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Consolidation loan or new card with 0% apr?

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Frequent Contributor

Consolidation loan or new card with 0% apr?

Hullo all, 


I'm in a position where I've been building a business for the last year gearing up for a product launch next year.  In the event that my product fails, i'll be stuck with around 30K in bills i need to pay off.

 

These bills are spread between a few different cards/lenders, and the largest single sum is around 13k.

 

I had thought about possibly getting a pendfed card, or otherwise, and BT'ing to it and taking advantage of the intro apr.

 

However, I get so many loan offers from places like SOFI, etc, that I've thougth more and more about a traditional consolidation loan.

 

It would lower my payments, my revolving debt won't take a hit, but it would give me another loan.  I don't know if that's bad.

 

From a home buying perspective, in say 1 year, which would look better, 30K in utilization against about 180K total credit (revolving) or a consolidated loan, and 0 revolving credit?  I already have 2 car loans and another home loan in another state that I rent.

 

Any help would be awesome!



CK EQ: 730 / CK TU: 735 / EXP FICO: 721 / EX Vantage: 793 / Total Exposure: 112K
Message 1 of 6
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Moderator Emeritus

Re: Consolidation loan or new card with 0% apr?

Installment loans for FICO are the way to go typically, but when talking mortgage specifically....

 

Revolving utilization kills, aggregate 30% and probably close to ~90% individual both are dings... my EQ Beacon 5.0 when I did a similar test was 660, went down to 646; doesn't sound like much but that's close to a tier and that's with a tax lien severely depressing my score.  From your scores in your signature, I would suggest that will absolutely drop you a tier as I doubt your mortgage scores are all north of call it 760 or 770.

 

Installment utilization is a non-factor on two of the mortgage trifecta scores (don't worry about any potential drop in FICO 8, that isn't relevant for mortgage).  What an installment loan does do though is drop straight to your DTI calculation; however, CC minimum payments do as well, and if the minimum payment isn't listed they'll impute one anyhow.  Something of a wash and if you're consolidating a bunch of lines might be lower actually but you should be able to get that information off a credit report in terms of the minimum payment for all of them.

 

I'd do some quick and dirty DTI math for your expected house and theoretical income (though I know starting a business this isn't 100%) and if you can afford the installment loan and the mortgage payment and get under call it 43% backend DTI, do that.

 

One other possible snafu: if your income is coming from the business of which you're an owner they're going to want 2 years tax returns, depending what your income looks like during the business establishment that might be a sticking point.




        
Message 2 of 6
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Frequent Contributor

Re: Consolidation loan or new card with 0% apr?

great advice about the DTI.  I hadn't really thought about it that way.

 

I have a full time job and a very good W2 income, the side business has been around for about 3 years and is an LLC and has plenty of paperwork.  The business has actualyl been successful on the consulting side, and has been funding the R&D on the product I'm launching. I just still have some debt racked up from it.  The business income isn't really enough to matter unless they are looking at pre-deduction income.  In which case the business brings in about an extra 50K per year.  After deductions/payroll it ends up way lower, like 4k.  But profitable...

 

One thought you just gave me, i wonder if my business would qualify for a small consolidation loan.  I could consolidate the business debt to the business loan, pay through the business, and it won't hit my credit at all.

 

I think regardless, it sounds like a consolidation loan is probably the best way to go with this.

 

Anyone have any suggestions on good consolidation loan companies, personal or business?



CK EQ: 730 / CK TU: 735 / EXP FICO: 721 / EX Vantage: 793 / Total Exposure: 112K
Message 3 of 6
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Moderator Emeritus

Re: Consolidation loan or new card with 0% apr?


@mccallb wrote:

great advice about the DTI.  I hadn't really thought about it that way.

 

I have a full time job and a very good W2 income, the side business has been around for about 3 years and is an LLC and has plenty of paperwork.  The business has actualyl been successful on the consulting side, and has been funding the R&D on the product I'm launching. I just still have some debt racked up from it.  The business income isn't really enough to matter unless they are looking at pre-deduction income.  In which case the business brings in about an extra 50K per year.  After deductions/payroll it ends up way lower, like 4k.  But profitable...

 

One thought you just gave me, i wonder if my business would qualify for a small consolidation loan.  I could consolidate the business debt to the business loan, pay through the business, and it won't hit my credit at all.

 

I think regardless, it sounds like a consolidation loan is probably the best way to go with this.

 

Anyone have any suggestions on good consolidation loan companies, personal or business?


Personal SOFI or CU's are legit, LendingClub isn't bad but sounds like they report as a consumer finance account and you want to stay away from that if possible.

 

Have you established your business credit yet?  If not, go start doing that (some guides in the Business board that are pretty legit for that).




        
Message 4 of 6
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Frequent Contributor

Re: Consolidation loan or new card with 0% apr?

Yes, my business has both a Chase Ink and a Capital one Spark, with 16K and 10K limits respsectively. I believe those should adquately establish credit yes?


The LLC also of course has a bank account, and also got an LOC through the bank, but i'm pretty sure that LOC doesn't report anywhere.



CK EQ: 730 / CK TU: 735 / EXP FICO: 721 / EX Vantage: 793 / Total Exposure: 112K
Message 5 of 6
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Moderator Emeritus

Re: Consolidation loan or new card with 0% apr?


@mccallb wrote:

Yes, my business has both a Chase Ink and a Capital one Spark, with 16K and 10K limits respsectively. I believe those should adquately establish credit yes?


The LLC also of course has a bank account, and also got an LOC through the bank, but i'm pretty sure that LOC doesn't report anywhere.


Check over in the business forum for business loan ideas then; probably a local credit union might be a good place to start, and of course there are SBA style loans and what not.  You have legit revenue in the LLC and some amount of credit so it's certainly possible, I would just be absolutely scrupulous in making sure I only paid off business expenses with it as doing otherwise smokes the corporate veil.

 

Think if there's any fudge factor in that, would go personal as there's nothing wrong with dumping cash into the LLC it's taking it out where things get awkward.  If that is the case, make sure there's no fudge laying around next time though sounds like you've done a reasonable job at least establishing that... though out of the business lines you mentioned only the Spark reports to personal to my knowledge.




        
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