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credit & debt

Should You Get a Loan From Your Credit Card?

The convenience can come at a steep cost. But there are options.

If you have a credit card from Chase or Citi, you may be able to borrow against the unused portion of your credit line in the form of a loan. Both issuers are touting the loans to select customers as a quick and easy way to get cash—say, for an unexpected expense or home project.

The primary appeal is convenience. You don’t have to apply for a separate loan or undergo a credit check, and loan payments are rolled in with your regular payment so that you have one bill each month. With the Citi Flex Loan, you can spread out payments for a term of up to 60 months. My Chase Loan, which Chase plans to launch late this year, will have a term of up to 24 months.

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For both plans, the interest rate is fixed. Most credit cards have a variable rate, so taking the loan provides more predictability for a big purchase than charging it to your card. But variable card rates will fall further if the Federal Reserve continues to lower the federal funds rate; following September’s decrease of one-fourth of a percentage point, Kiplinger expects another quarter-point cut in late October.

Shop around. The issuer will likely offer you a loan rate that’s lower than your card rate (recent average card rate: 17.14%), but you may find an even better deal elsewhere. (Neither issuer was willing to provide a range of rates charged for the loans, but several Citi cardholders we spoke with said they had received offers ranging from 9.99% to 16.99%.)

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If you switch to a card that offers a 0% rate for the first several months you have the account, you’ll fare better as long as you pay off the balance before the no-interest window closes. The Wells Fargo Platinum Visa and U.S. Bank Visa Platinum cards both recently charged zero interest on purchases for the first 18 months.

If you prefer a personal loan, review offers from lenders at lendingtree.com and supermoney.com. Lightstream, a division of SunTrust Bank, recently offered rates as low as 3.99% on personal loans. As you compare loans, check for origination fees and prepayment penalties.

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