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Need Advice: Paying Down A Lot of Debt At Once

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Established Member

Need Advice: Paying Down A Lot of Debt At Once

Hi there,

 

My household recently went down to one income due to COVID-19, so I've taken out a 401(k) loan to consolidate a large amount of high-interest debt and free up cash flow. My question is, how should I approach paying down the debt to avoid adverse consequences (like credit limits being slashed and cards being canceled)? Here is a rundown of what's being paid off:

 

2 installment loans

11 credit cards, all with high utilization but 3 of which have 0%/deferred interest promos

 

I'm not able to pay off everything, but I am able to knock off the installment loans and bring utilization down to below 30% on all cards. I can also put enough cash aside so that the 0% deferred interest offers can be paid in full when due, but waiting until that due date means those cards would have 60-90% utilization in the interim. I'm also thinking that once this is all done, my credit scores should be high enough to qualify for a 0% balance transfer card for the remaining utilization.

 

I guess I'm just worried that doing the right thing (paying everything that generates interest off quickly, and everything that doesn't slowly) will freak out lenders since I've had high balances for a while and will be doing something unusual.

 

Thanks for your help.

 

 

 

Message 1 of 14
13 REPLIES 13
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Established Member

Re: Need Advice: Paying Down A Lot of Debt At Once

Also, please ignore card data in signature. That's old and I don't know how to remove it. We're now talking about $50k+ in consolidation.

Message 2 of 14
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Community Leader
Senior Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

CLDs or balance-chasing will either happen or not, regardless of how you approach it. Finances before FICOs - pay off all the high-interest debt, pay the loans down to 7-8% (scoring boost), and pay off as much other debt as you can while putting a little cash aside as an emergency fund. Let the chips fall where they fall. CLDs aren't a huge deal when your balances are low, and with good management you can often get those limits reinstated over time.



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TCL $85,100| Agg. Util under 5%
Message 3 of 14
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Established Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

I don't know in this case that I would get too concerned about low utilization numbers if it meant sacrificing 0% APR offers that could be maxed out to save interest.

 

Taking out some Discover cards might be a good idea since they not only have that intro 0% APR period but present BT offers once a quarter or so. If you already have one you could get a second one and put all your expenses that you can on it during the intro period.

 

Check out the credit unions too since they will often start you with a 20k+ limit and offer BTs frequently.

 

If you have a Checking Line of Credit (CLOC) that will help you make larger catch up payments to your CCs or what debt you are trying to payoff. Many banks have rolled back on those offerings but Affinity FCU will offer a CLOC of 10,000 to go along with 20k type starting limit all in one credit pull. The credit card has 5% cash back on Amazon plus rotating quarterly categories.

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Message 4 of 14
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Super Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

Number one, who are your lenders? Number two why are you paying off the installment loans? Aren’t they lower interest than the cards?
For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.



RIP:



 

 

 

 




Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 5 of 14
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Established Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

I would tackle the highest rates first, then worry about where utilization stands on the other accounts with the cash remaining. For accounts at 0% right now, let them stay with the balance for now unless it's going to end soon and be a higher rate then definitely keep the money available there.
as of 10/13/20
Current Cards:
Message 6 of 14
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Valued Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

I am sure you are going to get differing opinions on this, but here is my 2c.

I would make a large payment 4-5 times minimum on each, and see if you get balance chased by any, all or none

Then you can decide where your payments should go.

You can go for saving interest, keeping prime lenders happy, or optimizing scores.

You won't know until you start and see how each lender reacts.

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Message 7 of 14
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Established Member

Re: Need Advice: Paying Down A Lot of Debt At Once

LendingClub x2

Capital One x3

Citi

Mercury (Barclays subprimed me and I couldn't be happier with the switch, btw)

Discover

Comenity

Barclays x2

Synchrony

Chase

 

Paying off the installment loans because the minimum payments are quite high and my first priority is freeing cash flow. Also, the rates are basically the same as the cards.

 

AND THANKS TO EVERYONE ELSE AS WELL FOR THE ANSWERS THEY ARE EXTREMELY HELPFUL!!!

Message 8 of 14
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Super Contributor

Re: Need Advice: Paying Down A Lot of Debt At Once

I have heard of Discover Barclay and synchrony balance chasing. You could pay the others first, so they realize it’s not a run.

I just read about capital one freezing a guy’s account because he made a big payment thru regular channels.
For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.



RIP:



 

 

 

 




Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 9 of 14
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Established Member

Re: Need Advice: Paying Down A Lot of Debt At Once

Going to do minimum payments on Discover since it's 0% for another three months. Barclays is also getting minimums until everything else is in as good a place as it can be (that's ok, the APR is one of my lowest). Synchrony is an Amazon card and I just paid the balance that isn't on a deferred promo, which is about $1k of a $1.5k limit in my wife's name so NBD if they chase it.

 

As for the rest, knocked off one installment loan and paid the other down to 8.9% of its original balance. All other cards paid down to 28% or less, unless there was a promo balance. This won't bring my overall utilization below 9% yet, but I'm hoping it gets me close enough to qualify for either another balance transfer offer or a low APR on a consolidation loan for the remaining ~$10k outstanding. Scores are currently in the 675 range with only one 6 y/o derogatory.

Message 10 of 14
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