Paid off CCs with Student Loans - Will lenders know?

[Anonymous]

After months which became years of unsucessful lower APR requests, I gave up on the CC companies and paid off balances totaling $4500 @ 18% and 22% APR with a 6.8% unsubsidized student loan.  The student loan sat for 6 months before I started paying it back during my final semester in college.

I have savings accounts and just landed a good paying job and have other accounts inluding a mortgage all on my credit report.

Will future lenders be able to see through me in what I've done? (the two cards were paid off in multiple payments over two billing cycles)

Yes my credit cards are paid off, but my total amount of debt owed remains the same to a degree.

I chose to do this as 6.8% in one account is more managable than 18% and 22% in two accounts, and was tired of carrying that debt.

I hope to start improving my score for a potential auto loan sometime this year through my new employer - a national bank.

My concern is, will the bank see what I did and see it as a negative in any way?

[DI]

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@Anonymous wrote:

@After months which became years of unsucessful lower APR requests, I gave up on the CC companies and paid off balances totaling $4500 @ 18% and 22% APR with a 6.8% unsubsidized student loan.  The student loan sat for 6 months before I started paying it back during my final semester in college.

I have savings accounts and just landed a good paying job and have other accounts inluding a mortgage all on my credit report.

Will future lenders be able to see through me in what I've done? (the two cards were paid off in multiple payments over two billing cycles)

Yes my credit cards are paid off, but my total amount of debt owed remains the same to a degree.

I chose to do this as 6.8% in one account is more managable than 18% and 22% in two accounts, and was tired of carrying that debt.

I hope to start improving my score for a potential auto loan sometime this year through my new employer - a national bank.

My concern is, will the bank see what I did and see it as a negative in any way?

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No, I did it 7 years ago and have and continue to receive new credit.  In fact, back when I had credit problems, I told an attorney who had my collection account what I was going to do.  He waited for the money and when I paid off the account, he list ed it as paid as agreed and removed all late payments.   Some may say its immoral to use your student loans.  Forget what others think!  They're not living your life or your situation.  Sometimes one has to do what one has to do! You made the right decison along with so many others who have done the same thing.  18%- 22% APR is too high. 

I just hope now that when you use credit cards  you get in a habit to pay them off in full monthly.  Congrats!!

[valley_man0505]

No, you did the right thing.  Not only is your interest rate better (however, it may cost you more in the long run if you only pay the minimum student loan payment each month since the terms are usually for 15 years), but your credit score will also be much better off.  Student loans are considered installment loans, while credit cards are considered revolving credit.  Your utilization rate (debt to available credit ratio) on revolving credit has a HUGE impact on your credit score.  However, utilization rates on installment loans have almost no effect on your score.  So, while your total debt remains about the same, you moved your debt from "revolving" to "installment", which is great from a scoring standpoint.

[cdtotten]

Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

[DI]

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@cdtotten wrote:

Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

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Sorry you got blasted for wanting to make a smart financial decision.  I hope you  went through with it anyways.

[MarineVietVet]

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@cdtotten wrote:

Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

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Are not opinions that differ from yours (or mine) equally valid? My opinion doesn't make yours wrong and vice versa. And my opinion doesn't bind or restrict anyone else from doing what they consider the right thing for them.

My view that SL's should only be used for paying off education expenses doesn't mean that another view is wrong; just different.

IMO trying to do the right (and yes ethical) thing should always be the first consideration and not how much money I can save. I admittedly often fail in my attempts at this but it's still my foundation for making decisions.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[valley_man0505]

Marine, you are right that you have a right to your opinion.   However, I personally don't feel it is not always "unethical" to do this.  For instance, I got my undergrad from a 5 year program and I had scholarships that got me through 4.5 years.  However, I ran short on money in the last semester and put some expenses on credit cards.  Once I graduated, I got a job and started working and began paying down these CC's.  I then decided to investigate graduate school, but I would not have been able to keep up on my credit card payments if I quit my job and went back to school....unless, I took out a student loan and used  that money to pay off the cards.  My choice was to either continue working at what I felt was a less than stellar job (I only took it because the job market was very bad in my field at that time) and pass up grad school in order to pay my credit cards (which were used for school related expenses) or I could quit the job, use student loans to pay my CCs, and further advance my education and career opportunities while riding out the downturn in the job market at the same time.

In fact, one of the main purposes for "unsubsidized" student loans is to allow students to have access to money above and beyond the school's cost of living estimate (which is covered by "subsidized" loans).  Since the goverment is not paying the interest on unsubsidized loans like they do for subsidized loans, is there really any harm in using unsubsidized loans for personal purposes?  It is not "free money" after all--you have to pay it all back (and then some) with your own money once you graduate.

Again, not trying to start on argument.  You are entitled to your opinion, but I just wanted everyone to consider the other side of things before forming their own opinion. Just keep in mind that we are not alwasy privy to ALL of the details surrounding each issue posted on this board (nor should we be) and it is not always fair to form opinions without all the details.

[cdtotten]

Marine, yes your opinion is valid and usually spot-on. I usually enjoy reading your responses as they are well thought out and articulated. And yes, I prefer to take the high road as much as possible in life. However, when there is an oppurtunity that comes across that could significantly help financially, but could be debated as ethical or not, it is sometimes hard to pass up. A cap of 6.8% for a student loan, as opposed to say someone paying 19.9% on a credit card is really hard to pass up. The point of student loans is to help you afford the cost of college (and all the things related to that expense). Most students take out loans to cover living expenses - and so I will never frown on someone using student loans for other purposes, as long as they legitamately attempting to earn a degree and will pay them back. As long as the government gets their money back + interest, they are happy.

[Anonymous]

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@cdtotten wrote:

Marine, yes your opinion is valid and usually spot-on. I usually enjoy reading your responses as they are well thought out and articulated. And yes, I prefer to take the high road as much as possible in life. However, when there is an oppurtunity that comes across that could significantly help financially, but could be debated as ethical or not, it is sometimes hard to pass up. A cap of 6.8% for a student loan, as opposed to say someone paying 19.9% on a credit card is really hard to pass up. The point of student loans is to help you afford the cost of college (and all the things related to that expense). Most students take out loans to cover living expenses - and so I will never frown on someone using student loans for other purposes, as long as they legitamately attempting to earn a degree and will pay them back. As long as the government gets their money back + interest, they are happy.

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Just remember the government's money is money I (and y'all) provide.

There are some of us who are not happy that you're being loaned money which we provide and are using it to pay off cc debt because you can.

And yes, I went to and paid for my own college.  DH went to and paid for his own college.  I still have kids in college, and yes they still work (full time btw) because they are not eligible for student loans - subsidized or unsubsidized.

I, for one, would like to see student loans being used as they were intended.  Perhaps if folks weren't using them for unintended purposes, there would be more available to those who would be using them for intended purposes.

I always love it when folks claim to be ethical as long as its convenient.

* gingerly steps off soapbox.  Texts son who is short on sleep due to full time college and full time job.  My text:  "Love you man, and am SO proud of you.  xoxoxo Mom" *

[smc733]

Please...   Because of the **bleep** ups of the current generation and baby boomers, the "current" adult generation 30-60 has no room to talk about us using the money they "pay in taxes" for student loans, they've borrowed enough from several future generations as it is...

There is nothing immoral about it, you used your credit card for daily expenses, I see student loans as ways to get through a 4 year period where you can't get reasonable income, this includes living expenses, not just tuition, housing and books.