Help with Refinancing Consolidation Loan

[Anonymous]

Hi, 

I have what seems like a frustrating and unsolvable dilemma, and I wonderd if anyone here might have some wisdom to share.

After getting way overeducated in two grad school programs, I am contending with CC debt consolidation. Basically, I made peanuts for nearly a decade, ran up credit card balances to get through those times, and now that I have much better employment and a decent salary, I consolidated and have made progress paying down this debt. I had $22k to pay down, and I'm now down to $16k. This pay down is satisfying, but of course I'd love to make the process faster/less interest-bearing. Instead, I'm stuck paying 9% interest on this loan.

The biggest—and only?—obstacle to obtaining a better rate seems to be my egregiously high student loan balance. When calculated with my income-based repayment amount, my DTI is 27%. But, the way "the bank" calculates my DTI, it's 36%. Not outrageous (in grad school, I was in the 50s in this percentile), but not good enough to qualify me for a rate better than 9%. 

There are a couple things that are especially frustrating about this: 

1. I've never missed a payment on a loan or credit card, filed for bankruptcy, or defaulted on any debt. I have, for twenty years, faithfully paid every bill on time and have paid off every car loan I've had (three) at least one year early. Yet it feels like I'm being punished. 

2. I qualified for a new car loan at 2%. So "the bank" is fine with me taking on more debt at a competitive rate but very much against helping me responsibly pay down this CC debt through an equally low rate. I know this has a ton to do with things beyond my personal finances, but it's infuriating. 

So, beyond slowly paying this debt down, and consequently forking over a ton of interest every month (and barring some miraculous forgiveness of student loan debt), is there anything I can do to refinance this consolidation with a lower interest rate? Would a local bank be willing to give me a better rate (my consolidation loan is through Upstart)? Thanks for any advice you have. 

[RonM21]

Sorry to hear that this has frustrated you so much. I do understand it though, when you tried to do the right things and get your education, as well as manage your credit well throughout. Certainly your scores are in good shape which reflect all you mentioned about paying your bills and never being late. For a loan, 9% isn't terribly bad, and actually pretty good compared to most. But maybe it comes down to where you get the loan from? My first thought would be to try a good reputable credit union and see what their rates are. Checking local banks would not hurt either as sometimes you stumble across one that may have a comparable rate.

But there isn't a definitive answer here because whomever looks at your profile to decide on whether to give you a loan and at what rate, will have their own way of sizing up your risk level.

[FlaDude]

First of all, congrats on retiring almost 1/3 of your debt so far. By my calculation you're paying about $120 per month in interest. The best personal loans I've seen are around 6% so assuming you could get one, you'd save around $40/month, which might not make a huge difference. Have you considered applying for a 0% BT card? There are several around with no transfer fee. Of course, you probably would not get enough CL to transfer the entire balance, but if you get one, that will improve your overall UTI, and they maybe apply for another after that. BOA and Amex Everyday both offer zero BT fee, I think Chase Slate might, and some credit unions do too.

[Anonymous]

Thanks for your advice and perspective! Appreciate the help.

[Anonymous]

Just an update on this: I was approved for a loan from Lending Club, so I paid off my consolidation loan and went from 9% to 6%.This LC loan allowed me to cut approximately one year off my repayment plan, so I'm now 26 months away from being completely credit card debt free, a state I haven't experienced in over a decade. Very excited about this, and I hope this illustrates to others that even a slightly lower rate can be possible through the right lender.