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Question By
itsjustkmess

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Did i make a bad choice?
I got an offer from Discover Personal Loans, and I took it. I currently have a discover IT card that I have been paying off no problem. It's not that I needed that money I just thought of it as oh this would be great to add to my portfolio. But now I feel a terrible lump in my stomach that I'm going to ruin my 719 credit score that has recently been on the rise. I asked for 10,000 dollars and they gave it to me, with 15.89 APR which is terrible and I should have said no, but I didn't. However there is no Prepayment fee which brings me to the question of Once they deposit the money into my account what would be the best way to give them the money back with helping my credit score at the same time. The original "loan" is for 48 months which i'd like to pay minimal Interest and pay it back maybe within the first year? i'm just not really sure what direction I should head into. Should I pay off all my credit card debt and pay the loan back instead? should I go on a spending rampage? HELP?!

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Thought

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How about paying off your 4k$ CC debt and 6k$ of loan. Then pay off the 4k$ remaining loan before the interest kicks in or asap!

Worked for me!

Reply by
itsjustkmess

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I'm considering this as well. 

Thanks for the Help! 

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Reply by
ddaug4uf

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Now that the OP has shared the details of the accounts, that definitely seems like the way to go. The significant decrease in utilization should easily offset the hard inquiry acquired by the debt which is probably impacting his score already if they have already approved the loan.

The only negative here I see by paying the loan off early, and it is an almost infinitesimal impact, is the loan will drop off earlier. If the OP is already stable at 24, this should have no real impact on him in 7 years.

Good luck!

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What are the interest rates on the credit cards that you would consider paying off? I think this boils down to simple math. If the interest rates on the cards are higher than the loan interest rate, then definitely pay them off. If the cards have lower rates, I would pay off the loan as soon as possible. 

Reply by
itsjustkmess

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The interest on my WF is higher, but my lowest Credit card. 

Currently on my Discover IT card i have 0% until December, and at this time they can't tell me what my APR will be until it's calculated. On my discover IT card i have about 4,000 racked up on it which is higher than my 30% utilization. 

Ultimately i'm curious as to Will it negative effect my score if i quickly pay the loan off versus keeping it for 48 months. 

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The positives:  1) Having 10k to play around with even though you don't need it.  2) A good credit score.  The negatives:  1) Adding 10k to your total debt, at a high interest rate, when you don't need it.  2) A likely lower short-term credit score by adding a new debt. 

I have learned that just because you CAN do something doesn't mean you SHOULD do something.  If I were you, I would pay off the loan as quickly as possible and I mean as quickly as possible.  You can pay off the Discover card at 4k and save more in interest even if the APR in January is a few points higher, than the 10K loan over 4 years at almost 16% interest.  The goal is to get OUT of debt, not more into it.  Your portfolio (what creditor's may look at to see how varied your debts are) is not nearly as important as how little debt you have (for your own sake as well).

The biggest factor I have seen influencing a credit score is credit card debt to credit limit ratio.  The less, the better.  Alternately, if you did pay off your credit cards with the loan, your score would likely go up a bit, but as what cost?  Just trying to help.  Good luck!

Reply by
itsjustkmess

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I know, Ugh. With only being 24 and being "financially stable" is reassuring, but some of the temptations are hard. I have been looking into buying a newer car so I had also debated on using this Money or Doing a car loan through the Dealer. But neither APR's seem appealing. I did notice I only ended up loosing 2 points because of a Hard Inquiry. Not because of the loan it self (so far) I also have a 94,000 home loan out as well, but that seemed to bump my score up. I thought it was because of the Diversity in Debts/Loans. Thanks for the Help. 

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