave no choice.

[Ethel]

dzug - I have available credit of over �100,000 on several cards - �20000 on one card alone.

It's not unusual.

[bond]

Thanks, it seems the loan will be a better idea. Didn't realise you could get a rate as low as 5.6%.

I have two credit cards, one with a �10K limit and the other with an �11K limit, but as you say, the monthly repayments will be much higher at a minimum of 2 or 3%.

[Postdog]

I always thought getting money on a credit card (as aopposed to paying for goods an services) was charged at a higher rate...and isn't it charged from the day you get it and daily until you settle. That's the case with the two cards I have anyway (Barclays and Halifax). Both companies keep sending me "cheques" to use where a card cannot be, but having read the small print, no way would I even get an emergency �10.00 on the cards, let alone a huge amount.

[Ethel]

postdog - you are of course right. Most credit card companies charge around 2 - 3% to advance money and then charge interest from day 1.

But bond may have intended to pay for his goods and services with the cards, rather than taking out cash with them.