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Author Topic: Getting a personal loan to pay down CC debt--need advice  (Read 13717 times)
pats12
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Posts: 91


« on: May 03, 2012, 12:26:44 PM »

Hi everyone,

I have about $20K in credit card debt, about half on a 14.99% card and the other on a card with 0% but will go to 18.99% in July. I've been paying down an initial $30K balance and making very good progress, but I'm wondering if I should get more aggressive.

So, someone suggested getting a personal loan, possibly from a credit union on another thread.

Is there any reason NOT to do this if I can get a rate below 14.99%?
Will it hurt my credit?

Rates in my area are quoted at 9.99%-11.99% at both credit unions and regular banks (which doesn't seem that great...not sure). Some banks don't post the rates and I have to apply to find them out.

Should I apply at several places to see what rate I can get? Will this cause my credit score to plummet?

I have a 760 as of last week.

I also have a mortgage and an 18K student loan which I pay on time each month if that helps to offer advice.
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ideagirl
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« Reply #1 on: May 03, 2012, 2:11:48 PM »

Hi everyone,

I have about $20K in credit card debt, about half on a 14.99% card and the other on a card with 0% but will go to 18.99% in July. I've been paying down an initial $30K balance and making very good progress, but I'm wondering if I should get more aggressive.

So, someone suggested getting a personal loan, possibly from a credit union on another thread.

Is there any reason NOT to do this if I can get a rate below 14.99%?
Will it hurt my credit?

Rates in my area are quoted at 9.99%-11.99% at both credit unions and regular banks (which doesn't seem that great...not sure). Some banks don't post the rates and I have to apply to find them out.

Should I apply at several places to see what rate I can get? Will this cause my credit score to plummet?

I have a 760 as of last week.

I also have a mortgage and an 18K student loan which I pay on time each month if that helps to offer advice.

What I did when I was in that situation was bounce balances around using those promotional "1.9%" or whatever balance transfer checks. They charge 4% for the transfer itself, but the rate is still low--if the promo is 3.9% for a year and they charge 4% on top, you're still at only 7.9%. Obviously this only works if you have enough cards with enough room on them to do it, but it's much simpler than applying for a personal loan and it doesn't require anyone to pull your credit report.

But back when I was in that situation, I didn't have a mortgage. Do you have enough equity to get a home equity loan to pay that off? The rates are absurdly low with good credit like yours, and while it does require a credit-report pull it just gives you another mortgage, which as I understand it is better than an unsecured loan. BTW I wouldn't be recommending this option if it didn't sound like you were responsible--using home-eq loans willy nilly and turning one's house into an ATM got a lot of people in trouble in recent years. But if you genuinely will use it to pay down that debt AND (this is the key) will stop using those cards such that you don't run up any new debt, it's your cheapest solution. (BTW, once you've paid off those cards, DO NOT cancel them--it will hit your credit score in a bad way.)
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dalekk
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« Reply #2 on: May 03, 2012, 2:24:31 PM »

I think a personal loan would probably be a good idea.  9-12% sounds about right.  I would not do a home equity loan.  You would get a lower rate, but you're replacing an unsecured loan (credit card) with a secured loan with your house as collateral.  I think putting your house at risk is pretty much always a bad idea.  Just shop around for the personal loan.  Even just a 1% difference in rate would mean hundreds of dollars over the course of the loan.

Getting a personal loan will actually help your credit.  Your credit utilization will drop and your credit score will go up. 
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pats12
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Posts: 91


« Reply #3 on: May 03, 2012, 3:29:33 PM »

I contacted a local credit union here just to ask around and they are offering a 5.99% for balance transfers. I went ahead and did an application to see if I could qualify to get one.

I do have a mortgage and the HELOC rate on it is 2.99% but I'm too scared to do that. My mortgage is not underwater, is very affordable, and I've had no trouble making the payments, but I just don't want to do that.
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clean
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Posts: 4,375


« Reply #4 on: May 03, 2012, 9:18:57 PM »

Quote
Do you have enough equity to get a home equity loan to pay that off?

It was said above... Dont trade unsecured debt for secured debt. 

Transfer what you can and get busy paying this off. 

Can you teach extra summer classes to get out faster?
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"The Emperor is not as forgiving as I am"  Darth Vader
pats12
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Posts: 91


« Reply #5 on: May 04, 2012, 1:37:42 PM »

Hi Clean,

I just picked up a summer class this morning and the credit union came through with a balance transfer offer of $7000 at 5.99%. This is the max they issue unless it is for a business.

This would leave about $13K at the high rates. Obviously I'd pay off the remaining 3K ASAP before it goes to the 18.99% and I think I can do that.

Both cards are from BOA--I was thinking of calling BOA up to say I've begun transferring the balance off (once it goes through so they can see I am really doing it) and see if they will lower the rate on either or both cards to prevent me from doing more.

Is that a bad idea for any reason? Can they ding me for asking by raising my rate or doing something to my credit score.
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prof_smartypants
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You're getting hosed by small minds with no game.


« Reply #6 on: May 04, 2012, 1:41:55 PM »

First thing to do is call the CC companies you are with and ask whether they can give you a lower rate, as you just suggested. Often, they will. This saves you transfer $$ and hassle.

This doesn't count as a credit pull, and shouldn't adversely affect your credit score at all.

If this doesn't work, consider other options.
« Last Edit: May 04, 2012, 1:42:46 PM by prof_smartypants » Logged

pats12
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Posts: 91


« Reply #7 on: May 04, 2012, 2:33:04 PM »

I just tried this...no dice. They pretty much said that this is the best rate they will do.

So, now I have a related question...

Should I try to apply for another low rate card to do a balance transfer? How long should I wait to do so (since I just applied for, and got, one yesterday).

I'm assuming applying for two cards too close together is a bad idea and will hurt my credit score.
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prof_smartypants
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You're getting hosed by small minds with no game.


« Reply #8 on: May 04, 2012, 2:55:15 PM »

go to creditkarma.com - they have a credit simulator tool that will tell you what affect these decisions might have on your credit.

It's free. I love it.

Otherwise, I spent the past 3-5 years flipping credit from one card to the next for a 0% limited time APR. I got my credit paid off without paying a fortune in interest (the one-time fee is a way better deal than paying interest every month), and my credit is still nearly 800.
« Last Edit: May 04, 2012, 2:55:26 PM by prof_smartypants » Logged

academic_cog
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« Reply #9 on: May 04, 2012, 3:11:19 PM »

Maybe this is a stupid question, but do you need a good credit score right now? You already have a house and seem to be planning to not buy anything and instead work on paying down debt for the next few months (or longer) so I don't understand why having it hit your credit score will matter much.
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pats12
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Posts: 91


« Reply #10 on: May 04, 2012, 3:17:57 PM »

No, I really don't need a good score necessarily. I'm not planning to buy anything and I've already refinanced my mortgage to a good low rate. I was thinking I didn't want to do anything that might cause these cards to go up higher than they are now.

I thought for some reason if your credit score goes down and the cards find out, they can then use that as an excuse to bump up your interest rate.
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msparticularity
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Assistant Professor cum bricoleur


« Reply #11 on: May 04, 2012, 4:06:58 PM »

No, I really don't need a good score necessarily. I'm not planning to buy anything and I've already refinanced my mortgage to a good low rate. I was thinking I didn't want to do anything that might cause these cards to go up higher than they are now.

I thought for some reason if your credit score goes down and the cards find out, they can then use that as an excuse to bump up your interest rate.

Yes, you're right; they can. You car insurance company can also increase your rates if your score goes down.
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clean
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« Reply #12 on: May 04, 2012, 7:22:42 PM »

Usually 2 credit applications in a year is ok, the 3rd starts to hurt.  They last a year, so it may be better to do them together as a year from now, they will come off together. 

Start calling other credit cards you have and see if they have any discounts to shift money to them.

Otherwise, there are a lot of credit unions in the world, see what they can do for you.   Also see if you can get a credit card from them and transfer the balances to them. 

Finally, dont get too caught up on the rate... get caught up on killing the balances.  If you can reduce the amount fast, the rate is irrelevant.

Have you considered the 'baby steps'?
    How much money in cash do you have?  The first step would be to take all of your money over $1000 starter emergency fund and send it to the debt.
      After that, send everything you can toward the smallest balance and pay minimums on the rest.  Once the first is gone, send all of that to the next smallest.  (Im ok with sending it to the largest balance, but do what you are doing now and transfer as much as you can toward lower rate cards- especially if you can do it without a fee).

That is enough to start with.
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hegemony
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« Reply #13 on: May 04, 2012, 7:48:49 PM »

I assume you've also looked at what caused you to get $30,000 in the hole as well, and plugged the leak.  Otherwise paying off the debt will only help temporarily.
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Tragedy tomorrow, comedy tonight.
pats12
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Posts: 91


« Reply #14 on: May 05, 2012, 8:12:33 AM »

Quote
I assume you've also looked at what caused you to get $30,000 in the hole as well, and plugged the leak.  Otherwise paying off the debt will only help temporarily.

Yeah, I have looked at that. Some of that balance was the result of poor choices, but more than half was a combination of medical bills for kids and a car. Once I get out, I'm staying out!
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