To Loan or not to loan that is the question.

[princessminor]

So, my husband and I are paying a lot of money to our credit card companies.  We are paying mins and we were able to pay off two small ones but there are so many more to go.  Would it be wise to take out a loan and pay off some of the cards?  I took this route 10 years ago and paid off the cards, but stupid me I maxed out the cards shortly thereafter and then I had to pay you guessed it, the loan and the cards.  Welp, last year I finally finished paying off the Citi loan and this time I'm not interested in using the cards, but to get them off our backs.  What do you think, would this be a good option?  Paying over $3000 montly on cards just doesn't make any sense.  Also, we would have to qualify for a loan as well.  Thanks in advance.

[Anonymous]

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@princessminor wrote:

So, my husband and I are paying a lot of money to our credit card companies.  We are paying mins and we were able to pay off two small ones but there are so many more to go.  Would it be wise to take out a loan and pay off some of the cards?  I took this route 10 years ago and paid off the cards, but stupid me I maxed out the cards shortly thereafter and then I had to pay you guessed it, the loan and the cards.  Welp, last year I finally finished paying off the Citi loan and this time I'm not interested in using the cards, but to get them off our backs.  What do you think, would this be a good option?  Paying over $3000 montly on cards just doesn't make any sense.  Also, we would have to qualify for a loan as well.  Thanks in advance.

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Take the sum of your CC's their APR's calculate estimated finance charges, and check with LendingClub if a loan makes sense for you.

For example. If your average APR throughout all cards is 16%, and they offer you a loan at 12%, It may make sense to take it. However if that is the inverse, It might not.

[princessminor]

Thanks, that makes sense.  I see a lot of talk about Lending Tree.  What makes them the better choice?  My husband has access to MCU credit union, and our bank is Citi.  Would these be better options?  We have no negatives or late payments on our reports.   The only fly in the ointment is high utilization.  Can this help/hurt us?

[Anonymous]

You need two things -- the loan, and a pair of scissors. 

Do to yourself now what an underwriter will do to you later if you don't get things under control: cut off your own credit. You can leave yourself with no, or only a very low amount of credit, by literally cutting your cards in half. Don't close the accounts. Just cut the cards. 

In other words, take the "adverse action" yourself, before somebody else takes it. 

[takeshi74]

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@princessminor wrote:

Would it be wise to take out a loan and pay off some of the cards?  I took this route 10 years ago and paid off the cards, but stupid me I maxed out the cards shortly thereafter and then I had to pay you guessed it, the loan and the cards. 

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Well, if you do that again it wouldn't be wise.  You have to determine the answer to that question.  You know yourself the best.  You know if you can take measures to prevent accumulating more credit card debt while paying down a debt consolidation loan.  Make sure you're budgeting and sticking to it or else it will be difficult to get ahead even if you get the cards and/or loan all paid off.

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@princessminor wrote:

I see a lot of talk about Lending Tree.  What makes them the better choice?  My husband has access to MCU credit union, and our bank is Citi.  Would these be better options?

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You really just have to shop around and Lendingclub allows one to do so.  I don't have direct experience with them but discussions about them seem to indicate that the rates offered there seem to have a tendency to be on the high side.  I'd recommend starting with the CU.

[Anonymous]

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@takeshi74 wrote:

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@princessminor wrote:

Would it be wise to take out a loan and pay off some of the cards?  I took this route 10 years ago and paid off the cards, but stupid me I maxed out the cards shortly thereafter and then I had to pay you guessed it, the loan and the cards. 

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Well, if you do that again it wouldn't be wise.  You have to determine the answer to that question.  You know yourself the best.  You know if you can take measures to prevent accumulating more credit card debt while paying down a debt consolidation loan.  Make sure you're budgeting and sticking to it or else it will be difficult to get ahead even if you get the cards all paid off.

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I agree with Takeshi and slightly disagree with Nixon. I wouldn't weigh the APR of the loan against your average CC APR, but against each individual card that it might be applied to. For exampe, if you have a 10% and a 22% (average 16%) and can get a loan for 12%, I would only apply it to the 22%. Applying it to the 10% would result in your interest rates going up.

[princessminor]

Much thanks to you all for your input.  Hopefully we can get better rates with lending club.

[krielly]

Have you checked out any of your local credit unions?  I had multiple cards carrying balances for a total of 16K+

Back in Feb 2014, I took out a 4 year loan at 9%, paid all of them off, and didn't hesitate for a second! I knew from past experience that I would probably let those balances languish, and not pay much more than the minimum. I preferred to have a specific date in sight where these would be paid in full.

As a side benefit, I gained almost 100 points in my FICO scores across the board due to such a reduction in utilization. BONUS!!!

in 5/14 I got the Discover IT with a 12 month 0% on purchases. I've carred a balance on it up until March when I paid it off. Now plan to rotate usage between my remaining cards and let one report a ittle something each month, and then PIF.

I have never regretted the move. Of course, it's all about the self control of not paying your cards off, and then racking them back up again! But sounds like you have been there/done that and learned a lesson. Good for you!