Educate me on debt consolidation loans

[dragontears]

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@steelholder wrote:

I think you're confused with what I asked, my question is how long does a loan stay in your credit report after you pay it off? Is it similar to a bankruptcy or repo?

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A loan that is paid off in good standing stays for the same as any other positive closed account: approximately 10 years from the closing date 

[donkort]

If it's an account in good standing, it can only help.  It can never hurt.

[FinStar]

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@steelholder wrote:

Another question, if I do get a loan how long would it stay on my credit report AFTER I pay it off?

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I believe that question was previously addressed on a similar topic (i.e. personal loan) back in 2021. I realize the passage of time can make anyone forget, but some datapoints typically don't change. It appears back then you were looking to consolidate $12K vs $20K this time around.

https://ficoforums.myfico.com/t5/Personal-Finance/Which-route-to-take-Personal-Loan/m-p/6228347#M217...

[BachChaconne]

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@steelholder wrote:

Hey all,

I'm looking into getting info on these types of loans and have a few questions. First, a bit of background, I have about 7 open CC that total around 20k of revolving debt. I don't have any loans or negatives on my credit reports and want to consolidate all payments and reduce the amount of interest I am paying. 

Question 1 - Do I have to wipe out/close the entire balance on each card I choose to consolidate? I'd like to keep a 3-5% utilization on each.

Question 2 - If I have a limit of 10k on a card and pay off 5k does the cc company reduce my credit limit in any way?

Question 3 - how will my overall credit limit be affected? For example, if my spending power is 100k and I get a 15k loan will it be reduced to 85k?

Question 4 - are there any reputable agencies that offer these types of loans specifically? Which rate is considered a "good deal"? I have navyfed and alliance credit union any tips?

Thank you all for your help!

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In regards to question 1, it will depend on the lender.  I had gotten a debt consolidation loan from my local CU and they insisted on paying all the credit card companies directly and having all the lines of credit closed... Financial Institutions are leery of giving you unsecured debt to bail you out of CC debt only to have you wind up running up the cards again and being double the trouble you were before.

If a creditor has closed your account after you hit a zero balance, then there was something wrong with your payment history and that was adverse action.  Creditors will often do this if you have been late a lot or showed irresponsible credit usage.  They will also "balance chase" you -- as you pay down a card gradually, they will decrease your credit limit until you have either paid it off or it is so small, they no longer feel you are a risk.  So if you have had cards that closed your credit card just because you hit a zero balance, then that implies there was something wrong with your overall credit profile that implied that your lenders were no longer willing to accept the financial risk of having you as customer.

[OmarGB9]

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@steelholder wrote:

Ummm yeah they do, I speak from experience not just making things up.

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Lenders don't just close cards because they hit a zero balance. Something else caused them to shut your cards down. Late payments, prolonged high utilization, too many new accounts opened in a short amount of time, any of those things ( if present) led to the closures. Not the zero balance. Anyway to answer your questions:

@steelholder wrote:

Hey all,

I'm looking into getting info on these types of loans and have a few questions. First, a bit of background, I have about 7 open CC that total around 20k of revolving debt. I don't have any loans or negatives on my credit reports and want to consolidate all payments and reduce the amount of interest I am paying. 

Question 1 - Do I have to wipe out/close the entire balance on each card I choose to consolidate? I'd like to keep a 3-5% utilization on each.

You can pay as much or as little as you want, but financially it'd make the most sense to zero out all cards and "stop the bleeding" so to speak.

Question 2 - If I have a limit of 10k on a card and pay off 5k does the cc company reduce my credit limit in any way?

They could. Whether they would or not just depends on your profile at that moment in time, as well as individual lenders' risk tolerance.

Question 3 - how will my overall credit limit be affected? For example, if my spending power is 100k and I get a 15k loan will it be reduced to 85k?

If you mean whether your revolving credit would be affected by a personal loan, no, it wouldn't. 

Question 4 - are there any reputable agencies that offer these types of loans specifically? Which rate is considered a "good deal"? I have navyfed and alliance credit union any tips?

 Navy is good, Alliance too. Also Upstart, Penfed, or a local CU. A "good deal" is subjective, but for a $20k personal loan, you'd probably want a rate at 10% or less.

Thank you all for your help!

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[steelholder]

In my case it was a zero balance for 2 cycles.  I've never had a late payment or did I get anywhere near the credit limit or too many hard inquiries.

[OmarGB9]

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@steelholder wrote:

In my case it was a zero balance for 2 cycles.  I've never had a late payment or did I get anywhere near the credit limit or too many hard inquiries.

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What card/lender was it? And maybe you didn't get close to the limit on that particular card, but what about your other cards?