Second personal loan and outstanding credit card balances

[Anonymous]

Hi there:

I currently have 1 personal loan, one auto loan and several credit card balances, which I would like to pay out with a second personal loan. Is this advisable or should i go another route?

1) Personal loan >3K left another year to go on payments 7% interest

2) Auto loan >3K left another year to go on payments 3% interest

3) Several credit cards (12) ranging from 9% - 26% on which I owe aroun $8K

I would like to minimize the amount of interest that i already pay to the credit cards. I can't figure out how to pay them all down as quickly as possible and minimizing the damage on my credit score and/or credit report if possible. 

A) How will this affect my credit score if I already have a personal loan and I take another loan to pay it down?

B) I have read that taking another loan makes me more risky, because I already used it to pay down credit card once. Is this a bad idea?

My current credit score fluctuates around 745 - 795 according to my scores data on some of the credit cards, if this useful.

Any advice would be appreciated.

[Anonymous]

It will improve your scores.  Just create a clear budget and plan that will enable you to:

* Always make payments on all three loans

* Save a substantial amount of every paycheck into an emergency fund which you do not touch

* Hide all credit cards until both personal loans are paid off.  After that your plan should include never going into debt again, except for inexpensive cars and a house.  Never carry a CC blalance, never buy furniture on a payment plan, etc.

[Anonymous]

I'm guessing the 1st personal loan was to pay off the previous batch of credit card debts but you ended up running your CC debts up again. If that is the case please take CGID's post to heart, if you've not seriously looked at your budget and have a realistic plan to get out of debt, stop paying interest and start putting savings away, I suspect you will probably end up with more CC debts on top of the loans again.

[Medic981]

Savings set aside for emergencies is very important. A budget helps to keep you from going into debt. Emergency savings helps your budget when unforeseen events occur. In my rebuild, I placed 10% of my net income into savings until I had three months cash available in case of job loss or other financial emergencies. I continue to place 10% of my net income into savings for a down payment on a home. 

As has been said many times on the forum, the best way to keep your FICO scores up is to PIF your CC balances every month. A person should never have to use a CC to finance emergencies because there should be savings to PIF.

[Anonymous]

Hi, I appreciate the advice. I happened to use my clear out of debt credit cards again. Yes, it was my fault, again. I do have savings and/or 401k set aside, but I have read that taking or loaning money from my 401k might hit me up with penalties and fees and interest and double taxation for taking money out. I'd rather not use those to pay my debt on my credit cards off.  I would be left with either no savings and/or less money on my 401k to be paid back. I will do a budget this time and set a more specific goal of paying the 2nd loan back. I am not exactly sure, who to get my loan from this second time. 

a) take another loan from same lender (Amex) or find another place?

b) use my savings and be left w/o savings and also use 401k to pay for the remainder of the debt owed on credit cards

c) take more OT at work to maximize the amount of income and pay all debt back as quickly as possible?

d) or use a combination of both "a", "b" and "c"

I don't wanna excuse myself, but i did some of this to get married and somehow my good credit manners went out the window

Thanks for any further helpful comments and/or replies

[Anonymous]

Why not just get yourself a 0% BT CC for 10k? Your scores look good enough to get whichever CC you might want. 

[Anonymous]

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@Anonymous wrote:

a) take another loan from same lender (Amex) or find another place?

I think Amex has a policy of only 1 personal loan at a time.

[xaximus]

Ideally, I would go with C. If you can do OT and not touch anything else, that would be the best move. The amount you have to pay, can be managed with some adjustment of your finances, can be paid off relatively soon.

Example - If you can get an extra $500 a month, the 8k that you owe, can be paid off in 16 months. If you can do $1000 extra per month, it can be paid off in 8 months. It just depends on what you can swing in OT and how you can adjust your finances.

[Anonymous]

Overtime, overtime, overtime!!!! This should be your first move to get the debt down. This will help all around. After bringing in that extra income, you might see that you might not have to borrow as much to get the debt down. If you still want to get another loan, I really like CGID & OldMan87's advice, you dont want to get yourself way in over your head.