That is actually excellent IF she can get that loan. By moving revolving balance to a loan her FICO score is going to improve significantly, then once everything is reported she can get a NEW loan in about couple of months for very low interest rate and payoff the high INT one. 👍👍
Agree that she should probably take the loan if approved, given the lower rate and benefit to util scoring. They could check w/ other local credit unions and see if they offer a lower rate for a 609 score, but a debt consolidation loan is, imo, a very good option to tackle this. Two important caveats, tho:
1) Because debt consolidation loans free up your revolving trade lines, it can be easy to get yourself into worse trouble than you started with if you start running up your cards again before the debt is paid off. So, ideally, your family member will want to have a budget to keep expenses within income and a card use plan that doesn't add more debt (strict transacting or sock drawering) in place before signing the loan. If they do and stick with it, the loan should definitely help them clear their debt.
2) Make sure the loan doesn't have any prepayment or early payoff penalties. That way, if they have extra funds they can put them towards paying down the loan and clearing it sooner than 5 years.
@credit8502020 wrote:
@tcbofade wrote:
@CYBERSAM wrote:That is actually excellent IF she can get that loan. By moving revolving balance to a loan her FICO score is going to improve significantly, then once everything is reported she can get a NEW loan in about couple of months for very low interest rate and payoff the high INT one. 👍👍
^ This.
times 100
Good luck!
Thank you! @tcbofade They initially offered her to close the accounts and I told her not to because that would hurt her credit for many reasons. I'm looking forward to the boost they are going to get in their scores and how they will be able to improve their credit profile overall and get out of and stay out of harmful debt!
They likely suggested closing the cards so the loan would be her only outstanding uns debt. Every person they suggest that to and actually does it is one fewer person they lend to that can get into the situation I talked about in 1) above. It's a soft way of trying to manage the risk on these loans; they're just watching their bottom line. As long as your family member can stay out of further credit card debt, keeping the cards open should be better for her score. It's also an opportunity to learn responsible card use, though getting a handle on finances should be the first priority.