- This topic has 6 replies, 4 voices, and was last updated 3 weeks, 6 days ago by Craig.
- October 21, 2019 at 10:41 am #855311HollyMember
I know this is mostly a relationship forum but i thought i should take my chances as the replies always seem very educated.
Basically after helping my mother with a loan and maxing out on my credit card, im now in a much better head space but realise i have effed my credit score. Both payments amount to just under 4,500. It is slowly creeping up monthly because both are half paid off but does anyone have any suggesttions on how to improve it further?
I have spoken to my bank and they suggested consolidating the two, but im sure this pretty much is just a larger loan to pay off the smaller loans so i would prefer to avoide this if possible.
Again, Im sorry and understand if you do not think this is appropriate, but worth a try. Thanks!October 21, 2019 at 11:21 am #855317anonymousseMember
It takes time for it to go back up. You need to work out a livable budget and really stick to it. Scrimp. Pay off the credit card as soon as you can. At least make more than a minimum payment each month. The consolidation loan you can get at a bank usually has lower interest rates than your credit card.October 21, 2019 at 11:38 am #855319SkyblossomParticipant
I’d compare interests rates as anonymousse suggested. The bank loan probably does have a much lower interest rate and that will make a huge difference in paying back the loan. More of what you pay will be applied to the loan instead of all or almost all of it being applied to the interest.October 21, 2019 at 11:42 am #855320cdobbsGuest
Definitely consider consolidating with a loan….the loan will be lower interest and allow you to pay them off faster and with less interest accumulated….it is also easier as you will need to make one monthly payment on the loan vs two payments on higher interest credit cards….your bank should be able to set this up for you with a quick phone callOctober 21, 2019 at 11:46 am #855321SkyblossomParticipant
This might help.
$4500 borrowed at an interest rate of 21% means interest of $945 per year if you only paid off the interest.
$4500 borrowed at an interest rate of 4% means interest of $180 per year if you only paid off the interest.
The difference between $945 and $180 is how much more you could pay toward the borrowed money. You could pay an extra $765 per year if you had the lower rate.October 21, 2019 at 2:20 pm #855341PDX816Guest
I am in a similar position unfortunately, I am going to get an evening and weekend job. 100% of that paycheck will be for debt payoff. it isn’t fun and my social life will suffer, but it’s what I need to do to balance an expensive city with nonprofit work.October 21, 2019 at 3:17 pm #855346CraigGuest
Here is a website to review factors affecting your credit score.
As might be expected, making payments on time is critical. Consolidating your credit card loans with a lower interest bank loan can help by lowering your utilization ratio. If you do this, please be aware that a common trap lots of people fall into is getting a consolidation loan, then charging their credit cards back up to the max, which digs the hole deeper.
If possible, stop using credit cards until your debt is paid off, or use a separate card that is automatically paid off in full each month from a linked bank account, so debt doesn’t creep up again. Carrying a balance on your credit cards will cost you thousands and thousands of wasted dollars over the course of your life. Sometimes life happens and it can’t be avoided, but if you can get to the point of paying off your cards every month and build a bit of a reserve fund, it will pay off big time over the years.
As others have mentioned, a realistic budget and plan that you can stick to helps make sure you can meet all your obligations, but hopefully leaves a bit left over every month that you can splurge with guilt free.
Sounds like you are on the right track, so good luck,