Credit card refinancing questions

[Mr_Draco]

Originally Posted by richard200593

The only issue I’m running into is creditors that Dig deep into my report are seeing “my plan” but I’m still in a much better boat than I was 2 months ago.

Yea as you are finding out, credit score doesn't really mean jack. Credit history matters more than your score.

When I first started building my credit to buy the Camaro, my score ranged between 820 and up and kept it that way for over 3 years. When I went to buy the car and get a loan for $15k, no one would touch me even though my score was excellent because of my history.

[Scalded Dog]

A while ago, my buddy told me about an awesome consolidation loan that he got.

He had six credit cards, each with an interest rate around 20%. He got all of the balances rolled into one balance, from the consolidation lender, with a rate of only 30%.

Yep, he thought it was a great deal, because his six credit cards at 20% meant 120% to him... so 30% seemed like a great deal.

My forehead still hurts from slapping it in frustration. Please do not be like my friend.

[sherob]

Originally Posted by Scalded Dog

A while ago, my buddy told me about an awesome consolidation loan that he got.

He had six credit cards, each with an interest rate around 20%. He got all of the balances rolled into one balance, from the consolidation lender, with a rate of only 30%.

Yep, he thought it was a great deal, because his six credit cards at 20% meant 120% to him... so 30% seemed like a great deal.

My forehead still hurts from slapping it in frustration. Please do not be like my friend.

[kmarshall2121]

Originally Posted by Scalded Dog

A while ago, my buddy told me about an awesome consolidation loan that he got.

He had six credit cards, each with an interest rate around 20%. He got all of the balances rolled into one balance, from the consolidation lender, with a rate of only 30%.

Yep, he thought it was a great deal, because his six credit cards at 20% meant 120% to him... so 30% seemed like a great deal.

My forehead still hurts from slapping it in frustration. Please do not be like my friend.

...but was the consolidation loan 'compounding interest'? - that 30% may be a better deal in his end game..

[richard200593]

So as an update.. and a final one. My plan worked. Just received funds to pay off all my debt with an 8.9 percent interest rate on a personal loan for 3 years, and that monthly payment is 600 dollars less than what I was paying just in minimum credit card payments to stay afloat and not gain any ground. So for those who say there isn’t a way... I’m sorry but I have proof that there is. In less than 2 months went from drowning in credit card debt with no end in sight and with a low 600 credit score, to a 750-760 credit score no credit card debt on my credit and one monthly payment that is much lower than what I was paying to begin with.

[richard200593]

Originally Posted by Scalded Dog

A while ago, my buddy told me about an awesome consolidation loan that he got.

He had six credit cards, each with an interest rate around 20%. He got all of the balances rolled into one balance, from the consolidation lender, with a rate of only 30%.

Yep, he thought it was a great deal, because his six credit cards at 20% meant 120% to him... so 30% seemed like a great deal.

My forehead still hurts from slapping it in frustration. Please do not be like my friend.

Yea most definitely was not my case at all. Went from all my credit cards being 25 percent plus, to all on an 8.9 percent apr 3 year installment loan

[ZED SLED]

Now close all your credit card accounts except maybe one and cut them up so that in a year you're not back in the same position + your loan payment.

[alexlj92]

DO NOT close any of your credit cards. Just keep them open and barely use them.

The credit rating agencies want to see responsible debt use. They do this through a utilization ratio (amount outstanding/ total aggregate credit limit). Having a larger limit and spending the same amount as you would with a smaller limit is more beneficial as it leads to a lower utilization in the eyes of the credit agencies.

You seem to have researched alot on how this works in order to fix it and youve done the right thing by terming out the credit card debt into a personal loan with a payment schedule.

Unfortunately, ~8% interest is not bad for an unsecured personal loan. I would be surprised if you can materially better that through a refi especially with the current rising interest rate environment. The best thing may just be to prepay more than your monthly payment if you are able.

[richard200593]

I know not to close them, already have minimum reoccurring payments on them and that’s all they will be used for, Netflix on one, Cable bill on the other, and set to pay off balance each month. As stated before I do know how to manage my money now, and am not concerned about racking up the debt again. 5-10 years ago being young and dumb was a different story and I’m finally catching up after all these years

[richard200593]

Originally Posted by alexlj92

DO NOT close any of your credit cards. Just keep them open and barely use them.

The credit rating agencies want to see responsible debt use. They do this through a utilization ratio (amount outstanding/ total aggregate credit limit). Having a larger limit and spending the same amount as you would with a smaller limit is more beneficial as it leads to a lower utilization in the eyes of the credit agencies.

You seem to have researched alot on how this works in order to fix it and youve done the right thing by terming out the credit card debt into a personal loan with a payment schedule.

Unfortunately, ~8% interest is not bad for an unsecured personal loan. I would be surprised if you can materially better that through a refi especially with the current rising interest rate environment. The best thing may just be to prepay more than your monthly payment if you are able.

It’s already set up for 3 year loan, so interest even at 8 percent I’m already happy with considering where it was, but I have every intention to pay it off in 2 years and already have the amount specified to do so, made sure of no prepayment penalties before I even touched the loan

[alexlj92]

Good Deal man you're on the right track. And yeah I just wanted to throw the dont cancel card thing out there for the general audience as a lot of people think closing them will help, but based on the way they analyze it doesn't.

[pyroguy]

Originally Posted by alexlj92

Good Deal man you're on the right track. And yeah I just wanted to throw the dont cancel card thing out there for the general audience as a lot of people think closing them will help, but based on the way they analyze it doesn't.

Closing all but 1 will ding your credit shortly, but it will still stay high. However, if you close them all out and pay everything off and get a zero credit score you actually can be in much better financial shape than having a credit score. Credit scores are only worth having if you want debt. Personally I'd argue that there's no good debt.

[sherob]

FICO looks at a lot of things when they determine your score... length of credit(age of credit) - medium impact, total accounts - low impact, payment history - high impact, credit use - high impact...

Your score will help down the road if/when you want to buy a house, if that is in the plans...

[AJL13]

Originally Posted by sherob

FICO looks at a lot of things when they determine your score... length of credit(age of credit) - medium impact, total accounts - low impact, payment history - high impact, credit use - high impact...

Your score will help down the road if/when you want to buy a house, if that is in the plans...

This. The difference of half a percent in your mortgage rate can mean tens of thousands of dollars down the road....well, at least in California it does. This is where credit scores absolutely matter. Unless you don't mind pissing away several hundred dollars each year in interest, then yeah, don't worry about it.