I am a 25 yr old male with a good job. I am not having trouble paying for the two cards I own, however I am thinking that the rate on my personal loan would be significantly lower than my two credit cards. I was wondering if a personal loan for about 10K would hurt my credit score?
2007-11-10 10:20:26 · 11 answers · asked by tkdrex2004 1 in Business & Finance ➔ Credit
It is a good idea....just as long as you understand the dangers.
Many people get this type of "consolidation loan", then turn around and run up their now empty cards all over again. Then they are in twice the amount of debt, and end up filing for bankruptcy.
From your question, it sounds like your problem is the high interest rate. I would first try to get a lower interest card, or call your current card company and request a lower rate. If your credit is decent you should be able to get around 15%.
If that fails, and you get the personal loan...DO NOT use any more credit until that loan is paid. You must stop using your credit card.
If you can't do that, then start reading up on the bankruptcy laws. I'm not joking here...I've see this happen to an awful lot of people.
2007-11-10 10:44:42 · answer #1 · answered by Anonymous · 2⤊ 0⤋
not a bad idea as long as the interest rate on the personal loan is lower than the average rate on your two credit cards.
with a fixed rate loan you know the term or maturity date of your loan and when it will be paid off by. as a side benefit,
your credit score should increase as your percentage of available credit just went up as a result of your paying off the balances on your revolving credit. dont close the credit cards as this will negatively affect your score under the current scoring algorythims used by the credit reporting companies.
i wouldnt suggest borrowing more than what is owed, unless of course you need the money... if the bank's policy is that the minimum loan size be $10k, then take the money and immediately pay back the difference, make sure the terms dont have a prepayment penalty or else it wont be worth it.
to learn more about how loans affect your credit score, try www.myfico.com for a complete explanation on how scores are determined.
your other option is too just pay those accounts down as quickly as you can. start with the one with either the highest interest rate or highest payment factor depending on your orientation. payment factor can be determined by dividing the minimum payment by the balance. lower payment factors mean longer terms with equates to more interest paid and higher payment factors mean greater cashflow demand.
get into the habit now of using your credit cards as an extension of your checkbook. dont spend more what you normally could afford if you were paying cash. that way when the bill comes each month, you can pay the balance if full.
good credit scores dont mean that you have to carry debt, but you do have to have some activity so they can rate it.
as a side note, start saving for retirement now... if your employer has a 401k plan, get into it. if they dont, start an IRA.
2007-11-10 10:48:48 · answer #2 · answered by loanman 4 · 0⤊ 0⤋
your interest from the loan (assuming you get it with all the credit card debt) will be much less. Its not a bad idea, but why 10k? get a loan for 6 thousand then immediately pay off your cards. The money that you are making should go to pay off the loan fast. A loan that is paid off is a good thing for your credit rating
2007-11-10 10:32:19 · answer #3 · answered by dennis v 2 · 0⤊ 0⤋
All you would be doing is just moving the debt around. Knuckle down with a written budget and pay off the debt. Maybe get a second job until the debt is payed off.
stop obsessing with your I Love Debt score. The only people that obsess with it are the ones that plan on borrowing lots of money and paying lots of interest.
Pay as you go and you will come out ahead.
Of course these people that do financing for a living are gonna tell you different.
No your problem is not the interest rate. It's your spending.
Debt Free is Definitely the way to be!
Love me or Hate me, You know I'm right
2007-11-10 10:44:14 · answer #4 · answered by heybulldog 5 · 1⤊ 0⤋
If you have a good job, why not just pay them off quickly?
A loan to pay off credit cards might not be easy to get, and if you can might have interest about as high as the credit cards. And yes, having a loan will affect your credit score. Plus the big danger is that you'll get the loan, pay off the cards, then run them up again so you'll be worse off than you are now.
2007-11-10 10:27:17 · answer #5 · answered by Judy 7 · 0⤊ 0⤋
It's a good idea ONLY if you then quit using the credit cards. Otherwise you will run up another $6K on the cards AND have a $6K personal loan to pay off too. If you can pay off the cards and cut them up and cancel them, good idea. If not, don't.
2007-11-10 11:11:15 · answer #6 · answered by oklatom 7 · 2⤊ 0⤋
Not a good idea, opt for a credit card debt consolidation loan:
If you are caught in the credit card debt trap, approach a debt consolidation company for help, instead of paying high rate of interest to your card issuer. Most of the debt consolidation companies provide loans to help you tide over the credit card debts. These loans are known as credit card debt consolidation loan. The advantage of this loan is that you are charged a low rate of interest. The difference between the interest charged on the credit card and the interest on the credit card debt consolidation loan is substantial, saving you quite a big sum of money.
http://debt-refinance-loan.com/category/Credit-Card-Debt-Consolidation-Loan.html
2007-11-12 14:59:00 · answer #7 · answered by helper01 2 · 0⤊ 0⤋
You should be able to get a rate less than 10% for this loan. This is a good idea assuming you are responsible and don't splurge just because you have more credit available. Responsible behavior with this loan will actually raise your credit score.
2007-11-10 11:21:09 · answer #8 · answered by Michaelsgdec 5 · 1⤊ 0⤋
Three years ago I did what you are thinking of doing, for less ($4k). I "paid off" my credit card with a zero interest one. IF you have the discipline and DO NOT incur additional debt, this is a good solution. Otherwise, you are going to make the problem worse. If I was you I would destroy both cards, live on cash and pay them off as quickly as you feel comfortable with.
2007-11-10 18:59:43 · answer #9 · answered by GrainOfSalt 2 · 0⤊ 0⤋
Hello! I Got This For You. As Always, It's Always Better That You Get The Info Firsthand. So Better Check It Out Yourself, Im sure You'll Discover Something...
2007-11-10 23:49:43 · answer #10 · answered by Jacob B 1 · 0⤊ 0⤋