Paying off Auto Loan with CCs

[Anonymous]

I am considering using several 0% BTs to pay off my uber high auto loan.( Loan was obtained when I had very low scores and no auto score)  I know this isn't a very popular solution with most posters here, but I would love to hear from anyone who has done this in the past year or so.

My situation:

I am currently upside-down in the auto loan so I can't do a refi.  Payoff on the loan is $8200....if I continue to make payments for the remaining 24 months on the loan I will have paid $9420. A total of $1220 interest.

I have four 0% APR BT offers at the moment that I could use. I was thinking of transfering $2000 onto each of them to pay off the auto loan.

 Citibank:   $4000 limit/ 0 balance        0% BT for 9 months  3% fee    would cost me $60   

 US Bank   $8000 limit/1900 balance    0% BT  for 12 mths. 3% fee     would cost $60

 Discover    $5000 limit/1100 balance    0% BT  and purchase for 12 mths  3% fee  would cost $60

 Cap One    $4500 limit/1800 balance   0% BT for life  3% fee capped at $50   would cost $50

Total balance tranfer fees $230

The balances on these cards are all at 0% APR for 12 months except for Cap One which is at 3.9 for life

At this time I am paying $600-$700 montly toward credit cards, $392 on auto loan. If I do this I would apply all $1000-$1100 toward CCs and would be debt free within 13 months and would save  $990 interest.

The bad part of the plan of course is that I would have 4 cards with over 50% utilization for a few months. I am not concerned with any FICO score decrease I would suffer for this short time. I am however a bit worried about possible AAs from my CC companies when/if they notice this new higher utilization of CCs during these shaky financial times.

My question to you guys is have any of you had serious CLD or APR increases recently from any of the companies mentioned above?  Anyone see any other problems with my plan?

I do realize I will not be able to use any of these cards for any purchases util these balances are paid off. I have several no balance cards I could use in emergencies but plan no major purchases in the coming year.

Message Edited by VEEnVEGAS on 04-15-2009 08:41 PM

[Anonymous]

I understand your math Vee, and yes it will save you over $900 in interest. However, a ramp up of that kind on all the cards might not look good to the banks. If your creditors pull your reports and see all the cards suddenly reporting over 50% util, they might do some nasty things to the cards and limits.

If this were 2005 I would say why not, it makes sense. But here in 2009, my advice is be careful.

[Anonymous]

Remember that your monthly payment will first be applied to balances with the lowest APR, being the 0% transfer balances from the auto loan. Be sure that the rates on your current balances will still allow you to pay off in your expected time period given that these will be accruing interest each month.

If you're disciplined enough to carry out this plan, and don't need a high credit score anytime during the next 13 months I don't really see a problem with it. The only card I have any experience with on your list is USBank, and I've recently gotten CLI on both of those cards. My cards give me automatic $1500 increases every 6 months without any kind of pull. If you haven't taken advantage of this recently, call the number on the back of the card and push the option to see if you've got an automatic increase waiting for you. This might be a good idea to do with all your cards just to keep that util. down as low as possible.

I would just make sure to divide the loan up among the cards to keep the utilization of each card as low as possible, and with that done I would hope you wouldn't have any problem with the cards reacting to new higher balances.

[Anonymous]

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@Anonymous wrote:

I understand your math Vee, and yes it will save you over $900 in interest. However, a ramp up of that kind on all the cards might not look good to the banks. If your creditors pull your reports and see all the cards suddenly reporting over 50% util, they might do some nasty things to the cards and limits.

If this were 2005 I would say why not, it makes sense. But here in 2009, my advice is be careful.

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My thinking exactly Pappy...If this were 2005 I probably would have already done this. 2009 is scary times!

[Anonymous]

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@Anonymous wrote:

Remember that your monthly payment will first be applied to balances with the lowest APR, being the 0% transfer balances from the auto loan. Be sure that the rates on your current balances will still allow you to pay off in your expected time period given that these will be accruing interest each month.

If you're disciplined enough to carry out this plan, and don't need a high credit score anytime during the next 13 months I don't really see a problem with it. The only card I have any experience with on your list is USBank, and I've recently gotten CLI on both of those cards. My cards give me automatic $1500 increases every 6 months without any kind of pull. If you haven't taken advantage of this recently, call the number on the back of the card and push the option to see if you've got an automatic increase waiting for you. This might be a good idea to do with all your cards just to keep that util. down as low as possible.

I would just make sure to divide the loan up among the cards to keep the utilization of each card as low as possible, and with that done I would hope you wouldn't have any problem with the cards reacting to new higher balances.

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Thanks for your reply and suggestions Mank. All good points.

I probably won't qualify for any CLIs on these cards as all of them except for Cap One are very recently opened.

The balances on these cards are all at 0% APR for the next year except for Cap One which is at 3.9%. I guess I should figure out how much I will pay on my Cap One balance over the year that I'll take to pay this back and subtract that from my savings.

[score_building]

looks like you have developed a well conceived plan to save a significant amt. but i believe many would object to the overall premise of supplanting installment debt with revolving from the outset, at least in most cases. that taking this action can lead to 'unforseen consequences' which you have actually already spotted is also a red flag as you've also noted. 

i agree, too bad it is not '05 when it may've been significantly easier to pull this off w/o a hitch.  if it were me i would also still be seriously considering if i could make it work due to the savings this game plan presents.  tough one.

Message Edited by score_building on 04-15-2009 12:31 PM

[Anonymous]

Thanks Scorebuilder...You reminded me that I should be a bit afraid of losing this installment loan from my reports. Another ding that will be harder to recover from than the temporary loss of points from higher utilization.

Maybe I should just pay down this auto loan and then try to refinance? Or perhaps just start throwing extra money every month at it to reduce interest paid? Neither of these plans will save me as much money as the original but both woulod cause me fewer FICO points and possibly fewer sleepless nights worrying about AAs!

By the way...while the CCs I listed will all be above 50% utilization if I do this my overall utilization will be about 26%.

[GregB]

Is the car loan a normal loan that you can pay additional amounts toward principal? Assuming it is:

Pay off the CapOne card to $0. This is necessary so that the BT will be "for life". Use $4000+ dollars on the 0% for life, 3% capped at $50, CapOne BT transfer to pay down the car loan balance. Pay the high interest car loan off as fast as you can.

If you can't PIF the CapOne balance in a month or two you could possibly justify using the Citibank BT to PIF the CapOne. This is starting to waste too much money in fees and you need to plan for that 0% term to end in 9 months. 

Showing big jumps in balances on 3-4 cards all at once doesn't sound like a good idea to me.

[Anonymous]

VEEnVEGAS -

There may be a hybrid approach to your scenario.

Find out what value you can refi with a good low, fixed rate in the 3.75 to 4.6% range.  Then move the negative equity to your 0% BT, which is most likely a more managable amount, lower utilization and easier to pay off during the 0% time frame.  Refi the difference with your low rate fixed auto loan.

Now you got the best of both worlds and didn't abuse your CC excessively.  Anyway, just a thought on the subject.

[GomerPyle]

I would seek to buy a new car and obtain 0% financing in order to get out from under an upside down situation.This would be the best of both worlds. It is truly a buyers market in the automotive industry. If you are not a good trader of cars hire a trading company to make the deal for you. Car trading is an art form.