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Credit card consolidation loan?

Moderator

Re: Credit card consolidation loan?

Any unsecured loan is going to be obtained at a higher interest rate than a secured one.

 

Talk to CU's, both about the consolidation loan option, or doing a cash-out refinance on your vehicle would be my recommendations.  While it's worth looking possibly at Prosper and/or LendingClub, I think financially you have better options.  CU's are throwing money at auto refinances right now, you have more than enough equity to cover the marker on the CC debt and we're probably talking in the 5-6% range and possibly better, rather than 10+ unsecured.  That's non-trivial when cash flow is tight, even on a 4K loan.

 

 

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Message 11 of 20
Valued Contributor

Re: Credit card consolidation loan?


Revelate wrote:

Any unsecured loan is going to be obtained at a higher interest rate than a secured one.

 

Talk to CU's, both about the consolidation loan option, or doing a cash-out refinance on your vehicle would be my recommendations.  While it's worth looking possibly at Prosper and/or LendingClub, I think financially you have better options.  CU's are throwing money at auto refinances right now, you have more than enough equity to cover the marker on the CC debt and we're probably talking in the 5-6% range and possibly better, rather than 10+ unsecured.  That's non-trivial when cash flow is tight, even on a 4K loan.

 

 


More risk for the borrower with secured. I am sure OP wouldn't want to lose their vehicle in the event of a default. Yes the rate is higher with unsecured, but rightly so. No risk to the borrower, only the lender.

 

If OP is confident they will be able to make the payments for the next several years then by all means go with the secured loan.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 12 of 20
Moderator

Re: Credit card consolidation loan?


Dustink wrote:

Revelate wrote:

Any unsecured loan is going to be obtained at a higher interest rate than a secured one.

 

Talk to CU's, both about the consolidation loan option, or doing a cash-out refinance on your vehicle would be my recommendations.  While it's worth looking possibly at Prosper and/or LendingClub, I think financially you have better options.  CU's are throwing money at auto refinances right now, you have more than enough equity to cover the marker on the CC debt and we're probably talking in the 5-6% range and possibly better, rather than 10+ unsecured.  That's non-trivial when cash flow is tight, even on a 4K loan.

 

 


More risk for the borrower with secured. I am sure OP wouldn't want to lose their vehicle in the event of a default. Yes the rate is higher with unsecured, but rightly so. No risk to the borrower, only the lender.

 

If OP is confident they will be able to make the payments for the next several years then by all means go with the secured loan.


On time payments for 4 years, known income, current payments in aggregate of $580/month.

 

That buys a lot of car loan frankly, and given his credit profile, he's not going to need that much.  Probably can reduce it to less than the 400 dollar range and that's on the order of 10% of his post-tax income in savings over his current debt obligation.

 

I agree with your point regarding who bears the risk of default, but that's not the likely scenario here: on the assumption the credit cards aren't run up again, it's a straight financial win to take the consolidation loan, and a FICO one as well.   This is an easy story to sell to a CU, might as well take advantage of the current credit market and the equity in the asset in this case to get out from under the credit card debt.

 

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Message 13 of 20
Valued Contributor

Re: Credit card consolidation loan?



On time payments for 4 years, known income, current payments in aggregate of $580/month.

 

That buys a lot of car loan frankly, and given his credit profile, he's not going to need that much.  Probably can reduce it to less than the 400 dollar range and that's on the order of 10% of his post-tax income in savings over his current debt obligation.

 

I agree with your point regarding who bears the risk of default, but that's not the likely scenario here: on the assumption the credit cards aren't run up again, it's a straight financial win to take the consolidation loan, and a FICO one as well.   This is an easy story to sell to a CU, might as well take advantage of the current credit market and the equity in the asset in this case to get out from under the credit card debt.

 


I was just trying to keep the car out of the picture.

 

Many ways to go about this. 

 

I am sure you are getting sick of the car by now. You could sell it outright. Pay off your cc's and use the equity as a down payment on a new car. The new car would have a very low rate like less than 2%.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 14 of 20
Contributor

Re: Credit card consolidation loan?

Still awaiting verification from Prosper.

 

I tried lending club and was immediately denied. I didn't even put in my social security number. It asked me for income and what I thought my credit rating was. It came back with a credit score of 651 (TransUnion) and said I was denied because of too many delinquencies.

 

How can they pull a credit report without a SSN?

 

I will call some credit unions this week......................

Message 15 of 20
Regular Contributor

Re: Credit card consolidation loan?

Your credit card debt is UNSECURED debt.  Do NOT take out a secured loan to pay off credit cards.  If something were to come up, you don't want to have your car reposessed!!!! Stick with you plan of paying off the car and then include additional money torward you CC payments.  Good Luck!!!

Message 16 of 20
Highlighted
Senior Contributor

Re: Credit card consolidation loan?

Hmm.  Great question, and an interesting debate.

 

I'm with Relevate tho.  If I were the OP, I would speak to a local credit union and tell their loan officer everything you told us.  Methinks that you could pay off all of the credit cards with the equity in your automobile and have a much lower payment AND interest rate... which would improve your monthly cash flow AND lower your total out of pocket.

 

Good luck to you!



Zero percent financing is where the devil lives...

10/01/17 Fico8 scores: EX 660, EQ 647, TU 663
Message 17 of 20
New Contributor

Re: Credit card consolidation loan?

When/where did you get your score? 


Starting Score: 534 EQ FICO: 10/11
Current Score: 727 EQ FICO; 717 TU FICO (per Lending Club) As of 6/1/14; ??? EX :
Goal Score: 700


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Message 18 of 20
Regular Contributor

Re: Credit card consolidation loan?

Was wondering if the OP was approved through Prosper ?

12/11/12 Starting Score EQ FICO - 583/ TU FICO - 615/
4/1/13 - Lender Pull - TU - 645 EQ - 675 EX 712
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Message 19 of 20
Contributor

Re: Credit card consolidation loan?

@Dustink

 

Thank You so much. This website I was looked for about month ago and no one didn't know about! Thank YOU!

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Message 20 of 20