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Debt Consolidation Loan?

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Debt Consolidation Loan?

Hi Everyone! I am looking for some advice and am somewhat new here so forgive me if this is the wrong place to post!

 

My husband and I have been married for 2.5 years now. When we got engaged 5 years ago, we discussed finances and he felt very strongly that he wanted to keep everything separate (which I agreed to but wasn't happy about). Since then, we had a son (he is 14 months) and have another baby on the way due in November. When our son came, we opened a joint account through Chase (since we both had accounts there) and have used that account to track gifts for our son, combine money for daycare expenses, etc.

 

We are considering moving across the country to be closer to family which means we are also considering buying a house for the first time. In addition to considering the purchase of a house, we are also upgrading our vehicle to accommodate 2 kids instead of 1. I assume there will be lots of other expenses along the way related to the move, changing jobs, etc. My husband now feels we should join all of our finances given the changes we have coming up and to gain more visibility into what we are spending and ways we could budget our money better.

 

I personally have been carrying a decent amount of debt for years now which is somewhat shameful for me. I have successfully paid off my higher interest credit cards (thanks to the suggestions on this board) but am still carrying large balances of around $15k each across 3 credit cards (amex, credit union and chase sapphire). I dont have any other items on my credit report other than open credit card accounts. I have had car loans in the past and student loans but those have all been paid off, on time. My current credit scores are:

Equifax: 715

Transunion: 708

Experian: 696

My husband has EXCELLENT credit and no debt to speak of. Our car loan is in his name.

 

So my quesiton is - I am considering a debt consolidation loan in order to bring all of my credit card balances down to zero. My credit union offers a loan at 13.99% interest for 5 years and would equate to a payment of $1046/month. Currently I am paying over $2000/month on my credit cards (but am also using them for expenses so these payments are not going toward the balance to pay down).

 

Is this a smart move to make or should I just continue to pay as much as possible on my credit cards? I am worried about my husband's reaction when he finds out about the debt as well as committing to a $1000 payment/month on top of all the other things we have going on.

 

Thank you in advance for your help!

HC

Message 1 of 18
17 REPLIES 17

Re: Debt Consolidation Loan?

I realize I should have mentioned I have zero inquiries, zero late payments, zero collections accounts. My payment history is excellent and length of credit is excellent.

 

I also have other credit cards to mention:

JCrew: $0/$3600

QVC: $0/$5000

Capital One: $0/$5000

Paypal Visa: $0/$3250

Chase Freedom: $0/$7000

 

The 3 I am carrying balances on have utilizations of:

Amex: $17150/$18000 and 14.99% APR

Chase Sapphire: $12295/$13000 and 18.24% APR

Credit Union Visa: $14518/$15000 and 9.9% APR

 

If there is anything else I need to provide please let me know. Looking for guidance/suggestions! 

Message 2 of 18
Established Contributor

Re: Debt Consolidation Loan?


@heather040984 wrote:

 

We are considering moving across the country to be closer to family which means we are also considering buying a house for the first time. In addition to considering the purchase of a house, we are also upgrading our vehicle to accommodate 2 kids instead of 1. I assume there will be lots of other expenses along the way related to the move, changing jobs, etc. My husband now feels we should join all of our finances given the changes we have coming up and to gain more visibility into what we are spending and ways we could budget our money better.

 

You should inform your husband about your debt, before doing any of the above.

Regardless of whether you join all of your finances or not.

He needs to know before taking on any new loans/debt.

 

So my question is - I am considering a debt consolidation loan in order to bring all of my credit card balances down to zero. My credit union offers a loan at 13.99% interest for 5 years and would equate to a payment of $1046/month. Currently I am paying over $2000/month on my credit cards (but am also using them for expenses so these payments are not going toward the balance to pay down).

* No *

5 year payments about the same and interest loss very close.

(Excluding your monthly expenses on cards)

No real advantage but increased danger of becoming more in debt.

FNBO 2% Cashback Visa (20k) / Bank of the West Cashback MC (20k)
US-Bank Cash+ (15k) / FNBO Travel Elite (15k) / Citi Double Cash (18k)
Ficos : 840 / AAoA : 9 yrs / AoOA : 23 Yrs / AoYA : 3
Message 3 of 18
Frequent Contributor

Re: Debt Consolidation Loan?

If you do decide to consolidate, shop around, don't just use your CU because it is handy. I was able to get a 10k loan at 6% when my scores were about where yours are. I've found the easy way to shop is to do pre-quals via Credit Karma or Nerdwallet. One soft pull app and they will check with a bunch of lenders.

Current Score: Mar 2019: EX FICO8 779, TU FICO8 800, EQ FICO 780, TU Vantage 773, EQ Vantage 786
AoOA: closed: 35 years, open: 24 years; AAoA: 11.8 years; Inquiries: 2019: 2, 2018: 3; No BK ever, 1 30 day late in 2013
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Slate, Chase Amazon, Chase CSP, Sync Lowes, Sync JC Penney - total CL 129k
Loans: Prosper (20k/3yrs 7.14%), Lending Club (10k/3yrs 5.89%), Chase car loan (35k/6yrs 0.9%)
Message 4 of 18

Re: Debt Consolidation Loan?

Thank you for your reply! 

Message 5 of 18

Re: Debt Consolidation Loan?

That is good to know, thank you!

 

One additional question - I have a savings account of 10k just in case I lose my job or something comes up unexpected. Should I take that and pay down what I can on credit card debt and then work on building it back up? Makes me nervous to not have a backup account should something happen but I know every month I carry these cards with interest I am losing money.

 

Let me know!

Message 6 of 18
Frequent Contributor

Re: Debt Consolidation Loan?


@heather040984 wrote:

One additional question - I have a savings account of 10k just in case I lose my job or something comes up unexpected. Should I take that and pay down what I can on credit card debt and then work on building it back up? Makes me nervous to not have a backup account should something happen but I know every month I carry these cards with interest I am losing money.

 


Obviously that's a decision you need to make, but I'll chime in. You would likely save money by using your savings, but if anything did happen and you needed that money, you might end up having to borrow again, maybe even at worse interest rates. Personally I would try to leave the savings alone, or at least use no more than half. To @Kforce's point, you really want to get to a point where you are not paying the cards every month and then just using them again. I was in that trap for years and even after paying down close to 25k, still have about as much debt as you. Have you worked to develop a realistic budget that you can follow to get out of debt?

Current Score: Mar 2019: EX FICO8 779, TU FICO8 800, EQ FICO 780, TU Vantage 773, EQ Vantage 786
AoOA: closed: 35 years, open: 24 years; AAoA: 11.8 years; Inquiries: 2019: 2, 2018: 3; No BK ever, 1 30 day late in 2013
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Slate, Chase Amazon, Chase CSP, Sync Lowes, Sync JC Penney - total CL 129k
Loans: Prosper (20k/3yrs 7.14%), Lending Club (10k/3yrs 5.89%), Chase car loan (35k/6yrs 0.9%)
Message 7 of 18
Community Leader
Senior Contributor

Re: Debt Consolidation Loan?

Hi OP and welcome

 

First, this is truly a lot on one person’s plate, and you must be feeling stressful. So these are my step-by-step very humble suggestions:

 

1. I agree with the other poster that it may be a good idea to talk to DH before you do anything that is going to create even more of a strain on finances.

 

2. Since you’re also using your cards for expenses, it’s suggesting to me that you’re either struggling on the income you're earning or, and this is by no means a judgement, living above your means. If it is the former, just talk to DH. His income may be more than yours and it may be time to assess how living expenses can be divvied up. If it is the latter, make a promise to yourself not to buy anything that’s not a necessity.

 

3. I also agree with the other poster about not using all your savings to pay down your debt. 50/50 sounds like a good idea. Work on getting those cards down to <48.9% to start with. It may also be worth looking into getting a loan using your savings as collateral.

 

4. Do you have a 401K or 403b? If yes, can you take a loan from it? You’d have to to ask your employer to see if their plan allows this. The nice thing about this type of loan is that you’re paying yourself back at a lower interest rate than a loan.

 

5. I suggest getting your free credit reports from www.annualcreditreport.com. I have concerns about why your scores are so low if you have excellent payment history, excellent longevity histoy, and no baddies. Just trying to figure out outside of UT, if any unknowns are in your report.

 

6. Also, the reason to give DH a heads-up has to do with buying a house. If it’s going to be in both your names, the LO takes the lowest middle credit score for approval and APR. So example: your scores are 708, 715 & 696. Lets say DH’s scores are 785, 801, and 765. Your middle score of 708 is the one the LO will use. Not his 785, which is a huge difference when talking mortgage rates. 

 

7. If you’re planning on buying within a year, buying a new vehicle or opening up additional loans or CCs should definitely be out of the question.

 

So finally, just understand that DH is going to find out one way or the other. So let it be prior to trekking across the country.

 

Oh, one other thing. Throw that shame out the window. You don't need that feeling. 😝 The majority of us have been there, done that. You’re not on an island by yourself. And the good news is you haven't let anything fall behind. So kudos to you!

GOALS: Garden til APR 2020 and 800 Club


SEP 2019: EX 791, TU 797, EQ 800
JUN 2019: EX 788, TU 794, EQ 779
DEC 2018: EX 777, TU 783, EQ 799

|| AmX Cash Magnet $25K || NFCU CashRewards $20K || Macy's $20K || Discover IT $18.7K || NFCU CLOC $15K || NFCU Platinum $12.5K || AmX ED $11.5K || CitiCostco $7K || CitiDC $6.3K ||
Message 8 of 18
Established Contributor

Re: Debt Consolidation Loan?


@CreditInspired wrote:

It may also be worth looking into getting a loan using your savings as collateral.

I forgot about this option.

One of my CU's has secured CD loans at (CD-Rate + 1.5%)

This would be a 2-5 year loan at about 4 to 5 %.

 

FNBO 2% Cashback Visa (20k) / Bank of the West Cashback MC (20k)
US-Bank Cash+ (15k) / FNBO Travel Elite (15k) / Citi Double Cash (18k)
Ficos : 840 / AAoA : 9 yrs / AoOA : 23 Yrs / AoYA : 3
Message 9 of 18
Community Leader
Senior Contributor

Re: Debt Consolidation Loan?


@Kforce wrote:

@CreditInspired wrote:

It may also be worth looking into getting a loan using your savings as collateral.

I forgot about this option.

One of my CU's has secured CD loans at (CD-Rate + 1.5%)

This would be a 2-5 year loan at about 4 to 5 %.

 


Now that's an awesome interest rate!

GOALS: Garden til APR 2020 and 800 Club


SEP 2019: EX 791, TU 797, EQ 800
JUN 2019: EX 788, TU 794, EQ 779
DEC 2018: EX 777, TU 783, EQ 799

|| AmX Cash Magnet $25K || NFCU CashRewards $20K || Macy's $20K || Discover IT $18.7K || NFCU CLOC $15K || NFCU Platinum $12.5K || AmX ED $11.5K || CitiCostco $7K || CitiDC $6.3K ||
Message 10 of 18
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