A couple of years ago, I took a chance on starting my own business and funded it myself. Sadly, it didn’t work out, and I ended up with around $30k in credit card debt. Tough lesson, but you live and learn, right?
Now I’m back at a new startup job making a decent salary (about $130k a year). You’d think that would make it easy to get a personal loan to consolidate my debt. But every time I apply, I either get denied or offered ridiculous interest rates that are just as bad or worse than my credit cards.
Has anyone else been through this? Are there any lenders who are more flexible with these kinds of situations? Or are there better ways to deal with this debt without taking on more crazy interest rates?
It’s frustrating because I’ve never missed a payment on anything and have nearly $100k in available credit. You’d think I’d be the kind of person they’d want to lend to. Do they just avoid big personal loans, or am I missing something?
If you owe $30k on credit cards, a lender might worry that if they give you a $30k loan, you might not use it to pay off the cards but instead rack up more debt, ending up with $60k. That’s a big risk for someone, even with a $130k salary. Bankruptcy becomes more likely in that scenario.
Do you have a good relationship with the bank where your paycheck goes? Talk to them. Also, look into sites like SoFi. Do you own a house? Home equity lines of credit (HELOCs) have much lower interest rates. Or consider applying for a 0% credit card for balance transfers. Your goal should be to move from 25% credit card interest to something like 8–12%. If you have a 401k, borrowing against it might also be an option.
@San
That makes sense. I’m definitely planning to use it to pay the credit cards, but I get why the bank might worry about that. I haven’t looked into HELOCs before, so I’ll check it out.
Tennyson said: @San
That makes sense. I’m definitely planning to use it to pay the credit cards, but I get why the bank might worry about that. I haven’t looked into HELOCs before, so I’ll check it out.
HELOC stands for Home Equity Line of Credit. It’s worth exploring if you own property.
They might be looking at how long you’ve been at your job or your debt-to-income ratio. If you haven’t been at this new job for long or have other big debts, that could be why.
I wouldn’t stress too much. Start tackling the debt bit by bit on your own.
@Wylie
Yeah, I’ve only been at this job for about 12 months, so that might be part of it. My debt-to-income ratio isn’t great either, haha. My payment history is solid, though. I’ll keep chipping away at it—just annoying to deal with high-interest rates.
You’re asking for more unsecured debt to pay off your current unsecured debt. From the bank’s perspective, that’s risky.
If you had something like property to use as collateral, they might be more willing to lend you the money. Otherwise, you might need to grind it out, cut expenses, and focus on paying it down over time.
You could also contact the credit card companies directly to negotiate lower interest rates or payment plans. Just be aware it might affect your credit score.
@Sage
I wasn’t asking for more debt overall, just to move it to a loan with lower interest. I’ve never missed a payment, so I’d think they’d see me as a good candidate.
Still, I get your point. It’s frustrating, but I’ll keep looking for the best way to handle this.
@Tennyson
How does the bank know you’ll use the loan to pay off the credit cards and not just rack up more debt later? Or what happens if your startup doesn’t work out? Without collateral, they don’t have much to fall back on.
I get why it feels like a no-brainer to you, but for the bank, it’s a bigger risk than you might think.
@Jesse
Yeah, I assumed they’d just pay the credit cards directly with the loan, but I guess I could still run up the cards again afterward. It’s frustrating, though, because they seem to trust me enough for an 18-month 0% credit card but not a personal loan. Thanks for the perspective.
@Tennyson
Some lenders will pay the credit cards directly. I got a consolidation loan through Upgrade, and they sent the money straight to my credit card companies.
@Tennyson
Banks usually need something tangible to secure loans, like a house or car. Debt refinancing like this isn’t as straightforward without collateral.
Sorry, but you might have to look at other options or work on paying it down yourself.
Think about it: you’re asking for more debt to cover old debt. That’s not a great solution.
Getting out of this will take time, discipline, and a plan. Budget carefully, set goals, and focus on paying it down steadily. Don’t give up and file for bankruptcy unless there’s no other choice, because you won’t learn anything from it.