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quik71

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Use taxes to pay off credit card debt and apply for a personal loan
I am planning on a disney trip in the summer with my kids. I currently owe $4000 on a 6.9% fixed credit card. Should I use my tax money to pay off the credit card then apply for a personal loan with a apr of 5.25? Or should I just leave the $4000 balance on my 6.9% apr and use the tax money exclusively for my trip? I either pay for my trip and still have an existing credit card debt of $4000 or I pay off the credit card and end up having a personal loan debt with a 5.25% apr. Please advise!

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Why don't you use the personal loan to pay off the credit cards and use your money in hand for disney?

I know that sounds like another version of the same sentence, but really its not.  Its an entirely different mentality.  Using the money in hand for the trip is more responsible "mindset" and a new way of thinking going forward.  We don't use credit for niceties like that.  We save our money and spend it for the "wants" in life.  Develop good habits like that, and your credit future will be very bright.

Paying off the credit card with the loan is also a strong move in more than one way.  A loan is term, not revolving debt.  It will last x-number of months and be done.  Credit cards are forever (it seems).  So, I always recommend transferrng card debt over to a loan when feasible. 

But the loan also strengthens your credit history.  The Term loan is a different kind of credit and looks good on your credit report.  So pay that card off, and leave it paid off.  Don't close it.  Keep it open, for credit limit ratio and age of credit history factors on your score...but put it away somewhere and only use it sparingly.

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quik71

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Enter Your Reply Thank you for your reply.  i received two conflicting answers to my questions and those two conflicting answers have already been circling around in my head.   Unfortunately I live paycheck to paycheck and have been unable to save over the years.  My kids are not getting any younger and I want to get the "Disney experience" out of the way before they are too old.  There are things i am going to need to pay for before the summer trip i.e. plane tickets, disney passes etc.   My timing has to be on target so that I am not paying an arm and a leg for plane tickets for a family of 4. I probably won't get my tax money until February/March, I can lock it in an account until my trip or I can pay off my credit cards, may have a little left to buy my plane tickets and then wait until closer to my trip to take out a personal loan to pay for the park tickets, car rental and hotel and just everyday expenses.  I don't know.,......  Is it better to have term debt than revolving debt?

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It is more than a credit score

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I would use your refund to pay off the card.  then hold off on the loan for as long as possible saving paying out interest.  Save some money between now and summer so the loan will not be as large.  If you are unable to save something between now and then, maybe Disney is a little out of your price range.  Remember a credit score is nice, but money in the bank is real.

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