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Debt consolidation advice

Established Member

Debt consolidation advice

Hi,

 

First, want to say thanks in advance for any advice or suggestions, and that this forum is a great resource!

 

My wife and I are looking into some options for consolidating 3 credit cards into one fixed rate, lower interest loan.  Here are the details of our situation:

 

We have about $24,000 in debt between 3 cards - a 7.99% Chase Freedom ($12,000 total), a 14.99% Citi Simplicity ($11,000 total), and a 0% Best Buy card that will soon be switching to a higher rate (I think close to 20% - $1000 total). 

 

My wife has never been late, or missed a payment on anything - however due to some past issues, I have some dings on my credit.  Because of my credit issues, my wife has assumed the burden of our credit debt - mortgage is in her name, as well as all the above credit cards.  We are basically almost maxed out on both the Citi, and Chase card. 

 

Her credit score is right around a 700, while my Equifax score is a 679.  We applied through a credit union for an unsecured loan, 72 months at 6.99% (it was a special they were running), however we were declined.  She tried to apply for herself, but her DTI was too high.  I then tried to get onto the loan which made our DTI acceptable, but they decline because of the few dings on my report (2 collections from 2008 for a total of 400, 2 lates on my car payment, and two charge-offs from 2006/2007).

 

Our house was purchased last year, so a home equity loan isn't really an option right now.  Does anyone have any suggestions for good credit unions who are a little less "risk-averse" than the one we already tried?  We looked into possibly securing her car to get a 5% rate on a 72 month loan from another CU, but her car is worth at best around $8000, so that won't help us very much.  At the very least, we'd like to "refinance" the 11K Citi card, and 1K Best Buy card. 

 

Any advice or suggestions would be much appreciated! 

2 REPLIES
Senior Contributor

Re: Debt consolidation advice

Can you borrow against your 401K?  Take out a 401K loan, use that to wipe out the CC debt, then with improved scores and improved DTI, open up a new CC with 0% BT or take out a loan from the CU to pay back the 401K loan. 

 

Nothing says you have to pay back the 401K loan immediately, but this is an option if you want to get the money back into your retirement account as quickly as possible.

 

There are some risks.  You might still have difficulty in getting enough of a loan to pay back the 401K loan.  In which case you have to consider the lost opportunity for your money to grow while it is not in your account.  Additionally, the biggest risk for 401K loans is if you lose your job, you have a shortened time period to pay it back, otherwise it is treated as an early withdrawal and you owe taxes and penalties. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Re: Debt consolidation advice

Carrying balances on too many credit cards can harm your credit rating. In order to staunch the bleeding and perhaps obtain a much better interest rate, many consumers consider consolidating credit via balance transfer. Shuffling credit card balances onto a card with a  and introductory benefits is a smart financial move.