Consolidation loan good or bad?

Anonymous · ‎07-27-2007

I have about $20k in CC balances, which I mostly racked up in grad school. Now that I'm working full time I'm committed to paying this off ASAP. This amount represents about 85% UTI, which I know is quite high. Much of this balance is on 0% IR (which will end next year), and much of it is on a high interest rate.

If I am able to get a loan to cover all of at a (hopefully) lower overall interest rate, would that be beneficial? Do these kinds of loans appear as more revolving credit or as an installment loan? I guess either way my UTI would go down but I think an installment loan would be better.

Anonymous · ‎07-27-2007

Installment debt is better than revolving debt, but you want a mix of installment and revolving loans.

If it's a signature loan or personal loan, then it's installment debt. Ask, and they will tell you. If it's a personal line of credit, those are generally revolving debt, but you only pay when you use it.

Depends how big of a loan you get and who your CCCs are. BofA is famous for ratejacking folks whereas AMEX seems far more tolerant of a nearly maxed out CC with low APR debt.

Any details about where you're at (CCC, balances, CLs, APRs now and what they will be) would be helpful. If you go thru a CU or other portfolio lender, you'll likely get the best possible rate.

Anonymous · ‎07-27-2007

About $10k is with Bank of America - high interest

About $4k is with Discover - 0% interest

About $3k is with Providian/WaMu - medium/high interest

The rest is in a smattering of HSBC and Barclay accounts which I picked up for the 0% balance transfers.

I also have an auto loan through my credit union which is about 2 months away from being paid off. I've been paying it very aggressively the last few months because I would like to have the pride of having paid off the whole thing, despite this account having a low interest rate.

I've got a bunch of student loans which I've never been late on.

No mortgage.

I guess my question was party motivated because I had heard in the past that a consolidation loan looks bad somehow on the credit.

Anonymous · ‎07-28-2007

@Anonymous wrote:
About $10k is with Bank of America - high interest
About $4k is with Discover - 0% interest
About $3k is with Providian/WaMu - medium/high interest
The rest is in a smattering of HSBC and Barclay accounts which I picked up for the 0% balance transfers.
I also have an auto loan through my credit union which is about 2 months away from being paid off. I've been paying it very aggressively the last few months because I would like to have the pride of having paid off the whole thing, despite this account having a low interest rate.
I've got a bunch of student loans which I've never been late on.
No mortgage.
I guess my question was party motivated because I had heard in the past that a consolidation loan looks bad somehow on the credit.

When I transferred all my balances to my LOC, my score skyrocketed, and now it's still going up a couple of points each month. I used to have a personal loan where when I pay it off, the account will close. My score did not go up that much when I went with this route. A safer bet is to go with the LOC; it's just hard to get approved for a high limit.

Anonymous · ‎07-28-2007

RevMen wrote:
I guess my question was party motivated because I had heard in the past that a consolidation loan looks bad somehow on the credit.

Consolidation loans "look bad" I suspect because people often close a bunch of CCs when they get a consolidation loan. That lowers your overall revolving debt CL.

Knowing the CLs as well as the balances on your CCs would help. Balances alone don't tell much.

Anonymous · ‎07-28-2007

Utilization is spread pretty evenly at around 85%. I'll ask my credit union about a LOC. I've done a fantastic job on my car loan with them, often paying more than the minimum and never being late. They might be willing to help me out.

Anonymous · ‎07-29-2007

Here are some suggestions. Since you have some history and no lates get one more card-try for one with a zero intrest balance transfer. Move WAMU debt to that. Keep paying down to get overall utilization down. Its easy to pay cards down when you are employed and the cards are not charging intrest. No need to be paying intrest on installment loan now. After you have paid down consider buying a house. Then go to BOA and get a Heloc to remove remaining debt-since it will be secured by the house it won't ding credit like other revolving debt. Then convert that to fixed rate. Result- you own a house, cards are 0 balance and your credit score will be quite high.

Anonymous · ‎07-29-2007

I like your way of thinking! Very creative.

Anonymous · ‎07-29-2007

@Anonymous wrote:
I like your way of thinking! Very creative.

Are you NUTS? Suggesting that someone buy a house just to pay off their debt? THAT IS THE WORST REASON TO BUY A HOUSE.

Also you are incorrect, my HELOC does count toward my revolving credit on my CR. By definition it is an open/revolving line of credit.

Anonymous · ‎07-29-2007

RevMen wrote:
Utilization is spread pretty evenly at around 85%. I'll ask my credit union about a LOC. I've done a fantastic job on my car loan with them, often paying more than the minimum and never being late. They might be willing to help me out.

CUs do tend to be very helpful. A signature or personal loan would establish installment debt and give you money to payoff your revolving CC debt.

Buying a house, presuming you found a good deal that got you into a home with available equity, is a possibility, but it's much more involved and there are lots of considerations. Check out this thread by Jacque383. Lotta good info about house flipping and house buying in general. Even if you don't ever plan to flip, buying a home like a flipper can save you money.

http://ficoforums.myfico.com/fico/board/message?board.id=loans&thread.id=127