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Established Member
pennccrn
Posts: 24
Registered: ‎09-06-2010

Balance Transfer VS. Installment Loan

Hi all: I wanted to run some math by everyone to make sure I'm making a "smart and educated" financial decision.  I'm looking to pay off about $6000 of CC debt, that I would like to pay off in one year. Currently, that $6000 in on a BOA CC carrying a variable APR of 13.45% I have narrowed this down to three options: 1) Keep the debt where it is and pay off aggressively 2) Do a balance transfer to another CC at 0% (plus fees) 3) Do an installment loan at my credit at starting 9.50%. I have a FICO score that floats b/t 690-705, mostly gets dinged for high utilization, although I did have a 30 day late payment about 4 years ago.  Another thing to add is that I'm doing this strictly to save $, not to worry about what my credit score will do.

 

So in calculating my fees:

 

Option 1: Keep as is: interest would be $780 (assuming that rates would remain low)

Option 2: Move to CC balance transfer: assuming a 5% transfer fee cost would be $300

Option 3: Installment loan at the credit union: total interest would be $600 (not sure if any orignination fees or other fees would apply)

 

Just wanted to get the group's perspective to see if I'm calculating this correctly and if I should consider anything else.

Discover It 12.5K; AmEx SPG 17.5K; BankAmericard Cash 7.5K; Citi Platinum Select 4.8K; Credit Union Card 5K; Target Redcard 1K; BankAmericard World Points 1K

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Super Contributor
enharu
Posts: 6,889
Registered: ‎02-27-2013

Re: Balance Transfer VS. Installment Loan


pennccrn wrote:

Hi all: I wanted to run some math by everyone to make sure I'm making a "smart and educated" financial decision.  I'm looking to pay off about $6000 of CC debt, that I would like to pay off in one year. Currently, that $6000 in on a BOA CC carrying a variable APR of 13.45% I have narrowed this down to three options: 1) Keep the debt where it is and pay off aggressively 2) Do a balance transfer to another CC at 0% (plus fees) 3) Do an installment loan at my credit at starting 9.50%. I have a FICO score that floats b/t 690-705, mostly gets dinged for high utilization, although I did have a 30 day late payment about 4 years ago.  Another thing to add is that I'm doing this strictly to save $, not to worry about what my credit score will do.

 

So in calculating my fees:

 

Option 1: Keep as is: interest would be $780 (assuming that rates would remain low)

Option 2: Move to CC balance transfer: assuming a 5% transfer fee cost would be $300

Option 3: Installment loan at the credit union: total interest would be $600 (not sure if any orignination fees or other fees would apply)

 

Just wanted to get the group's perspective to see if I'm calculating this correctly and if I should consider anything else.


Find out more about potential fees for #3 first.

 

Also, it might be hard to get approved for any kind of new credit if you have extremely high utilization being reported.

You can also consider Chase Slate. There's no BT fees.

 

What is your utilization at?

 

JPMorgan Palladium (100k), AmEx Platinum (NPSL), AmEx SPG (46k), AmEx BCP (42k), Chase Sapphire Preferred (47k), Citi Prestige (31k), Citi Thank You Preferred (27k), Citi Executive AAdvantage (25k), JPMorgan Ritz-Carlton (21k), Merrill+ (15k), US Bank Cash+ (22.5k), Wells Fargo (12k), Bloomingdale’s (12.4k), Chase Freedom (5k), Discover IT (5k).
Mega Contributor
LS2982
Posts: 15,434
Registered: ‎04-09-2011

Re: Balance Transfer VS. Installment Loan


enharu wrote:

pennccrn wrote:

Hi all: I wanted to run some math by everyone to make sure I'm making a "smart and educated" financial decision.  I'm looking to pay off about $6000 of CC debt, that I would like to pay off in one year. Currently, that $6000 in on a BOA CC carrying a variable APR of 13.45% I have narrowed this down to three options: 1) Keep the debt where it is and pay off aggressively 2) Do a balance transfer to another CC at 0% (plus fees) 3) Do an installment loan at my credit at starting 9.50%. I have a FICO score that floats b/t 690-705, mostly gets dinged for high utilization, although I did have a 30 day late payment about 4 years ago.  Another thing to add is that I'm doing this strictly to save $, not to worry about what my credit score will do.

 

So in calculating my fees:

 

Option 1: Keep as is: interest would be $780 (assuming that rates would remain low)

Option 2: Move to CC balance transfer: assuming a 5% transfer fee cost would be $300

Option 3: Installment loan at the credit union: total interest would be $600 (not sure if any orignination fees or other fees would apply)

 

Just wanted to get the group's perspective to see if I'm calculating this correctly and if I should consider anything else.


Find out more about potential fees for #3 first.

 

Also, it might be hard to get approved for any kind of new credit if you have extremely high utilization being reported.

You can also consider Chase Slate. There's no BT fees.

 

What is your utilization at?

 


I agree with enharu we need to know overall util. I think option 2 may be best if your overall util. is not very high.




Silver Spade Garden Club Member - Last App 12/16/13 - Looking for a clean slate NO INQ's / Diamond Inspired!
Starting Score:
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Established Member
pennccrn
Posts: 24
Registered: ‎09-06-2010

Re: Balance Transfer VS. Installment Loan

enharu & ls2982: Thanks to you both for your quick reply. Current UR is 42%, (19.5k used of 46k available) however one card is within 1,000 of the CL. I plan to check additional fees on Option 3 (installment loan). I know I inquired which one of these would be the most finacially prudent but would there be a different answer if I asked which method would help my credit the most?

Discover It 12.5K; AmEx SPG 17.5K; BankAmericard Cash 7.5K; Citi Platinum Select 4.8K; Credit Union Card 5K; Target Redcard 1K; BankAmericard World Points 1K

Starting Score: TU 620 EX 535 EQ 615
Current Score: TU 755 EX 783 EQ 760 7
Goal Score: 780


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Super Contributor
enharu
Posts: 6,889
Registered: ‎02-27-2013

Re: Balance Transfer VS. Installment Loan


pennccrn wrote:

enharu & ls2982: Thanks to you both for your quick reply. Current UR is 42%, (19.5k used of 46k available) however one card is within 1,000 of the CL. I plan to check additional fees on Option 3 (installment loan). I know I inquired which one of these would be the most finacially prudent but would there be a different answer if I asked which method would help my credit the most?


Installment loans are factored out of your revolving credit utilization, so your scores might see a small boost from the lower utilization. I don't think it's going to be a very big boost though because your scores also take a ding from opening a new account + inquiry. Also, some banks do not like it when loan balances are too high compared to original amount borrowed.

 

 

JPMorgan Palladium (100k), AmEx Platinum (NPSL), AmEx SPG (46k), AmEx BCP (42k), Chase Sapphire Preferred (47k), Citi Prestige (31k), Citi Thank You Preferred (27k), Citi Executive AAdvantage (25k), JPMorgan Ritz-Carlton (21k), Merrill+ (15k), US Bank Cash+ (22.5k), Wells Fargo (12k), Bloomingdale’s (12.4k), Chase Freedom (5k), Discover IT (5k).
Valued Contributor
nicholasyud
Posts: 1,734
Registered: ‎08-13-2012

Re: Balance Transfer VS. Installment Loan

Option 2 if you qualify.

Option 3 as a back up


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Frequent Contributor
oscar_actuary
Posts: 292
Registered: ‎03-25-2013

Re: Balance Transfer VS. Installment Loan

Your math is wrong on #1 & #3, unless you plan to pay no principle until you pay it all off at once after a year.

 

That notwithstanding

If you plan to pay off the loan in 12 equal payments, options 2 is clearly better.

On the other hand if you plan to "pay it off aggresivley" you could beat #2 with either #1 or #3, and it could come down to fees on 3 and qualyfying

 

 

 

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Mega Contributor
Creditaddict
Posts: 18,820
Registered: ‎10-23-2007

Re: Balance Transfer VS. Installment Loan


pennccrn wrote:

Hi all: I wanted to run some math by everyone to make sure I'm making a "smart and educated" financial decision.  I'm looking to pay off about $6000 of CC debt, that I would like to pay off in one year. Currently, that $6000 in on a BOA CC carrying a variable APR of 13.45% I have narrowed this down to three options: 1) Keep the debt where it is and pay off aggressively 2) Do a balance transfer to another CC at 0% (plus fees) 3) Do an installment loan at my credit at starting 9.50%. I have a FICO score that floats b/t 690-705, mostly gets dinged for high utilization, although I did have a 30 day late payment about 4 years ago.  Another thing to add is that I'm doing this strictly to save $, not to worry about what my credit score will do.

 

So in calculating my fees:

 

Option 1: Keep as is: interest would be $780 (assuming that rates would remain low)

Option 2: Move to CC balance transfer: assuming a 5% transfer fee cost would be $300

Option 3: Installment loan at the credit union: total interest would be $600 (not sure if any orignination fees or other fees would apply)

 

Just wanted to get the group's perspective to see if I'm calculating this correctly and if I should consider anything else.


Check pre-qual on Chase... If they offer Slate that has $0 Transfer Free first 60 days think it is and 0% for 15 months!!! and if pre-qual chances are good.

also check pre-qual for Citi.

2. If you don't get any of these offers through pre-qual maybe cold apply for 2 of some card... if not good outcome (also when applying I would not include the BT in the approval, wait to get approved then go do the BT)

3.  If no credit card with large enough limit then go loan... credit wise it will help but how long are you talking to pay off? do you need a full 36-60 months? short term savings of a 1-2 year credit card BT won't help if you have to move it 3 times saying that you stick to it and don't run up any new credit and pay the full amount you need to get it done in the years planned vs loan you will have to pay the minimum to get it paid on time but you will free up all your credit cards again so... still need to be dedicated to paying off and not creating more room for yourself.

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Mega Contributor
LS2982
Posts: 15,434
Registered: ‎04-09-2011

Re: Balance Transfer VS. Installment Loan


Creditaddict wrote:

pennccrn wrote:

Hi all: I wanted to run some math by everyone to make sure I'm making a "smart and educated" financial decision.  I'm looking to pay off about $6000 of CC debt, that I would like to pay off in one year. Currently, that $6000 in on a BOA CC carrying a variable APR of 13.45% I have narrowed this down to three options: 1) Keep the debt where it is and pay off aggressively 2) Do a balance transfer to another CC at 0% (plus fees) 3) Do an installment loan at my credit at starting 9.50%. I have a FICO score that floats b/t 690-705, mostly gets dinged for high utilization, although I did have a 30 day late payment about 4 years ago.  Another thing to add is that I'm doing this strictly to save $, not to worry about what my credit score will do.

 

So in calculating my fees:

 

Option 1: Keep as is: interest would be $780 (assuming that rates would remain low)

Option 2: Move to CC balance transfer: assuming a 5% transfer fee cost would be $300

Option 3: Installment loan at the credit union: total interest would be $600 (not sure if any orignination fees or other fees would apply)

 

Just wanted to get the group's perspective to see if I'm calculating this correctly and if I should consider anything else.


Check pre-qual on Chase... If they offer Slate that has $0 Transfer Free first 60 days think it is and 0% for 15 months!!! and if pre-qual chances are good.

also check pre-qual for Citi.

2. If you don't get any of these offers through pre-qual maybe cold apply for 2 of some card... if not good outcome (also when applying I would not include the BT in the approval, wait to get approved then go do the BT)

3.  If no credit card with large enough limit then go loan... credit wise it will help but how long are you talking to pay off? do you need a full 36-60 months? short term savings of a 1-2 year credit card BT won't help if you have to move it 3 times saying that you stick to it and don't run up any new credit and pay the full amount you need to get it done in the years planned vs loan you will have to pay the minimum to get it paid on time but you will free up all your credit cards again so... still need to be dedicated to paying off and not creating more room for yourself.


I think that util may be a bit too high to get a decent CL. Would most definitely have to recon.




Silver Spade Garden Club Member - Last App 12/16/13 - Looking for a clean slate NO INQ's / Diamond Inspired!
Starting Score:
EX (PLUS) 583 EQ FICO 565 TU FICO 590 3/15/2011 / Goal Scores: 720
Current Score: EX FICO (PSECU) 671 (myFICO) N/A / EQ FICO 679 / TU08 FICO 678 / TU VS 706 3/6/2014

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