Help figuring out the best path...

[Anonymous]

I've done so much research and read so many posts my head hurts, and I'm not sure I'm any closer to an answer. I'm tired of carrying credit card debt, and I'm ready to get rid of it.

Just for reference, my husband and I are in the process of building a home. We got approved for a loan with a reputable builder in our area, and the mortgage payment is on par with apartment rentals here. So that was a no-brainer. In other words, that ship has sailed, so please don't "you shouldn't have bought a house" me.

But back to getting rid of credit card debt. We have decent credit scores (in the neighborhood of 730-770s FICOs), and I've been working on paying down balances as much as possible, but that has slowed since we are putting back money for cash reserves for when we take possession of the house. But I'm trying to figure out the next course of action once we close on the house. I'm torn between a personal loan and going for balance transfers.

Here's the status: 6 total credit cards, all at zero except 2:

- Chase Sapphire Preferred: @$10.8k/12.8k (17.4% APR) - monthly payment $272

- Capital One Venture: @7.7k/10.9k (17.4% APR) - monthly payment $188

(The other 4 cards are store cards, so no hope of BTs on those...)

All total, a little over $18k in debt. It was accrued at a time when my husband got very ill, and was out of work for almost a month. Then he decided to change his career and took a massive pay cut to "start over" in his new field. No paycheck and big hospital bills = ouch. Lesson learned from that. We don't live beyond our means anymore, and understand the importance of saving, but we've been carrying around that debt since that time, and it's old already.

So, I like the idea of a personal loan, to just wipe it all out in one fell swoop, then make a monthly payment for 3-4 years until it's gone. But I'm also intrigued by the 0% balance transfer offers we get, especially for Discover. I'm wondering how many 0% BT cards we could apply for at once and shuffle the debt around to pay no interest. What is the best route for us? We made $98k gross last year, but it'll be much higher this year, as my husband got a nice raise. So we can afford to go either route, really. Which one makes more sense? Will either option help/harm our credit scores?

[Anonymous]

Congrats on the impending home purchase. Buy now while you still can; the American Dream is becoming harder to reach and not just in LA, SF, NYC but places like here in Denver and even Boise, ID.....So if a mortgage is the same price as an apartment, a house will always win.

Speaking of the house...the house may be your third option. Depending on how much you put down/how much the house appreciates right away, you may want to consider a HELOC or home equity loan to pay off your debt. 1) it may be easier to secure the $18K on one loan and 2) the loan may be tax deductable (speak to your tax preparer or account first to confirm). 

I see no reason why using new credit cards for 0% balance transfers wouldn't work; however, more than likely you will have to open 2 or even 3 cards to accomodate the total debt. Having said that, $18K is actually fairly manageable-especially if you can throw about $1K each month to pay it off. With a 0% balance transfer for 18 months you could be debt free by the time the 0% expires. *Just remember that if you are interested in Chase Slate you cannot transfer debt from one Chase card to another. 

[Anonymous]

Great advice, CO. I'm wondering how many new cards we could apply for without doing too much damage?

I guess that's why the personal loan also appeals... one HP and one payment. Plus I can get a bit longer term to pay it off, so I can throw a little more in savings too. I hear good things about Lightstream.

Thanks for the heads up about Slate and HELOC. I'll definitely look into.

[kcos194]

Just my two cents, but with your income and scores you would likely get approved for multiple 0% BT cards, and by the time the BT offers are expiring the HP’s will have less of an impact on your score. Rather than a personal loan that will still charge you interest no matter the terms. So if you’re shooting for, say, a 3 year window to pay it all down then you could theoretically BT to a 0% for 18 month card(s), repeat in 18 months, and not pay interest.

Point is, I’d weigh the interest charges higher than the HP effects. Again though, just my humble opinion.

[Anonymous]

You make a good point kcos. You're right, 0% is much better than say 7%. Not expecting any other HPs in the next several years since our cars should be good for another 3-4 years at least, and the mortgage will be done. So nothing better to use the HPs on.

Thank you both... appreciate having other folks' perspectives.

[Aahz]

I'd suggest applying for the Chase Slate and requesting the $7700 BT from your Capital One card on the application.

Then I'd suggest the BofA BankAmericard and reqeust the $10800 BT from your CSP on the application.

Both of those cards have 0% BTs for 15 months and, more importantly, have $0 BT fee for the first 60 days, so it's a true zero cost loan.  With your scores and existing limits I think both cards are achievable with those starting limits as long as you request the BTs on the app so they know what you're after. 

After a year your credit report will look even better (assuming no new mistakes are made) and you'll have no problem finding a way to transfer any remaining balance elsewhere.

[Anonymous]

Thanks Aahz, I'll definitely look into both of those cards. I was also considering the Citi Diamond Preferred, but I'm not thrilled about a 5% BT fee.

This is going to sound completely moronic, but I didn't even consider the angle of transferring any remaining balance to another BT card after the 15-18 months. I was pretty apprehensive thinking about transferring all $18k. In theory, we can definitely afford the $1000 a month towards paying the CC debt down. But with a new house, I'm not sure I want to commit that much a month. At least not right away. But even if I could get half of that done in the first year, I could transfer the remaining half to new cards and finish it up next year. 

Thanks again for all the input. I'm excited about being rid of credit cards.