This month, I acquired 2 PL because I had been reading about diversification on the CR.
The first is an unsecured/signature personal loan (UPL): $2500.00 at 12.99%.
The other personal loan is secured by my vehicle via a lien I took out on it (SPL): $11,350.00 at 7.99%.
A little background on these PL:
When I was apping for the UPL, the underwriter asked me if I wanted to do the SPL instead because I didn't have any loans on record and I had a better chance of getting a higher loan amount, but I declined due to fear about lien=bad on the CR coupled with the fact that I didn't need the cash anyway. Lack of loan history was given as the reason for the low amount on the UPL. However, after doing a bit of research, I learned that the UPL was treated mostly like a CC because it's not essentially backed by anything beyond a signature.
I then had a lender pull my CR, which stated a lack of secured debt affecting my score. So I explored the process of doing the SPL using the vehicle lien and what that would look like on my CR, and wound up taking out the SPL. Using my paid car as collateral is emotional for me, as I can't stand debt, but I figured at the time that it may be a positive step toward the 800 club, which is where I want to be by 2015 if possible. I read that secured personal loans look better. As a side note, FYI: For those who have the opportunity to get a secured personal loan through USAA using their paid vehicle as collateral (I had to go to the DMV to place a lien on it), I was told by several CSRs at USAA that this does not count as an auto loan on the CR; it is a secured personal loan, and the details will show that it is secured by an auto.
Coming back to today:
Now, I'm not sure if acquiring either PL would be positive or neutral in my journey. Maybe someone could touch on this? For a rounder picture, these are my additional TL, util under 1%:
15K Visa
15K Visa
3K Visa
1K MasterCard
Aged off report but will reappear after rehab: SL $7500.
All the cards are from USAA, and I was told that they now cap people at 25K total extended credit. I think the only way I got more is because I apped for the 15K Visas within a day of each other. I'm considering closing the 3K Visa and 1K MC after acquiring the Amex BCE.
Back to the PL:
Both PL minimum payments, plus principle-only payments for faster payoff, are automatically withdrawn from the same account into which they were deposited to make payback easier. Since these 2 PL are solely credit building/diversifying tools, I have no need to spend unnecessarily on interest over time. Therefore, I had planned on paying them off over 12 months just for the payment history. Both personal loans have a four-year lifespan if I just make the minimums.
What is the most beneficial method of paying off these personal loans for maximum effect on my score, in terms of time frame to pay them off?
I know there is a lot to address in this post. Please let me know whether I need to start a new thread. Thanks for reading.
