secured loan

[Anonymous]

I hve 10000 left over from house sale/purchase. I waas thining of taking a secored laon to pay down significatn credit card debt. Should i do this or jsutpay the debt directly?

[tufa4311]

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@Anonymous wrote:

I hve 10000 left over from house sale/purchase. I waas thining of taking a secored laon to pay down significatn credit card debt. Should i do this or jsutpay the debt directly?

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Would the 10k pay off the credit card balances you have in full?

What would you gain by keeping the 10k cash and then taking out a loan, and a secured one at that, to pay off your cc balances?

I only see one reason to keep the cash and take out a loan - if you can invest the cash and earn a higher interest rate than your cc balances - highly unlikely.

If your cc balances are significantly higher than 10k then put the 10k towards that, then see what interest rate you could get on a personal/consolidation loan to pay off the balance of your credit cards - the interest rate has got to be lower in the consolidation loan.

[Anonymous]

In my opinion, pay the cards directly. No sense paying more interest if you can help it.

[Anonymous]

Great idea pay down and then consolidate. Tganks

[Anonymous]

Thanks

[tufa4311]

And on top of that, you will almost for sure see a drastic raise in your credit scores as you are doing two things that help a score: lowering your cc utilization and taking out a installment loan - just be sure it is a loan from a bank or credit union rather than a finance company. I believe that finance company loans are frowned upon by FICO and can lower your score.

One word of caution - be sure that after you get your cards down to $0 that you don't run them back up, if at all possible. You do not want to have debt that was incurred to pay off your credit card balances and then run those balances back up - then you'd have two debts! Remeber, the $0 credit card debt will be a bit of a red herring, you didn't pay off your debt, you just moved it to another financial vehicle.

[Anonymous]

Thank you! And I should NOT ever close any card, correct?

[tufa4311]

Not necessarily. There are prime and subprime cards. Subprime cards, such as store cards, are not what you want in your portfolio although they do have their short term uses.
Remember also that even when you close a card you don't loose its history and that will continue to report for years (7 years I think, maybe 10)
But you will loose the available credit and that will hurt your utilization which in turn can hurt your score.
If you have a number of prime cards, or at least cards by banks and credit unions, you can consider closing subprime cards but it has it positives and negatives. It all depends on where you are in the game.

[Anonymous]

Thanks. I was thinking there was a danger of having too much available credit. Is that frowned upon also? I have a long credit history with my FICO score around 720 and my wife's the same. We bought a house and will want to reliance on about six months to get rid of pmi so I want to boost my credit as much as possible. Tganks so much for all the advice.

Bw

[tufa4311]

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@Anonymous wrote:
Thanks. I was thinking there was a danger of having too much available credit. Is that frowned upon also? I have a long credit history with my FICO score around 720 and my wife's the same. We bought a house and will want to reliance on about six months to get rid of pmi so I want to boost my credit as much as possible. Tganks so much for all the advice.

Bw

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I don't know how it's veiwed by FICO - with all the factors that go into your score this is an aspect I assume they would look at but, again, I don't know. In addition to your FICO score, this subject could influence your credit providers. Have a read:

http://ficoforums.myfico.com/t5/Credit-Cards/Too-much-available-credit-updated/td-p/4015680