Using a 0% balance transfer card for a few thousand dollars is a great way to save on interest if you’re in debt. However doing that with say, $25,000, isn’t always possible in today’s economy, where credit limits just aren’t what they used to be. And hence why some turn to loans instead.
But are these loans a bad idea? Should you apply in 2013 or not?
The Discover Financial Services personal loans seem to be the most widely used (versus the other big banks). In fact, they regularly send me loan applications in the mail, even though I don’t have any credit card debt.
As you can see above, the Discover personal loan application offers anywhere from $5k to $25k. At the time of this review, the advertised interest rates ranged between 7.99% to 18.99% and you could a length of up to 84 months (7 years).
Still, you probably are better off getting a 0% intro offer from a credit card. If you need to pay someone cash that doesn’t take credit cards, you could always use PayPal to send the money to them (Paypal is classified as a purchase typically).
Among numerous reviews posted on the forum, there were 2 in particular which claimed this loan offer from Discover to be a “scam” for the following reasons:
- One guy said it because his loan wasn’t approved despite a good credit score.
- Another guy said it because he was given an interest rate higher than the 7.99% even though he claimed to have a high score.
In a nutshell, both seemed to feel it was a bait ‘n switch however I can assure you the Discover personal loans are definitely NOT a scam. Here’s why…
- You may be surprised to hear that Discover and American Express have a lot in common, including the fact that both cater to those with excellent credit. In fact, many Discover cards are harder to get than AmEx cards. In other words, they are picky with who they choose. But this isn’t a bad thing… don’t you want a bank that manages their risk responsibly?
- Remember the advertised range is 7.99% to 18.99%. Just because you don’t get the best rate, it doesn’t make it a scam. I have seen reviews from people with only average credit scores who still go a fairly good rate. For example in 2011 this guy got $19k at 11.99% with a credit score in the low 700s.
- Ultimately if the personal loan is a lower rate than what you’re currently paying on your debt, it makes sense to get. Even if you get a rate 3% lower than the average APR on your credit cards, that still means you are saving money, right?
For large debts, the personal loans from Discover can be a good way to pay down debt at a lower rate. The vast majority of reviews I have read from customers are positive, so don’t let a couple disgruntled people talk you out of them. You should apply if you don’t want to do balance transfers.
On the other hand, even if you have $25k in debt, you may be able to transfer it at 0% if you split it between 2 or 3 different cards. Considering that there are 0% offers for almost 2 years, this may be the way to go. My recommendation would be to setup automatic bill pay on those accounts after you do them, so you don’t have to hassle with multiple bills each month.
This post was written or last updated November 7, 2013