Is taking a personal loan to clear debt a smart move?

Loans
1

I owe $10,400 in total. This includes a personal loan with $4,700 left and three years of payments to go, plus $5,700 in credit card debt. I’ve been working on improving my credit score because I want to buy a car next year. My credit score dropped before when I paid off accounts, even though I stayed current on everything else.

I’m considering taking out a $15,000 personal loan for five years. My current payments are $225 for the personal loan and $375 minimums on credit cards, so I’m paying $600 monthly now. The new loan would cover all my debt and leave $3,200 for savings. My new payment would be $440 a month for five years. Would this be a good idea? Could it hurt my credit score?

2

Moving debt around doesn’t solve the problem. But if you can avoid racking up more debt, this could help. A big drop in debt might actually boost your credit score. Just don’t forget to start building an emergency fund with the extra $200 each month.

3

@Chen
That’s my plan, but things happen. I’d probably keep one card just in case of emergencies. I’m also waiting on a potential job offer that could help. Thanks for the advice!

4

Wynne said:
@Chen
That’s my plan, but things happen. I’d probably keep one card just in case of emergencies. I’m also waiting on a potential job offer that could help. Thanks for the advice!

If you cancel a card with a balance, it can hurt your credit score.

5

@Tanner
I’d make sure to pay it off first.

6

Don’t take that loan! At $440 per month, you’d be paying over $11,000 in interest, which is insane. Personal loans typically have lower rates than that. This lender sounds predatory. If you stop using your credit cards and focus on paying them off, you’ll save a lot more. $5,700 in credit card debt is manageable if you stay disciplined.

7

@Noor
You’re right. The loan is from Lending Club, and it does feel predatory. My credit is 653 now, much better than the 515 it was a few years ago. I’ll keep working on it. Thanks for the breakdown!

8

Wynne said:
@Noor
You’re right. The loan is from Lending Club, and it does feel predatory. My credit is 653 now, much better than the 515 it was a few years ago. I’ll keep working on it. Thanks for the breakdown!

Your credit score isn’t terrible. Just avoid these loans and focus on paying off your current debt as fast as you can.

9

You don’t have a lot of debt. If your credit is decent, apply for a zero-interest credit card and transfer the balance. Pay it off within the promo period.

10

Getting a loan to pay off another loan just keeps the cycle going. You need to break the pattern.

11

Morgan said:
Getting a loan to pay off another loan just keeps the cycle going. You need to break the pattern.

I get your point. My goal is to consolidate everything and have a plan to be debt-free in five years. I appreciate your input!

12

Using a loan to pay off debt often backfires. You could end up maxing out your cards again. Be careful.

13

Kai said:
Using a loan to pay off debt often backfires. You could end up maxing out your cards again. Be careful.

I wouldn’t use the cards again. This is more about saving money long-term. I’d probably cut up all but one card to avoid temptation.

14

You can’t borrow your way out of debt. Focus on paying off what you owe. If you’re planning to finance a car, rethink that too. Adding more debt won’t help.

15

Listen to Dave Ramsey. Pay off what you owe now. Don’t take out another loan or you’ll end up in the same place in a few years.

16

Check out Christy Vann on YouTube. She has great advice on paying off debt without taking new loans. Her strategies can help you clear your debt faster.

17

Jules said:
Check out Christy Vann on YouTube. She has great advice on paying off debt without taking new loans. Her strategies can help you clear your debt faster.

Thanks for the suggestion! I’ll check her out. This has been really helpful.

18

Look for credit cards offering zero-interest balance transfers instead of taking a personal loan. Just be mindful of hard inquiries affecting your credit score.

19

Stop thinking in terms of monthly payments and look at how much interest you’re paying. Figure out why you’re in debt and work on paying it off in two years or less.

20

Niko said:
Stop thinking in terms of monthly payments and look at how much interest you’re paying. Figure out why you’re in debt and work on paying it off in two years or less.

This is a great perspective. Thanks for helping me see the bigger picture!