loan to consolidate CC's

Anonymous · ‎12-05-2012

Would this make any sense to do:

Step 1: Use a BT offer at 0% for 18 months to pay off a current credit union loan.
(Local CU that has been great with me through 3 others and my current one. APR is 7.35)

Step 2: Once current loan is paid off, research other personal loan rates at current CU and others.

Step 3: Pick a CU (either current or new) or bank and get a consolidation loan for credit card balances.

Step 4: Pay off all creditors with personal loan so that everything is under one monthly payment.

I am basically wondering if using the 0% BT to pay off current loan is best. The CU I've used for last 5 years has been great. They provided my first car loan and other loans. Largest loan from this CU was 4,000. I am wary to ask for 8k, but that is for consolidation and moving expenses and a mini vacation since my work is giving me a raise and taking me somewhere else.

So...good idea, bad idea...anything is appreciated!

Creditaddict · ‎12-05-2012

@Anonymous wrote:
Would this make any sense to do:

Step 1: Use a BT offer at 0% for 18 months to pay off a current credit union loan.
(Local CU that has been great with me through 3 others and my current one. APR is 7.35)

Step 2: Once current loan is paid off, research other personal loan rates at current CU and others.

Step 3: Pick a CU (either current or new) or bank and get a consolidation loan for credit card balances.

Step 4: Pay off all creditors with personal loan so that everything is under one monthly payment.

I am basically wondering if using the 0% BT to pay off current loan is best. The CU I've used for last 5 years has been great. They provided my first car loan and other loans. Largest loan from this CU was 4,000. I am wary to ask for 8k, but that is for consolidation and moving expenses and a mini vacation since my work is giving me a raise and taking me somewhere else.

So...good idea, bad idea...anything is appreciated!

You lost me...

1. Curent Credit Union - You have a Personal Loan with them for $4k at 7.35% and you want to know if it's a good idea to move to a 0% for 18 months? have you already been approved for this card to be able to do the BT?

2. You want to pay off the Personal loan with the BT and then you want to pay off the BT over what period of time and then...

3. Ask for a NEW Personal loan to pay off the original personal loan now on the credit card or that is paid off now in the scenario and you want to pay off other credit card debt you are leaving out of your question right now??

Anonymous · ‎12-05-2012

Creditaddict,

Thank you so much for responding so quickly! And yes, I know it's very confusing, and quite possibly unnecessary, my scenario, that is.

Answer to your Point 1.

I have a loan from my CU- 2k balance. Loan started in April of 2012.

I have a Citi Simplicity card with a limit that covers that and also has 0% BT and purchases until 12/2013.

Answer to your Point 2.

I want to use that BT from Citi to pay off the 2k loan.

Then either ask them for another loan right away after payoff of current loan, or shop around for better interest rates.

How is 7.35% for an unsecured personal loan?

Answer to your Point 3.

If I ask for another personal loan, it would be to pay off the balance of the BT from the Citi card, some other bills, moving expenses, and a mini vacation.

The new loan amount I'd request is 8,000 to all the above.

This current CU has been great with getting me loans, but I've never shopped around for better rates. Every loan I've had with this local CU

has been one after another. The loan officer even said, "99% of people get a loan every year, one after the other."

A new loan that will have one monthly payment and will allow me to pay off all my other creditors. That way I can have zero balances on my cards and

move and take a trip before I begin my work in my new environment.

Creditaddict · ‎12-05-2012

@Anonymous wrote:
Creditaddict,

Thank you so much for responding so quickly! And yes, I know it's very confusing, and quite possibly unnecessary, my scenario, that is.

Answer to your Point 1.
I have a loan from my CU- 2k balance. Loan started in April of 2012.
I have a Citi Simplicity card with a limit that covers that and also has 0% BT and purchases until 12/2013.
Answer to your Point 2.
I want to use that BT from Citi to pay off the 2k loan.
Then either ask them for another loan right away after payoff of current loan, or shop around for better interest rates.
How is 7.35% for an unsecured personal loan?
Answer to your Point 3.
If I ask for another personal loan, it would be to pay off the balance of the BT from the Citi card, some other bills, moving expenses, and a mini vacation.
The new loan amount I'd request is 8,000 to all the above.

This current CU has been great with getting me loans, but I've never shopped around for better rates. Every loan I've had with this local CU
has been one after another. The loan officer even said, "99% of people get a loan every year, one after the other."

A new loan that will have one monthly payment and will allow me to pay off all my other creditors. That way I can have zero balances on my cards and
move and take a trip before I begin my work in my new environment.

7.35% on a Personal Loan is a FANTASTIC Rate!

If you are looking to actually go into WAY more debt and spend money to just move debt around it's pointless.

and if you qualify for the 0% for 18 months, why not just get a 2nd 0% to cover moving and all the other things.

or just go right to your current cu and the current loan and ask it to be modified to move up to the $6-$8k at current 7.35% over say 36-48 months.

Moving $2k at 7.35% and paying 3% to move it over 18 months would be a savings of $58 roughly... I however think the personal loan is doing WAY less damage to your credit, probably actually helping... but put that on credit card and close to limit... it's a down to credit... now how much down, who knows... might not even really notice depending what other credit you have that is paid off....

overall you love the credit union, they have been good to you... no point in paying to move unless it was all about any possible way to save a buck.... but the personal loan has a set period to have it paid off... no question of "Oh I think I'll just pay $25 this month and make it up by paying $300 next month... then all of a sudden you find yourself at 18 months and not only have you not paid the $2k you BT but also started charging on it and now you owe $3k!

Not saying these things will happen but....

Anonymous · ‎12-05-2012

That makes a lot of sense. I guess my reason for thinking this way of consolidating is because I'm sick of having credit card balances.

I mean, wouldn't $0 balances on all my cards with decent limits and 1 personal loan look better than what I have now:

A couple cards with balances and a personal loan.

I mean my util is hurting RIGHT NOW, how wouldn't it be better off to zero all my card balances and have it all under one loan?

My score would drop from inquiry, but it's used to having a loan so no difference there, but my score will skyrocket once my balances on the cards are zero, right?

Anonymous · ‎12-05-2012

From what I understood:

CC (1) has BT offer at 0% offer until next year (unkown limit)

You have a $2K loan at 7.35% interest rate and you wish to use CC (1) to pay it off so you don't pay interest till next year

I am assuming that you are doing this to save money. Verify how much % the CC charges for the BT if any and proceed if you deem it worth it and would save you money.

Now onto the second part about taking a new loan to pay off the credit card, moving expenses, vacation and other bills.

IMO:

Taking a loan for a vacation is a no-go.

Taking a loan (that will charge interest on month (1) to pay a CC that has 0% interest for at least a year is also a no-go

Taking a loan to pay off bills is usually a no-go to me (unless an emergency deems it necessary), bills should be paid as they come in (budget) though replacing high interest debt with low interest debt can only be good

Taking a loan to pay moving expenses is also a no-go unless it is an emergency (budget)

Best financially sound thing to do (IMO) is to do the BT and pay off the card in the 0% period (saving interest money), the loan could be a good decision if it is used to pay off other CCs or a previous loan that has a higher interest rate (analyze and calculate how much you will really save before taking the jump). If the other bills you are trying to consolidate are other CCs with high APRs then you can also BT those to the 0% card and save money. Be wary of BT fees.

EDIT: Don't worry about the high UTIL since it won't affect you unless you are actively seeking credit or plan a big purchase soon (you can always pay it off and on the next report your scores should see a jump). Be careful with taking a loan to pay off credit cards because the loan has a set amount of time to pay off and you can't add anything to the balance unless you get a new loan. With CCs once they are at $0 you can rack them up to high balances again which will leave you in a worse position.