topic Consolidating credit card debt in Personal Finance

Consolidating credit card debt

Anonymous — Fri, 14 Jun 2019 07:39:05 GMT

Generally, does it make sense to try to consolidate outstanding balances from five credit cards, or is the new loan that would consolidate these balances likely to be more expensive than what the individual banks are charging?

Re: Consolidating credit card debt

CreditInspired — Fri, 14 Jun 2019 12:31:19 GMT

Hi and welcome to MyFICO

It depends on several things:

The interest rate on the 5 CCs
The combined minimum payments on those 5 CCs
The total outstanding balance to be paid off
The consolidated loan amount you are seeking
The interest rate on the consolidated loan
The term of the consolidated loan

If you provide that info, we can give you more concrete answers.

Re: Consolidating credit card debt

Anonymous — Sat, 15 Jun 2019 06:58:33 GMT

Thanks. But if I had answers about a new loan to considate individual credit card payment, I would not have the question. I am trying to learn whether debt consolidation is generally recommended. The mere act of applying for a loan, I am told, will lower my FICO score, so I could hurt myself by trying to get definite information about rates, etc. I sense a kind of Catch-22: until I apply for new financing, I will not know where I stand, but if I do so, I could hurt my score, especially if I want to shop around for the best rate. I thus would like to learn what the recommended strategy is.

Re: Consolidating credit card debt

Anonymous — Sat, 15 Jun 2019 13:40:05 GMT

It depends on your credit scores, if you have any derogs, what your utilization is on said cards (so each card, it's limit and it's balance), and what their interest rates are. We'd need all of this information and could then make an educated guess whether or not this might be able to help you.

If it's determined that it might be able to help you, folks here will be able to chime in with some places to go for preapprovals etc.

(The previous poster thought you were a little further along in the process and was offering to crunch the numbers and determine if there were any cash savings. Which if you get through all of the above and have a couple of offers to compare, may actually surprise you. Often times it isn't what it's cracked up to be.)

If you have 5 maxed out cards, chances are there are no consolidation options available to you until you get your utilization under control. (That's the catch-22 for most people looking to consolidate.)

I will say that overwhelming majority of people asking this question have issues with their budget that more loans aren't necessarily going to fix. (I was in this particular situation for years before my BK, and crazy schemes to move debt around were really just masking my budget problems.)

Re: Consolidating credit card debt

CreditInspired — Sat, 15 Jun 2019 13:57:57 GMT

@Anonymous wrote:
It depends on your credit scores, if you have any derogs, what your utilization is on said cards (so each card, it's limit and it's balance), and what their interest rates are. We'd need all of this information and could then make an educated guess whether or not this might be able to help you.

If it's determined that it might be able to help you, folks here will be able to chime in with some places to go for preapprovals etc.

(The previous poster thought you were a little further along in the process and was offering to crunch the numbers and determine if there were any cash savings. Which if you get through all of the above and have a couple of offers to compare, may actually surprise you. Often times it isn't what it's cracked up to be.)

If you have 5 maxed out cards, chances are there are no consolidation options available to you until you get your utilization under control. (That's the catch-22 for most people looking to consolidate.)

I will say that overwhelming majority of people asking this question have issues with their budget that more loans aren't necessarily going to fix. (I was in this particular situation for years before my BK, and crazy schemes to move debt around were really just masking my budget problems.)

Re: Consolidating credit card debt

Anonymous — Tue, 15 Sep 2020 04:47:04 GMT

Hi,

i am not the original poting party but I'd like to get your take on whether or not taking out a Discover paersonal loan for 15k to payoff 3-4 cards that have a higher interest rate would be smart or not.

Here are the facts

New loan ( ad said 6.9% / reality 18.99%)

15k at 36 mos $549 month

Paying of 3 diff cards that all have 22.99% rates.

Currently Paying a total of $1200 month on all 3 cards now to pay down. Minimum due pmts total $550.00

Credit score 690

Thanks ahead of time for the help

Curt

Re: Consolidating credit card debt

dynamicvb — Tue, 15 Sep 2020 15:33:25 GMT

@Anonymous wrote:
Hi,

i am not the original poting party but I'd like to get your take on whether or not taking out a Discover paersonal loan for 15k to payoff 3-4 cards that have a higher interest rate would be smart or not.

Here are the facts
New loan ( ad said 6.9% / reality 18.99%)
15k at 36 mos $549 month

Paying of 3 diff cards that all have 22.99% rates.
Currently Paying a total of $1200 month on all 3 cards now to pay down. Minimum due pmts total $550.00

Credit score 690

Thanks ahead of time for the help
Curt

This may make sense as long as you have the discipline to continue to pay the $1200 a month towards the loan and did not charge back up the cards. That is what a lot of people wind up doing, taking a loan, then putting charges back on the cards with their increased available credit and they wind up deeper in the hole than if they had not consolidated anything. So the question to ask yourself, is how dedicated are you to paying down debt and not incurring additional debt?

Re: Consolidating credit card debt

FlaDude — Tue, 15 Sep 2020 21:39:11 GMT

Consolidation to lower interest rates can be a great tool, I've used it to very good effect. That said, 22% down to 19% is not much of a savings.

Re: Consolidating credit card debt

Kforce — Thu, 17 Sep 2020 00:39:31 GMT

@Anonymous wrote:
Here are the facts
New loan ( ad said 6.9% / reality 18.99%)
15k at 36 mos $549 month
15k, 36 mo, $549 month, 18.99% = $4,791 interest paid
15k ,15 mos $1200 month, 18.99 = $1,846 interest paid

Paying of 3 diff cards that all have 22.99% rates.
Currently Paying a total of $1200 month on all 3 cards now to pay down.
15k, 15 mo, $1200 month, 22.99 = $2,313 interest paid

Savings = $477, with 1200/mo

Re: Consolidating credit card debt

Slabenstein — Thu, 17 Sep 2020 00:59:28 GMT

A CU might be able to get your a better rate than 19%. (Trivially, they would necessarily have a slightly lower rate, since, iirc, they're capped at 18%.) You could check local CUs as well as the big "anyone can join" national ones. They should be able to quote you rates in your score range w/o an hp.

Re: Consolidating credit card debt

SouthJamaica — Fri, 18 Sep 2020 02:59:36 GMT

@Anonymous wrote:
Generally, does it make sense to try to consolidate outstanding balances from five credit cards, or is the new loan that would consolidate these balances likely to be more expensive than what the individual banks are charging?

On paper, if the interest rate is low enough, it makes sense, but there's a permanence to a loan, and it has a way of becoming a weight around your neck.

Re: Consolidating credit card debt

SouthJamaica — Fri, 18 Sep 2020 03:00:45 GMT

@Anonymous wrote:
Hi,

i am not the original poting party but I'd like to get your take on whether or not taking out a Discover paersonal loan for 15k to payoff 3-4 cards that have a higher interest rate would be smart or not.

Here are the facts
New loan ( ad said 6.9% / reality 18.99%)
15k at 36 mos $549 month

Paying of 3 diff cards that all have 22.99% rates.
Currently Paying a total of $1200 month on all 3 cards now to pay down. Minimum due pmts total $550.00

Credit score 690

Thanks ahead of time for the help
Curt

No, don't do it at that rate. Just pay your cards down.