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DM131

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Drawbacks to using a second personal loan(lower %) to pay off first one?
I have a personal loan that I am paying off(car broke big time and had to fix, and a couple expenses), I received an offer for a different personal loan with a 10% lower APR and lower payments, how would getting that one(different company) and paying off the first one, essentially shifting it, affect my score? Would having the two loans open for that period of time negatively impact my score a lot? I am working on trying to build back up, as I have a couple past negatives(chargeoff/collections unfortunately... am at 634 or so now) so I can hopefully get a house in a year or two once I save up enough.

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First, you did not get an offer, you got a targeted advertisement.

Second, it would hurt your scores doing this. You would be getting "hard inquiries" and you would be reducing the "average age of accounts" and you will be penalized for both. The third thing you will be penalized for is that the new loan will have a full balance owed (instead of having the paid down loan now which you are being rewarded for). I don't know what your financial situation is, but it may be best to double down on payments and get the current loan knocked out if you can afford it. If finances are an issue, then you may want to consider your plan. Do some further reading on the subject before making a decision, I just wanted to throw a few things out there for you to consider. Be advised that the damages I've addressed would significantly subside in a year.

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