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Personal Loan vs CC

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Personal Loan vs CC

think I'm posting this under the right forum, if not - apologies!

My brother and I start(ed)/(ing) to take over a friends business.  With out going into too much, it's requiring us to go out of pocket and our first expenditure seems to finally be coming to an end, after taking almost 4x longer than originally expected and we're getting our money + some back.  He just pulled out from his savings and I had to do a majority of it spread out on some cards.  I shuffled it around to prevent a majority of it from reporting.  I know your reports have no history and even if I let a couple cards report maxed out a a month or two, it'd have no impact in that regard once paid off.  I just didn't want it reporting and/or scaring any particular creditor off thinking I was maxing out and having problems again.  Even called before hand explaining and each one more/less just basically joked around and teased/laughed at me saying that's what credit is for and not to worry.  As long as I continued making payments and stuff, it'd be no problem.

 

I'm wondering if it'd be better just to try and if able, take out a personal loan for the next amount?  I only have the SSL right now (which will be done by years end) and pretty sure if I were to do this, I might as well just pay that one off because the new loan would basically nullify it. 

Would having like a $20000 loan that was at like 99% utilization hurt me more than having that $20000 report in revolving for a month or two?

I've tried searching, but I'm guessing probably not hard enough.  Most stuff I found led me to believe I may take an initial hit with the loan, but it'd probably be better over all - especially as time goes by?  I just don't know how much having an almost fully utilized loan would hurt/help compared to the SSL that's almost paid off in comparison.  Pretty sure it'd hurt in comparison, especially at first being a new account - just not sure by how much and if it'd be worth it.  Know that having 1 definitely helps mixture of credit.

Any advice/suggestions would be greatly appreciated!

BK7 Discharged 12/16


EQ8/9: 696/730 | TU8: 738 | EX8: 733
Message 1 of 8
7 REPLIES 7
Valued Contributor

Re: Personal Loan vs CC

I do 0% all the time on credit cards for cash flow.

Never need loans and builds credit with each cc used.

Cost 3% APR or less for 12-18 months with transfer (blank check) fee

Just remember, you are spending real money not credit.

 

You have Navy and PenFed, both good sources for multiple cards.

GL!

Rebuild started in 2014  -  $100k+ unsecured credit in 2017  -  $350k+ unsecured credit in 2020.

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Message 2 of 8
Senior Contributor

Re: Personal Loan vs CC


@Drusbo wrote:

think I'm posting this under the right forum, if not - apologies!

My brother and I start(ed)/(ing) to take over a friends business.  With out going into too much, it's requiring us to go out of pocket and our first expenditure seems to finally be coming to an end, after taking almost 4x longer than originally expected and we're getting our money + some back.  He just pulled out from his savings and I had to do a majority of it spread out on some cards.  I shuffled it around to prevent a majority of it from reporting.  I know your reports have no history and even if I let a couple cards report maxed out a a month or two, it'd have no impact in that regard once paid off.  I just didn't want it reporting and/or scaring any particular creditor off thinking I was maxing out and having problems again.  Even called before hand explaining and each one more/less just basically joked around and teased/laughed at me saying that's what credit is for and not to worry.  As long as I continued making payments and stuff, it'd be no problem.

 

I'm wondering if it'd be better just to try and if able, take out a personal loan for the next amount?  I only have the SSL right now (which will be done by years end) and pretty sure if I were to do this, I might as well just pay that one off because the new loan would basically nullify it. 

Would having like a $20000 loan that was at like 99% utilization hurt me more than having that $20000 report in revolving for a month or two?

I've tried searching, but I'm guessing probably not hard enough.  Most stuff I found led me to believe I may take an initial hit with the loan, but it'd probably be better over all - especially as time goes by?  I just don't know how much having an almost fully utilized loan would hurt/help compared to the SSL that's almost paid off in comparison.  Pretty sure it'd hurt in comparison, especially at first being a new account - just not sure by how much and if it'd be worth it.  Know that having 1 definitely helps mixture of credit.

Any advice/suggestions would be greatly appreciated!


To specifically answer your question....

Having a loan reporting with the entire balance outstanding will not negatively affect you credit scores as much as allowing several credit cards to report maxed out (i.e. above 88.9% utilization).





Message 3 of 8
Frequent Contributor

Re: Personal Loan vs CC


@MaizeandBlue wrote:

@Drusbo wrote:

think I'm posting this under the right forum, if not - apologies!

My brother and I start(ed)/(ing) to take over a friends business.  With out going into too much, it's requiring us to go out of pocket and our first expenditure seems to finally be coming to an end, after taking almost 4x longer than originally expected and we're getting our money + some back.  He just pulled out from his savings and I had to do a majority of it spread out on some cards.  I shuffled it around to prevent a majority of it from reporting.  I know your reports have no history and even if I let a couple cards report maxed out a a month or two, it'd have no impact in that regard once paid off.  I just didn't want it reporting and/or scaring any particular creditor off thinking I was maxing out and having problems again.  Even called before hand explaining and each one more/less just basically joked around and teased/laughed at me saying that's what credit is for and not to worry.  As long as I continued making payments and stuff, it'd be no problem.

 

I'm wondering if it'd be better just to try and if able, take out a personal loan for the next amount?  I only have the SSL right now (which will be done by years end) and pretty sure if I were to do this, I might as well just pay that one off because the new loan would basically nullify it. 

Would having like a $20000 loan that was at like 99% utilization hurt me more than having that $20000 report in revolving for a month or two?

I've tried searching, but I'm guessing probably not hard enough.  Most stuff I found led me to believe I may take an initial hit with the loan, but it'd probably be better over all - especially as time goes by?  I just don't know how much having an almost fully utilized loan would hurt/help compared to the SSL that's almost paid off in comparison.  Pretty sure it'd hurt in comparison, especially at first being a new account - just not sure by how much and if it'd be worth it.  Know that having 1 definitely helps mixture of credit.

Any advice/suggestions would be greatly appreciated!


To specifically answer your question....

Having a loan reporting with the entire balance outstanding will not negatively affect you credit scores as much as allowing several credit cards to report maxed out (i.e. above 88.9% utilization).


Yeah, what I was thinking.  But I wouldn't let the cards report for more than 50ish % and that's where I'm getting confused.  Would it still be better to have a fully utilized loan of like $20000 opposed to a few cards reporting for that amount, but at lower utilizations of all, not to mention that bringing my over all utilization up on the revolver lines?  I would think so, but that's what I'm not sure of.

BK7 Discharged 12/16


EQ8/9: 696/730 | TU8: 738 | EX8: 733
Message 4 of 8
Valued Contributor

Re: Personal Loan vs CC


@Drusbo wrote:

... called before hand explaining and each one more/less just basically joked around and teased/laughed at me saying that's what credit is for and not to worry.  .


Keep in mind the people saying "Yeah, no problem," are not the same people who initiate AA. Ijs.

 

Also, have you considered adding a couple of business cards? Hidden tradelines/utilization. I've heard they are also more lenient pertaining to high utilization.

 

Personally, I'd do the loan. Business plans/timetables sometimes go awry -- the additional safety net of having longer to pay it back  would make it worthwhile for me. Plus you can always accelerate the payment schedule if you get flush with cash after a few months. 

Starting Score: (5/24/2018) -- FICO 08 EXP: 643; FICO 08 TU: 642; FICO 08 EQ: 677
Current Score (01/18/2020): FICO 08 EXP: 744; TU: 748; EQ: 748
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Message 5 of 8
Frequent Contributor

Re: Personal Loan vs CC


@James_A wrote:

@Drusbo wrote:

... called before hand explaining and each one more/less just basically joked around and teased/laughed at me saying that's what credit is for and not to worry.  .


Keep in mind the people saying "Yeah, no problem," are not the same people who initiate AA. Ijs.

 

Also, have you considered adding a couple of business cards? Hidden tradelines/utilization. I've heard they are also more lenient pertaining to high utilization.

 

Personally, I'd do the loan. Business plans/timetables sometimes go awry -- the additional safety net of having longer to pay it back  would make it worthwhile for me. Plus you can always accelerate the payment schedule if you get flush with cash after a few months. 


Haha, good point.

Yeah.   Plan on looking into that after we have a few more transactions.

 

Totally!  Like this first one was supposed to be a quick turn around, like, less than a month.  But, coming up on 6.  Definitely been a lot more stressful for me having them on my CC's than if I had taken a loan out for it.

Thanks for the response!

BK7 Discharged 12/16


EQ8/9: 696/730 | TU8: 738 | EX8: 733
Message 6 of 8
Valued Contributor

Re: Personal Loan vs CC

Obvioulsy the Loan is going to be set payments, lower rate and have a longer term to pay back. With it though comes a HP and new account penalty. Which may or may not matter to you. 

Adding new BIZ TLs will also incur a HP, but will not report to Perosnal. so there's that benefit. 

 

Some people prefer to utilize the credit/TLs they currently have rather than adding new ones. Others aren't as bothered so much by it.

I believe Loan balances are less impactful than CC balances in terms of possible AA though.

 

Ultimately you have to decide what's best for you, and what makes the most sense in your situation.

Running the numbers for both scenarios to see if the work. 






Message 7 of 8
Moderator Emeritus

Re: Personal Loan vs CC

In general, go with the lowest APR.

 

Usually that's a loan, but if you can finagle 0% promotional credit card financing, that can be better.

 

The big sticky thing here: you're talking business, but doing everything in personal credit.  If you're going to do this for real, that's not where you want to be for anything but a sole proprietorship and I'd argue SP is not doing it for real anyway.

 

The fact you have a buddy on this means you need a corporate structure frankly and 0% doesn't play as often there... and in that scenario business expenses should never ever go against personal CC's assuming you have any liability shield from the business entity.




        
Message 8 of 8
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