Credit is bad… will a loan fix it

Credit Card
1

So I’ve been thinking about getting a loan to pay off my credit cards, but I don’t know if it’s a smart move. I used credit cards to get through college, and now I’m stuck paying $1,100 a month just in minimum payments.

I make $103k before taxes, but I live in Chicago and have other bills too. If I take out a loan, I’d want my payments to be under $600 a month so I can actually breathe a little. I’m also hoping this helps my credit so I can get a car or an apartment without needing a cosigner.

My sister is adding me to her credit cards, which have a $54,500 limit and 0% utilization, so I’m hoping that helps my score. Right now, my Vantage score is 558 because my credit utilization is 94%—I have $34,800 in credit cards, and $32,500 of that is used.

Would a personal loan actually help? Or am I better off just grinding it out?

2

With a 558 credit score and no way to finance a car, what bank do you think will give you a personal loan?

3

Noor said:
With a 558 credit score and no way to finance a car, what bank do you think will give you a personal loan?

That’s why I’m trying to lower my utilization first.

4

My friend went to a bank, took out a $500 loan, and put it straight into a savings account. He let the bank auto-draft the payments from the savings. Cost him a little in interest, but his credit shot up. Might be worth a try.

5

@Noor
Sounds like a credit builder loan. I did one before, but my main issue now is my utilization. That’s what I need to bring down.

6

Gray said:
@Noor
Sounds like a credit builder loan. I did one before, but my main issue now is my utilization. That’s what I need to bring down.

Wait… you have almost 35k in credit and 32k of it is maxed out?

7

Taking out a loan just to get more loans later is not a good idea. Knock out the credit card debt first before worrying about a car.

8

It could work, but you need to do the math.

A personal loan at your credit score might have an interest rate around 22%, meaning you’d pay about $1,200 a month for 48 months. That’s nearly $60k total over four years.

If you just pay aggressively on your credit cards, you could pay about the same but finish sooner.

The real question is: do you want to set it and forget it with a fixed loan, or do you think you can be disciplined enough to pay down your cards fast?

9

@Parker
This is super helpful… I’ll see how much my score jumps after my sister adds me to her cards before I decide.

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Gray said:
@Parker
This is super helpful… I’ll see how much my score jumps after my sister adds me to her cards before I decide.

Yeah, I was in the same spot. My minimums added up to $1,190 a month, and my personal loan was $1,270, but at least it was one fixed payment.

Looking back, I wish I had done it earlier instead of wasting two years making minimum payments. The loan forced me to pay it off.

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@Parker
I think this might be the move. Who did you go with for your loan?

12

What are you spending money on? You make about $8k a month before taxes.

13

A loan only helps if you stop spending on credit. A lot of people consolidate their debt, then max out their cards again.

Not trying to be rude, but if you’re already thinking about taking on more debt for a car, are you sure you won’t end up back in the same spot?

14

@Rai
I only racked up debt because I was struggling to survive on a low income. I don’t live off my credit cards anymore. But yeah, I do need a car to get to work :frowning:

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Gray said:
@Rai
I only racked up debt because I was struggling to survive on a low income. I don’t live off my credit cards anymore. But yeah, I do need a car to get to work :frowning:

If you make $103k, that’s about $6k a month after taxes. Why not just save up and buy a cheap used car?

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@Rai
Appreciate the advice… I live in Chicago.

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Gray said:
@Rai
Appreciate the advice… I live in Chicago.

You might have to live frugal for a while, but it’s doable. Save up for a $5k used car, or use public transport until you have enough cash.

Cut out unnecessary spending. No eating out, no subscriptions. Build a $5k–$10k emergency fund first, then focus on getting debt-free.

18

You make six figures but are only paying the minimum on your credit cards? Chicago isn’t cheap, but it’s not NYC or SF either.

You should not be making minimum payments. If you take out a loan with a score that low, the interest rate will be awful.

What else are you spending on?

Can you cut back somewhere?

Do you have any savings?

Could you pick up extra hours or a side hustle to knock this out faster?

If you have any savings, you could buy a cheap used car instead of taking on more debt. And honestly, I wouldn’t involve your sister in your finances.

19

Your sister adding you won’t magically fix your credit. And you probably won’t qualify for a personal loan without sky-high interest.

You’re just moving debt around instead of fixing the problem.

20

Luca said:
Your sister adding you won’t magically fix your credit. And you probably won’t qualify for a personal loan without sky-high interest.

You’re just moving debt around instead of fixing the problem.

It helped my brother’s score, and he was in worse shape than me. My problem is just high utilization. I don’t have any late payments, charge-offs, or collections—just maxed-out cards.