Combine all debt onto a new loan, or pay off individually?

[StormySar]

My dh and I found ourselves in a tight situation which we are still working our way out of. We had to use credit cards to live off of for a while, which have a very high interest rate.

If I can get a loan (I don't know much about this financial stuff, so please ignore my elementary language here lol), is it possible to find it with "fixed" interest (is that what it's called)? Would my best bet be to check my bank first?

My idea, and tell me if this is smart, is to get a loan large enough to pay off my credit cards, an installment loan, possibly the rest of my van (or darn near it) and a few other smaller debts. I'd imagine we'd be saving in finance charges each month if I'm not paying 23% on each credit card plus whatever our van and other debts have. I'm amazed at how little i"m actually paying off each month on my credit cards! I do try to pay over the minimum payment but if I do, it's not by much usually.

My idea was, this would clear my credit up a little, I'd avoid future late or missed payments, avoid the high charges, and have one consolidated loan we'd pay each month in addition to my husbands motorcycle, our rent and utilities.

My husband and I are also considering a mortgage here soon - if I were to get a loan for my debts now, pay off everything showing up on my credit report (credit cards and whatnot) and they showed up free and clear, would it better our changes at getting a mortgage with a clearer credit report, or hurt it if they see we just took out a loan?

Or, if we get a mortgage and find a house in our price range, woudl it be smart to consolidate all of our debt into the mortgage so we don't have a bunch of large payments going out through the month? Or keep the loan seperate from the mortgage so we aren't in reality paying off our debts for the next few decades and can be free and clear of themn in a much shorter time (and eliminate a payment).

[mightymoo]

Some experts recommend against consolidation loans becauset the concern is they clear out the credit cards and if the person has a problem, they just run up the cards again and get themselves further in debt. You know best whether this is something that would be an issue for you.

If it isn't, getting a lower interest rate would be desireable, however I don't think you can generally get fixed rate unsecured loans. I'm not really familiar I'm sure others will comment.

On the mortgage situation. If you don't have any money to pay off your debt, then I am guessing you don't have money for a down payment. You cannot take a mortgage out for more than a house is worth, so its not really feasible to consolidate your credit cards onto your mortgage. The only way you can consolidate credit cards onto a mortgage is if you have equity in a property you can leverage.

I don't know how the loan versus credit cards would affect your credit rating, hopefully the credit experts will help with that.

[aggie11381]

I'd say don't consolidate. The debts don't disappear once they're paid, all the late payments are still on the record for seven years. The little debts won't look any worse on your credit if you're staying current. Plus now you'll have a new consolidation account which looks bad. It might also be tempting to all of the sudden have those credit lines open again.

Have you tried the snowball method? Put the debts in order, pay the minimums on everything except the smallest. Throw everything you can at that little one. We paid off $22K in credit card debt last year by this method.

Don't add them into the mortgage. There are a lot of reasons you could have to move and it will be impossible to sell the house. Also wouldn't it make your mortgage payment bigger and harder to pay? That would put your home at risk.

Good luck with this! You can get through it. We went through the same thing - had stopped using the cards, but couldn't get rid of the debt. Once we calmed down and got a budget organized, it started going quickly.

[DarkHorseMama]

Originally Posted by aggie11381

Have you tried the snowball method? Put the debts in order, pay the minimums on everything except the smallest. Throw everything you can at that little one. We paid off $22K in credit card debt last year by this method.

Seconding the debt snowball. We retired about $40K of student loans, $9K credit card, and $18K car payment in less than four years doing the snowball roll. It works best in conjunction with a strict household budget to back it up.

[UmmBnB]

We chose to consolidate some of our credit card debt to a fixed rate unsecured loan through my bank. I have excellent credit and a long-term relationship with my bank so it wasn't an issue. However, while the rate was low (4.9%) it was higher than two other balances we were carrying, fixed at $2.9%, so we left those and we are using the snowball method to get it all paid off.