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Hey yall,

I was wondering if it would be a good idea to get a personal loan in order to pay off my debt which is at 16.9% right now. I know the rates on those are at about 14% or so. If I can actually get approved would that be a good thing to try out. What about a personal line of credit that has variable payments, depending on how much you take out. I have about $3200 in debt.

Thanks
Brett
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If you can get it, and it saves you interest, and you do not amass any more debt, then yes it sounds like a good idea.
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$3200 in debt isn't a whole ton.

You say you're at 16.99% and could get a personal loan for 14%, that's a bit of a difference, but have you tried calling the CC company? You can probably get your rate reduced to 10% or so provided there's no major problems in your credit history. 10% would beat even the personal loan. I think that's your best place to start.

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Brett,

Do what ever it takes to lower your rates, so long as you know what you're getting yourself into. In other words, lower your rates; but be careful about exchanging unsecured debt for secured debt unless there's a big incentive. Also, be careful that you don't just run up your CCs again, once you consolidate.

If you need more motivation to get your rates lowered, check out my post Why Interest Rates Matter ( http://boards.fool.com/Message.asp?mid=17699844&sort=whole ).

Also, you might want to call your CC companies before making the transfer. They might be willing to meet or beat the rate on a signature loan from a bank or CU.

In the end, this is main reason people play the BT game on this board -- to get the lowest rates they can while paying down their debts.

- Joel
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I was wondering if it would be a good idea to get a personal loan in order to pay off my debt which is at 16.9% right now.

One thing you must absolutely remember is that you are not paying off debt, you are merely shifting it around. Yes, this can be to your advantage if the new interest rate is lower, but it will destroy your finances if you start charging up your newly cleared off credit cards. I reccommend cutting up or even canceling the cards you are transferring from.

As others have mentioned, try negotiating with your credit card banks. If you tell them you will transfer the balance unless the interest rate comes down, they may be willing to lower it to keep your balance in-house.

SirWired
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We used an unsecured personal loan from our credit union to pay off a few very high interest cards (25%-29%), but first, we called all of the credit card companies and asked them to lower the APR. All but two (the two highest, actually) did so. Our loan was granted at 11.5% and we can refinance that in a year when our debt has been paid down by quite a bit.
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I was actually considering using a credit union, because i would rather not have to use collateral, would a credit union be my best bet then?

I appreaciate all the advice everyone has given to me. I am very Foolish now, and would not charge up my credit cards again. I have tried to get my rates lowered, but Capital One already said they did. I got a letter saying that they evaluated my records and I was allowed a rate reduction to 16.9 from 18.9%. I have since tried to call and get it lowered, but they don't really care and say they can't lower it for 6 months.

I know that 16.9 is a high rate and if I could transfer it to a lower rate I would be much happier.

For what its worth. I have a budget and I plan to start contributing to my ING account more often.

Thanks again for all the help.

Brett
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One more thing yall. Might it be wise to transfer my debt to my mom. Who will "hold" it for a month, and my Fico score would go up. I have used the fico score simulator. And then apply for a lower rate credit card or loan through a credit union. Do credit unions do credit checks? That way I can get a lower rate and save some money.

Thanks,

Brett

By the way I found a credit union...Fort Worth Telco, that I can join because my mom retired from Southwestern Bell. Their signature loan rate is 9.99%. Could I get approved for this loan with a Fico score of 715 or above. Not that ya'll would actually know, but would it be more likely to get approved then with say a 685 that I currently have.
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Might it be wise to transfer my debt to my mom. Who will "hold" it for a month, and my Fico score would go up. I have used the fico score simulator. And then apply for a lower rate credit card or loan through a credit union.

What exactly do you mean by transferring the debt to your mom?

Do credit unions do credit checks? That way I can get a lower rate and save some money.

Yes, credit unions will check your credit before giving you a loan.

Their signature loan rate is 9.99%. Could I get approved for this loan with a Fico score of 715 or above. Not that ya'll would actually know, but would it be more likely to get approved then with say a 685 that I currently have.

I got a $20,000 unsecured loan from a credit union with a FICO score of about 650.
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Brett257,

You wrote, By the way I found a credit union...Fort Worth Telco, that I can join because my mom retired from Southwestern Bell. Their signature loan rate is 9.99%. Could I get approved for this loan with a Fico score of 715 or above. Not that ya'll would actually know, but would it be more likely to get approved then with say a 685 that I currently have.

Does Fort Worth Telco Credit Union ( http://www.ftworthtelco.org/ ) have a branch physically close to you? Setting up the loan would be quickest if you could drop by a branch with a loan officer.

Actually, I don't see where you get the 9.99% APR from Fort Worth Telco CU. Here's the the applicable section from their web site:

UNSECURED LOANS 13.25% APR
LINE OF CREDIT 14.50% APR

It does look like credit cards from FWTCU start at 9.99% APR though. Here's their rate page: http://www.ftworthtelco.org/prodserv/rates.html

Are you still in the Collin county (Plano) area? I make that assumption because of your profile.

I think you might do better than FWTCU. Personally, I wasn't too impressed with their rate schedule. I use Texans Credit Union ( http://www.texanscu.org/ ) and have had nothing but good service from them. Texans services most of North Dallas and its outlying suburbs ( http://www.texanscu.org/Serve.htm ).

You might also try Community Credit Union. They also have great rates and fairly convenient locations. While their service area is slightly more restrictive than Texans, they will accept members from just about anywhere in Dallas county or any of the surrounding counties, except for Tarrant.

You might also want to investigate other credit unions in your area. Here's a list of state-chartered credit unions ( http://www.tcud.state.tx.us/PDF%20Files/branches.pdf ) in Texas. Here's another list with proper links ( http://www.tcul.coop/index.asp?SEC={7DAF574C-9EA9-4997-B410-C1D566F5E750}&type=B_BASIC ). And here's a page that will try to match you to a credit union ( http://www.howtojoinacu.org/ ). Finally, here's a directory of all federally insured credit unions in the United States ( http://www.ncua.gov/data/directory/2002CUDirectory.pdf ).

- Joel
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Brett257,

You wrote, I was actually considering using a credit union, because i would rather not have to use collateral, would a credit union be my best bet then?

This brings up an interesting point. If you have the choice between a 12% APR on an unsecured note and a 6% APR on a refi of your used car, which would you take?

In my book, 6% is probably enough to justify risking my car; but only if it was still new enough that I would carry full coverage anyway. (Adding comp/coll would probably wipe out any savings.)

Besides, I could always pay the loan off early once my FICO improves and good BT offers start showing up in my mailbox.

- Joel
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Joel:

If you go to the main start page of Fort Worth Telco http:/www.fortworthtelco.org and scroll to the bottom you see the special loan rates. What do you mean by "rate schedule"?

I will also check out the Texans credit union.

I have on more question for the all knowing board members.

Would I 700 something FICO score qualify me for a credit card with balance transfer rates?? I never recieve credit card solicitations at my new apartment, a good thing, so I have to apply online.

Thanks again yall

Brett
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chrisdotcom:

When I was talking about transferring the money to my mom, she has an open credit card that she said I could transfer my balance to for a time in order to raise my fico score and then I would be able to get another loan and pay that card off with a balance transfer from a new low rate credit card, or a check from a credit union loan.

Thanks
Brett

Oh and Joel, my car is paid off and I have liability on it. Mustang GTs and 20 year olds don't mix well with full coverage insurance so refinancing the car wouldn't be a good idea.
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Does Fort Worth Telco Credit Union ( http://www.ftworthtelco.org/ ) have a branch physically close to you? Setting up the loan would be quickest if you could drop by a branch with a loan officer.

Can't speak for that CU, but my CU gave me a loan and I did not see anyone in person. Everything was done through the mail. Easy as pie. Just a thought.
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One more thing yall. Might it be wise to transfer my debt to my mom. Who will "hold" it for a month, and my Fico score would go up. I have used the fico score simulator. And then apply for a lower rate credit card or loan through a credit union. Do credit unions do credit checks? That way I can get a lower rate and save some money.

Brett,

It can take 2-3 months for changes in your credit situation to percolate into your credit report (and hence score.)

And yes, credit unions do perform credit checks. They are usually more willing to treat you as a human being than a bank, but the approval process is still based on the same principles.

SirWired
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I'm wondering what else is on your credit report to cause the FICO score to be 685? Are there any collection accounts? Charge offs? Other credit cards? If you're 20, then length of credit history is probably a factor.

As for transferring the debt to your mom for a month. First off, it can take 3-4 months for your FICO score to adjust to credit activity. Secondly, and I may be the only one with this train of thought, but is it ethical? In my opinion, credit scores reflect our spending habits and responsibility with credit. It also protects the bank, who use the scores to determine what the risk will be in granting us a loan.

Until you're able to find a good BT rate or get an unsecured loan, how about cutting back on expenses, eating out less often, taking your lunch to work and throwing every extra penny towards your snowball. That's a good and ethical way to improve your credit score.

Do you have a budget? We just started one in July and it hasn't been easy, but it's definitely been an eye-opener. We started off just writing down everything we spent money on - every single cent is accounted for. We were able to find several hundred dollars to put towards debt!
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LuluB,

You wrote, Can't speak for that CU, but my CU gave me a loan and I did not see anyone in person. Everything was done through the mail. Easy as pie. Just a thought.

Yes, I know dealing with a CU by mail is pretty easy. I did for a while nearly 20 years ago. But I chose that CU because the interest rates were so much better than anything local.

I made that statement about location because it appeared to me that Brett was probably located in the North Dallas area and there are a few equally good credit unions in the area that he probably qualifies for.

While it's certainly possible to deal with a CU by mail, nothing beats the immediacy of walking into a branch and speaking with a loan officer. If they approve your application, you can often be out the door in under half an hour with the cash in your account. When dealing with an institution by mail, the loan process can take days.

Of course some institutions are beginning to take loan applications online too. But if everything else is equal, I'll still probably prefer a local institution over one that's remote.

- Joel
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chrisdotcom,

You wrote, As for transferring the debt to your mom for a month. First off, it can take 3-4 months for your FICO score to adjust to credit activity. Secondly, and I may be the only one with this train of thought, but is it ethical? In my opinion, credit scores reflect our spending habits and responsibility with credit. It also protects the bank, who use the scores to determine what the risk will be in granting us a loan.

I don't see this as an ethical dilima. It sounds to me that in fact, Brett has a financial resource that's not accounted in his FICO source -- his mom.

If his mom is willing to loan him the money at a better rate, what's the harm? Brett's FICO score probably suggests to his lenders that they can get him for whatever they're currently charging. But if he has cheaper, alternative financing through his mom, they're wrong. His mom represents an inequity or imbalance in the system and I think Brett has every right to use this to his advantage.

Once Brett transfers his balance to his mother's credit card, his FICO score will improve and he should get better offers he can use to pay off his balance with his mom. That effectively restores the balance.

The FICO score is hardly infalible. Most importantly, it doesn't take into account our tangible financial resources -- yet, it will downgrade us based on intangibles, like the length of our credit history or the ratio of outstanding debt to available credit. Are these really fair measures?

If I was a millionaire and I had a poor FICO score just because I didn't have any open lines of credit, would it be fair for me to shuffle funds through various accounts to try to bring my FICO score up? I think it's much the same thing when a young adult has no credit history; but has a parent willing to offer financial support.

- Joel
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Of course some institutions are beginning to take loan applications online too. But if everything else is equal, I'll still probably prefer a local institution over one that's remote.

Me too. My CU is local, it's Pentagon Federal CU. However, I have not been in the military for a while, and there's only one branch I can go to now that I'm a civilian. And that one is a pain to get to. So I chose the mail route for my loan. But I can make my loan payments online. That was a huge plus, as was the CU's interest rate.
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