I never thought about consolidating credit card debt into a loan when I visited that bankruptcy attorney on an overcast November day way back when. My credit scores were in the 700’s and I was making a 6 figure income but struggling in the aftermath of an expensive long distance divorce and child custody spat with my now amicable ex-wife. My circumstances may not be yours but my choices may feel familiar.
My bank and attorney never mentioned them nor did any of my creditors. My monthly payments were killing me and I saw no end to what seemed like exorbitantly high eternal payments to faceless institutions that had me by the “huevos”. All I knew was that I’d go on a bankruptcy (BQ) payment plan, deal with a 7-year credit hit and then start over again. I had a house I kept under the Chapter 13 and got lucky with a good car that would carry me through it all but that’s about it.
For an educated guy, I wasn’t so educated all of a sudden. I tried to get Bank of America to roll my Bank of America credit card debt into my Bank of America mortgage but they said no – because I had the credit card debt! That was the answer. I tried to renegotiate a car loan and credit card rates with all of them but my creditors turned away from me. Huh??? You do realize you might get 10% of that if I go under right??? I’m offering to pay everything damn it just help me with the rates and put me on a payment in full plan!
At the time, I thought my only options were a Chapter 13 bankruptcy (which I chose as I had assets) vs. a Chapter 7 vs. a debt consolidation company arrangement. I chose the Chapter 13 for the legal protections and I literally cried in my lawyer’s office as I walked out knowing I was trashing years of perfect payments to creditors and somehow had ended up in a place I never thought I’d be. Had I understood the availability and benefits of personal loans to people with lower credit scores and lower incomes, I never would have taken the path I did… my scores and income were good! I had scores in the 700’s and definitely would have fit within the excellent to fair credit personal loans category. Check out the rates!
I didn’t know that down the road during post-bankruptcy discharge and 6 years after filing the damn thing that I would embarrassingly struggle to be approved for an apartment rental when I sold my home and moved closer to my kids with a new job. I never told my daughter, who went with me to look at and apply for the apartment that we loved, why I suddenly didn’t love it. I didn’t know that I would shamefully have to explain my circumstances to my new employer when they ran a credit check.
And then after the discharge from Chapter 13, I was in an accident and had thousands of dollars in upfront medical costs, which I put on my credit cards. Oh… I had a credit card with no balances which predated my Chapter 13 that I kept through the BQ. So my bankruptcy plan took every imaginable penny I earned and allocated it so that there was nothing left over. They gave me like $200 per month for food. Have you been on a date lately? Cars need repairs from time to time, right? Houses have issues from time to time, right? Do you think things arose in that 5 years, like auto and home repairs? What do you think happened to that credit card during this 5 year BQ payment plan? It’s a vicious cycle this credit card debt treadmill. The struggle is real, dude.
So I came out of the Chapter 13 on shaky ground. I couldn’t allow myself to go down this path again. I used online personal loans to stop myself from sliding back into the abyss and learned to really love the power of my debit card. I took back control. So yes, I failed – and then I fell down – but then I finally succeeded. If you’ve fallen, I want you to succeed on the first shot. Here’s why personal loans can be a solid interim tool in managing and eliminating your credit card debt and improve your well-being like they did for me:
Between 2 small loans and 2 credit cards, I was paying about $600 per month and the credit cards were minimum payments and going nowhere for 22 more years at that rate. I took a lower interest personal loan with a 5-year payback option and cut my monthly payments to $350.
This not only allowed me to work towards a debt-free date but it also allowed me to start having savings again and money when I needed it. One of my shrinks (yes one of them, I have an army of them) recently told me how people that take personal loans are stupid. I’m with stupid then and – no – under the right circumstances, it’s actually a smart thing to do when looking at the alternatives. I was clearly better off with a much lower payment and an end in sight than where I was headed. I stopped the bleeding and then the wound started heeling.
Speaking of stopping the bleeding, this is exactly what a personal loan did for me and can do for you. I was looking at 20+ years of payments to be out of debt and the monthly payments were higher. I cut those payments to close to half and was out in 5 years, and had I wanted to, I could have been out in 3 years and still had lower payments than the minimums I was throwing away. I don’t even want to know how much that total is over time.
The stress of feeling like the debt is forever with you and has no end in sight was a burden I carried with me all the time. As soon as I decided to consolidate credit card debt into 1 loan, and was approved and had the money the next day, through online funding, every passing month brought me closer to the finish line.
A bankruptcy tanks your credit for 7 years. Debt consolidation companies can put you on a plan but there is also an impact in the remarks on your credit score as well as the score itself. Making minimum payments while maxing out your credit is stressful and also keeps your score down due to the high utilization of debt to available credit.
As my father would say in a piercing, stoic Brooklyn Jewish accent: “it’s not a way to live a life, son.” No Shizo, Dad. I thought was supposed to be rich. And It sucks… and it’s sucking the life out of me!
All I do is work, pay endless amounts of bills that never go away and maintain a decent but not great credit score. So here’s what happened to me when I did the personal loan – my credit scores skyrocketed – by 25-35 points!. Huh??? “Whatchu talkin bout, Willis?” A few weeks prior to I was unabashedly eating comfort food in gluttonous amounts to cope with it.
I know of situations where a credit score takes a short term hit but before it improves but here’s what happened: I paid off my credit cards with the loan money but left my cards open with full limits available. The credit card companies raised my limits as well. My debt to credit availability ratio was now much higher. My debts were also now consolidated into an installment loan which apparently also made a positive impact. I made sure to use my debit card – my new best friend – and only use my credit cards for hotel deposits and car rentals, which I would immediately pay off. Literally over a 30-day period, my scores skyrocketed, I was making lower monthly payments and soon after I saw my balances go down each month.
It’s true man. I love using my debit card. It makes me feel powerful. It makes me feel strong and in control. It makes me feel like I’m saying eff you to the big nameless credit card digit heads each and every time I use it.
I no longer have that hollow post-plastic stripe swiping, chip inserting feeling of I’m not getting off the credit card treadmill anytime soon and I need the money in my bank account so that – ummm…. I can continue making my now higher monthly minimum credit card payments? It’s not a way to live a life.
I need to reiterate this point as I do in most of my posts as you cannot effectively change your financial life simply through debt consolidation loans alone. Consolidation loans simply help you move debt into a place that is more manageable so that you can pay it off at a date certain but YOU MUST CHANGE THE BEHAVIOR THAT GOT YOU WHERE YOU ARE, where possible.
Look, everyone has their own circumstances and an online personal loan can help people in a variety of credit conditions, but you need to decide if it makes sense for you like it did for me. I don’t ever want anyone to do something that they don’t feel is right. That’s what I did when I filed a BQ with high credit scores and a perfect payment history.
The benefits I realized through a personal loan were massive and life changing:
Loan Camel sets this up to be painless for you:
To get started by checking out your rates to help you like it helped Daddy Poorbucks, Loan Camel helps people get over the hump painlessly while providing a world of personal loan options to choose from. To see your options and even check rates and terms without impacting your credit, you can start the process of moving forward with a competitive personal loan.