Debt Consolidation - hurt score or help?

[Anonymous]

I have roughly $19,800 in credit card debt. I stopped using them quite awhile ago and have slowly been paying them with minimum payments mostly. My total monthly payments are $473. Current usage according to Credit Karma is 58%.

I was approved for a loan with Upstart for $20,000 for 60 months and my monthly payment would actually be about $50 less. All of my CC will be paid off and I can pay down the total much quicker so I see it as a benefit without costing me more per month. Overall, the interest rate on the loan is less than 13% and some of CC are 20%. No penalty for early payment on the loan.

I am getting married this year & we plan to start looking at houses. Will getting a loan now & paying off the CC debt help or hurt my credit? Financially the loan makes sense because my debt will paid quicker but I don't know how it would change my score or how a lender looks at my credit with the new loan. My current score is about 657.

[Kree]

It will both hurt and help.

New inquiry (hurt)

New tradeline (hurt)  (unless this is first installment, then help)

lower Average Age of Accounts (hurt)

Pay down credit card utilization (help)

The question will be if your new lower utilization will outweight the other factors.  Generally Yes. but the more we know about your profile the more we can help you consider.

Other things to think about:

1. With the CCs as you pay them off your mins will go down, the loan will be the same from month 1 to month X,  If you have financial issues in the future,  there is less wiggle room for lowering payment if needed

2. Upstart has various hidden fees, which could offset the % savings

3. Some of these personal loans get marked "Consumer financing" which is a credit report negative.  I don't know much about this topic

I would recommend tossing your current payment into excel to see exactly how much interest you will pay over 60 months, and compare that to the upstart loan.   I think seeing a dollar amount will make it easier to decide what to do.

[Anonymous]

So from a standpoint of possibly looking into getting a mortgage in the next 6-8 months, I may be better off leaving everything as is from the sounds of it. 

[Anonymous]

Taking a debt consolidation loan when you have the means to pay back your debts without it is usually ill-advised. Have you looked into the avalanche and snowball methods for paying back debt?

[Anonymous]

Yes I have but I can't afford to pay more than I am paying right now. Which was why I was looking at the 60 month loan because my monthly payments would not increase but my total debt will be paid in 5 years. My Discover card right now, as an example, is saying if I continue to pay the minimum I will have it paid off in 10 years. So, I thought as far as getting rid of my debt, this would be better/quicker. My other option is to just continue making the minimum payments, which I have been doing. 

The 3 year loan would have been a couple hundred more a month & pay everything down in even less time but I don't think I can cover that extra amount monthly.

[Anonymous]

If you’re in a position where you absolutely are so stretched that you can’t pay more than the minimums on each card, that’s when a debt consolidation loan makes sense as long as you are certain you can make the payments asked of you. 

Paying nothing but minimums tells creditors that you can’t afford what you have spent and can lead to AA. Bank of America pretty much forced me into filing for bankruptcy because they raised my interest rate from 16 to like 21% when they saw I was struggling to make my payments which forced me to charge things up on my US Bank until I just had a financial meltdown so get ahead of it as soon as possible.