topic Re: Balance Transfer Advice in Credit Cards

Balance Transfer Advice

Broke_Triathlete — Wed, 22 Jun 2016 02:32:16 GMT

So....

I have a car loan that I just opened 2 months ago, and I already hate it. My balance left is right at $19.2K. I am wanting to pay it off ASAP. After I made my first payment and saw $149 (7.8%) going to interest my stomach churned. I am doing everything to pay it off as quickly as possible. I'm about $5K short at the moment. It would take me around 4-5 months to snowball that amount. So I got a BT offer from Discover for transfering my limit from my CL to my bank account at 0% for 12 months, then standard APR after. So I could pay my car off before my next payment and have no more interest. I am not worried about paying the $5K off before the promotional period ends. I ran some options below.

1) 12 months at current loan terms - $1,327.52 in interest (FML)

2) Pay $10K now and continue minimum for next 12 months - $695 interest

3) Don't pay any extra, continue to save until I get the $5K (5 Months) - $620 Interest

4) Balance transfer now and pay off my car in a week - 0% interest but $150 BT Fee (And obviously risk not paying the $5K back, which again I'm not worried in the least)

The only cons I see is I'll have the standard baby emergency fund, brought to you by Dave Ramsey, and my Discover will have approximately 72%-75% utilzation on it, with 0% on others. (It's the only card with a $100 or so balance at the moment).

Am I missing anything? Does the BT make sense? Has anyone had any negative action taken by Discover, such as a CLD for taking a BT?

Re: Balance Transfer Advice

Creditaddict — Wed, 22 Jun 2016 02:44:07 GMT

Couple things... Car loan $19,200 and you mention paying $10k in one scenario but you talk about only owning $5k in another scenario.

The figures might be different if you only leave $5k on car loan vs. $9200 and paying over 12 months vs. discover over 12 months.

Re: Balance Transfer Advice

Broke_Triathlete — Wed, 22 Jun 2016 03:49:56 GMT

I think there is a small misunderstanding CA. I could put $10K into it now or do nothing and wait until I save the extra $5K and pay if all off completely.

Re: Balance Transfer Advice

Creditaddict — Wed, 22 Jun 2016 03:52:12 GMT

interest is calculated on total balance so if you pay $10k down and then can make large payments to pay $9200 over 12 months like if you BT to discover I would bet that is lower interest paid and less fees than your other plans.

Re: Balance Transfer Advice

Broke_Triathlete — Wed, 22 Jun 2016 12:51:15 GMT

Cool I'll check the numbers on that. Thanks CA

Anyone else?

Re: Balance Transfer Advice

NRB525 — Wed, 22 Jun 2016 13:13:44 GMT

Have you checked credit unions for a better rate, then refinance the car?

Generally, I am inclined to leave loans such as this, with security and a known payment plan, in place. You can budget the payments, and if something else happens in your life in the next few years, you've got the existing payment plan, and still all that cash sitting in the bank. Yes, the current loan is a fairly high rate of interest, but it is borrowing for a specific asset, not the same as credit card debt.

The high utilization on Discover should not be a worry, but I'd go slowly with just paying this off so fast, using $10k of cash immediately.

Re: Balance Transfer Advice

Anonymous — Wed, 22 Jun 2016 13:24:38 GMT

If I'm following correctly I think I like it

I'll sum up what I think I'm reading, correct me if I'm wrong.

You've already paid (or have the funds to pay) off your car loan but for 5k

You have the opt to borrow 5k vis BT from Disco @ 0%

(thus using Disco's 'free loan' to wax off the 5k you're short)

Then you can 'slow' pay Disco using the promo period thus FREE loan and your car is PIF

And the only downside being the Disco would be @75% debt/ratio but all other cards at boo boo balances or zero.

If that's the scenario...I say bless it

You're not concerned with paying off the 5k prior to the promo period AND if plans change you have a paid off asset to

grab a quick low cost loan...remember you'll gave a 'pink' in hand as your car will be PIF

Also, as an insurance agent....I'll tell you you could raise your deductible and adjust coverage anyway you see fit as you don't

HAVE TO meet lender requirements.

That is some lenders won't allow say a $1k deductible vs $500 in fear that the borrower won't have the money...whereas you can save yourself some money with the higher deductible and umbrella coverage....only mention b/c you seem especially 'sickened' by paying high fees when you don't have to

best of luck

Re: Balance Transfer Advice

Broke_Triathlete — Wed, 22 Jun 2016 15:31:32 GMT

@NRB525 wrote:
Have you checked credit unions for a better rate, then refinance the car?

Generally, I am inclined to leave loans such as this, with security and a known payment plan, in place. You can budget the payments, and if something else happens in your life in the next few years, you've got the existing payment plan, and still all that cash sitting in the bank. Yes, the current loan is a fairly high rate of interest, but it is borrowing for a specific asset, not the same as credit card debt.

The high utilization on Discover should not be a worry, but I'd go slowly with just paying this off so fast, using $10k of cash immediately.

Thanks for your post NRB. I already have a student loan installment on my report for 5 years now, plus another paid off car loan. Is it redundant by keeping both open? They way I was seeing it was saving the $5K in interest that I wouldn't need to necessarily shell out. I agree at the minumum paying the $10K because that'll leave me a decent E-fund but also knock my interest payments from $150 down to $58 according to the agent I spoke too. That's about $450 saved in the next 5 months, give or take a few bucks, of course.

Re: Balance Transfer Advice

Broke_Triathlete — Wed, 22 Jun 2016 15:44:32 GMT

@Anonymous wrote:

If I'm following correctly I think I like it

I'll sum up what I think I'm reading, correct me if I'm wrong.

You've already paid (or have the funds to pay) off your car loan but for 5k

@Anonymous have the opt to borrow 5k vis BT from Disco @ 0%
(thus using Disco's 'free loan' to wax off the 5k you're short)

Then you can 'slow' pay Disco using the promo period thus FREE loan and your car is PIF

@Anonymous the only downside being the Disco would be @Anonymous% debt/ratio but all other cards at boo boo balances or zero.

If that's the scenario...I say bless it

You're not concerned with paying off the 5k prior to the promo period AND if plans change you have a paid off asset to
grab a quick low cost loan...remember you'll gave a 'pink' in hand as your car will be PIF

Also, as an insurance agent....I'll tell you you could raise your deductible and adjust coverage anyway you see fit as you don't
HAVE TO meet lender requirements.
That is some lenders won't allow say a $1k deductible vs $500 in fear that the borrower won't have the money...whereas you can save yourself some money with the higher deductible and umbrella coverage....only mention b/c you seem especially 'sickened' by paying high fees when you don't have to
best of luck

Actually you got it nailed down to a T! I was also thinking then I'd be able to save a few bucks on insurance as well. I was thinking I'd be able to free up $400 a month in expenses that would allow me to either pay off my student loan and really be debt free, or invest in my IRA or open a roth 401. I already have budgeted to contribute to my roth but I'd be able to max it out early then.

Re: Balance Transfer Advice

RonM21 — Thu, 23 Jun 2016 00:04:14 GMT

Looks like you have set yourself up well for multiple options. A few moving parts, but I think you have a good plan to get it all to work pretty well!

Re: Balance Transfer Advice

Anonymous — Thu, 23 Jun 2016 03:17:49 GMT

There's a lot of good information in your thread OP and you have a solid plan.

I do have a couple questions for you. Did you know the interest rate before you purchased your car? If yes, why did you agree to it?

The refinancing option sounds like a good idea so you won't deplete your ER fund. What are your thoughts on the refi?

If you go with your original plan, how long will it take for you to rebuild your ER fund?

Re: Balance Transfer Advice

Broke_Triathlete — Thu, 23 Jun 2016 13:49:50 GMT

@beautifulblaquepearl wrote:
There's a lot of good information in your thread OP and you have a solid plan.

I do have a couple questions for you. Did you know the interest rate before you purchased your car? If yes, why did you agree to it?

The refinancing option sounds like a good idea so you won't deplete your ER fund. What are your thoughts on the refi?

If you go with your original plan, how long will it take for you to rebuild your ER fund?

Thank you. Yes, I did know the interest rate. I agreed to it so I could get the car and give my dad my good running jeep so he doesn't have to take the city bus anymore to get his chemo treatments. Once I started to feel that he didn't appreciate what I had done... I started looking at the numbers and mildly start to panic. I did this for him and did not need/want a new car. I hate car payments but if it meant he'd stay around longer then I was willing to do it.

I thought about the refi but that was short lived because I figured if I could just pay it off it'd be a guaranteed return of 7.8% over the next 6 years. That's my thought anyways!

Well not long at all actually. Even with my modest income I'm able to save 52% of my net income, so within 6 months I could get it back to $10K.