Consolidate credit card with loan - Improve Credit Score?
Discussion
Here's the scenario.
You have a number of Credit Cards all with reasonably high APR's and a total borrowing of £5k. Total repayment will be £7.5k over 5 years to clear all debt at current rate.
You can take out a loan for £5k for 4 years and total repayment is £7k.
With the loan all credit cards are repayed and closed except on used for fuel and repayed in full at the end of each month.
Would this be a good thing for your credit rating as you'd be reducing the number of debts to one instead of 4-5? (Loan has early repayment options with 30 days interest as a charge.)
You have a number of Credit Cards all with reasonably high APR's and a total borrowing of £5k. Total repayment will be £7.5k over 5 years to clear all debt at current rate.
You can take out a loan for £5k for 4 years and total repayment is £7k.
With the loan all credit cards are repayed and closed except on used for fuel and repayed in full at the end of each month.
Would this be a good thing for your credit rating as you'd be reducing the number of debts to one instead of 4-5? (Loan has early repayment options with 30 days interest as a charge.)
Can't get a decent 0% card sadly. 
We're chipping away at the current debt and it's heading in the right direction, but have been offered the loan by current account holder and financially it seems to make sense, ie repayment will be quicker, overall interest rate and repayment amount will be lower, and we also get to reduce the number of cards/loans from 4-5 to 1.
We're chipping away at the current debt and it's heading in the right direction, but have been offered the loan by current account holder and financially it seems to make sense, ie repayment will be quicker, overall interest rate and repayment amount will be lower, and we also get to reduce the number of cards/loans from 4-5 to 1.
The biggest danger will be consolidating and then thinking, ooh! I'm a little short this month, I'll just pay for it on my now empty credit card. Something I've seen happen many times with people I know.
Theres a multitude of 0% cards out there at the moment, look on places such as moneysupermarket where they are often categorised by what risks the card companies will authorise to. A loan will work but you do need to be disciplined, it will also have no allowance for overpayment which is the big advantage of a credit card.
Theres a multitude of 0% cards out there at the moment, look on places such as moneysupermarket where they are often categorised by what risks the card companies will authorise to. A loan will work but you do need to be disciplined, it will also have no allowance for overpayment which is the big advantage of a credit card.
Thanks Zippee.
This is a hangover from my undisciplined student days when I battled my way through my final year on a combo of credit cards and a few hours in a pub (working not drinking!).
Financial control is much better now and the plan would be to only use credit card for fuel and repay in full each month.
Really the reasoning for doing this is to try and improve a damaged credit rating, simplify the finances by reducing the number of outgoings each month and reduce the overall repayment amount.
I've checked regarding early repayment, you can make partial or full early repayment and the charge is 30 days interest on the amount you wish to repay which isn't too bad I suppose.
This is a hangover from my undisciplined student days when I battled my way through my final year on a combo of credit cards and a few hours in a pub (working not drinking!).
Financial control is much better now and the plan would be to only use credit card for fuel and repay in full each month.
Really the reasoning for doing this is to try and improve a damaged credit rating, simplify the finances by reducing the number of outgoings each month and reduce the overall repayment amount.
I've checked regarding early repayment, you can make partial or full early repayment and the charge is 30 days interest on the amount you wish to repay which isn't too bad I suppose.
Cyder said:
Here's the scenario.
You have a number of Credit Cards all with reasonably high APR's and a total borrowing of £5k. Total repayment will be £7.5k over 5 years to clear all debt at current rate.
You can take out a loan for £5k for 4 years and total repayment is £7k.
With the loan all credit cards are repayed and closed except on used for fuel and repayed in full at the end of each month.
Would this be a good thing for your credit rating as you'd be reducing the number of debts to one instead of 4-5? (Loan has early repayment options with 30 days interest as a charge.)
The interest on your proposed loan still seems high around 18% APR.You have a number of Credit Cards all with reasonably high APR's and a total borrowing of £5k. Total repayment will be £7.5k over 5 years to clear all debt at current rate.
You can take out a loan for £5k for 4 years and total repayment is £7k.
With the loan all credit cards are repayed and closed except on used for fuel and repayed in full at the end of each month.
Would this be a good thing for your credit rating as you'd be reducing the number of debts to one instead of 4-5? (Loan has early repayment options with 30 days interest as a charge.)
Could you not move to a credit card with low interest on balance transfers or lower than your current amount.
For reference with a low APR personal loan you could knock nearly a year off of your payments.
Most of the credit cards are around the high 20% bracket, so this makes sense. Ideally you're right we'd just dump everything onto 0% balance transfers, but sadly a former life of being an idiot and spending everything I had and more means that isn't possible currently as my credit rating is rubbish.
Edited by Cyder on Wednesday 12th October 12:48
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