@Anonymous wrote:
Also posted this on the Personal Finance forum but it involves Credit Card debt so maybe I get some help here!
Hey guys, here´s my current situation:
I have around $12.5k in CC debt spread over 3 cards that have 0% APR until April. I usually pay around $1800/month and planned on getting a Balance Transfer CC when the 0% APR expired. The plan was to finish paying the whole debt before the end of the year (probably 3-4 months before).
Because life is sometimes very unpredictable, now I need to look for a new place to rent (ASAP..in the next month or so) and I also have plans to refinance my car loan. To get the best of the best I need to improve my score and I would also like to free up a little money each month. I´m in the 640-650 range, around 57% CU. I think paying off my CC debt would bump my score to the 740-750 range (according to a few calculators, including Credit Karma).
I found a few personal loans that would get rid of my debt, give me a decent monthly payment compared to what I´m currently paying on Credit Cards (I could pretty much double it and get rid of the debt faster). I also think getting a Balance Transfer Card would still have my CC utilization high and keep my score kinda low, besides the fact that I don´t believe I could get one for that amount of money. Please correct me if I´m mistaken.
What do you guys think? Get a personal loan right now (3 year, around 14% APR which I would probably pay fully in 1.5-2 years), bump my score and get some applications for rent after all my CC´s report $0 balance or do you have anything in mind? I know ideally I should wait to get my balance down until April when the promotional APR in my credit cards finish but that is not an option, as I need to apply for apartments soon. I have a little over 2 year credit history and I´ve asked at a few places and most think that I would probably not be approved with my credit score and history. I have a fairly decent and stable income, this would be my very first personal loan. I´ve also been getting pre approvals from Prosper, among others.
Thank you guys in advanced.
First, these two statements are incompatible. If you have 0% apr, you're paying no interest. That effectively minimizes your monthly payment for getting rid of it in a certain timeframe. You can't pay interest, reduce the payment AND shorten the timeframe.
Second. it is hard to evaluate you without knowing what your loan rate is and what costs may be associated with the car loan. Because of the relatively low values of car loans, even a couple percent different usually only results in $20-$30 extra per month. You may find that it isn't worth it to refinance.
Third, 14% is a very high APR. If you go down this route, you need to make sure that you can prepay the loan. Some loans do not permit prepayment, which forces you to pay the entire interest amount.
On the other hand, I can't see you getting a 0% BT card with a sufficient credit to cover your debt. Your best bet may be to find a card with a good SL that has a 12-15 month intro period and then pay the 3% BT fee to take advantage of it. This will affect your utilization, but will probably save you money in the long run.
Bottom line, you'll have to sit down and crunch the numbers to figure it out. However, as you pay off the CCs, your scores should pop. I would be wary of trusting CK (or any other estimator), but I do think you should receive a significant boost as you pay them off.
