Hi Money Minder,
I got a question since I’m new to Reddit and checking out the personal finance community. I have some credit building questions, especially after dealing with some legal stuff last year that set me back financially.
I’m trying to catch up on an auto repossession, a couple of credit cards with high interest rates, and my school loans and child support payments. I’ve heard about taking out a loan to pay off these debts in one go.
If I take out a 5-10k loan to catch up and improve my credit, how much of a difference will it make? Will the payback term and interest rate be better than what I’m dealing with now?
Right now, I have a 15% APR auto loan balance of $2200 and credit cards with 30% APR (up from 20% due to missed payments) totaling about $2200. I also have around 30k in student loans.
I just want to get in a good place financially, start building my credit, and eventually start my own business. I’ve been working on my credit for 8 years and have been on time with 94-97% of my payments. I’m currently using about 50-60% of my available credit and working hard with two jobs.
I recently got a Kickoff secured loan account and Kickoff secured card, as well as an Opensky secured card.
Thanks for the help!
Seeking Credit Advice
Response from THE MONEY MINDER:
Hello There,
Congratulations on taking the crucial step to address your financial situation and work towards building a better future. I understand the challenges you’re facing, especially with the legal trouble and debts piling up. Taking out a loan to consolidate your debts and catch up on payments can be a viable option to streamline your finances and improve your credit standing.
In your case, it’s important to calculate the total amount you owe, including the interest rates and payback terms of your current debts. By securing a loan with a lower interest rate than what you’re currently paying on your auto loan and credit cards, you could potentially save money in the long run. Make sure to shop around for lenders who offer competitive rates and terms that fit your financial situation.
Consolidating your debts into one loan can simplify your repayment process and help you better manage your finances. Additionally, by making timely payments on the loan, you can demonstrate responsible credit behavior, which will positively impact your credit score over time.
It’s excellent to see your commitment to improving your credit profile by making on-time payments, reducing your credit utilization, and working towards your financial goals. Keep up the hard work and stay focused on your objectives. Starting a business can be an exciting venture, and getting your financial house in order is a critical first step towards achieving that dream.
Remember to also continue building your credit history by using your secured cards wisely, keeping your balances low, and making regular payments. With dedication and perseverance, you can overcome your financial challenges and pave the way for a brighter financial future. Good luck on your journey to financial stability and success.
Best regards,
THE MONEY MINDER
