Need advice on credit card refinancing options

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
I am hoping someone can contribute some creative ideas to help me with my situation. Here goes.

I made the mistake of starting two businesses and using personal credit to pay for business startup expenses rather than opening lines of business credit. 

One of my businesses has been since closed down and the other took off and is doing extremely well.  

I now have about 64k in credit card debt and I am trying to get creative in figuring out a way to pay off everything faster.

I have 64k in credit card debt across a few credit cards, with an average interest rate of 22%. Here are all of the details of my situation:

650 credit score
94% credit card utilization ratio
No other debt
Never missed a payment
No derogatory marks on my credit
Age of credit history about 4 years
Minimum payments every month equal about $3,400
I have minimized all spending as much as humanly possible and am on an extremely tight budget

I have enough monthly income right now to pay all of my living expenses and bills, plus the minimum monthly payments on my debts, but not much left each month. I am making more and more money every month because my business is doing very well but I want to pay everything off as quickly as possible. 

I am about to pay $10k off of the highest interest rate accounts, which should drop my utilization down to about 80% and my total credit card debt to about $54k.

I am debating on next steps. With a credit score of approximately 650 and a credit card utilization ratio so high, I cannot get a personal loan with a decent interest rate.

I am wondering if I were to take a $20k personal loan with a relatively high interest rate of 20% or higher, is it worth it because it makes my credit card utilization ratio drop a lot right away? Will I see a decent enough rise in my credit score after paying down the additional $10k as well as moving some credit card debt to a personal loan that I will be able to get another loan at a lower rate within a couple of months?

Ideally I would like to get all of my interest rates down as low as possible so I can pay everything off within 2 years at most. 

Does anyone have any creative ideas about how to consolidate and refinance all of this given my scenario?

Member Summary
Staff Summary
  • Also categorized in:
Thanks for visiting Join for free to remove this ad.

Own a house? HELOC.

Otherwise get the highest balance cards down (under 50% on as many cards as possible) and wait for score to go up.
Alternatively, any balance transfer offers? Clear card with best offer, use BT to clear card with next best offer, and so on to get all rates as low as possible, and pay them all down as fast as possible.

My recent experience is that utilization ratio per card has a pretty high impact on a good credit score. My wife had one account with 80% ratio for a while, kept her scores capped in the 740s. After paying that off and having a max individual account usage around 20%, her scores jumped over 700. She briefly had one with usage just over 100%, and that had a huge hit on the free scores too. All this while, her overall usage was only around 5%, with many unused accounts.

So I can't give you an anecdote about exactly what to expect in your case, but I think your personal loan plan seems worth a try. The interest rate will have little difference from where you are now. If you're really pushing for a better score, I think my strategy would be to get all accounts under 80% then 70% etc, rather than paying off one entirely. If there's a big difference in interest rates, I'd be tempted to make that my plan instead. If you foresee paying it all off in a couple of years, that might just be most effective and simplest anyway.

I'd explore pulling money from other places you may have - home equity loan, car loan, even 401k loan, if you have any of those available. Any of them probably offer much better interest and would offer usage ratio relief. A 401k loan won't show on your credit report at all.

Disclaimer: By providing links to other sites, does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to

Thanks for visiting Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017