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Debt Dispersion Question

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Debt Dispersion Question

So since my wife and I have been investigating a lot about getting our scores up and trying to look for ways to decrease unnecessary payments we have been transferring some high-interest credit cards to some 0% offers that have become available to us. It has been an amazingly helpful thing to have!
That said, we also move a couple of higher interest payments to a lower interest Discover personal loan thereby combining two different payments into one lower payment.
Here's where my question comes in...I looked at it last night, and while the interest is lower than before, I've still paid $2,300 towards this loan so far already and have only dropped the balance by $700. This is a huge waste of money in my eyes and I thought to myeself, "Self, if you could just disperse this money across, say, 4 or 5 different 0% cards you could make much larger strides towards paying this off while keeping your utilization low." Discover has no pre-payment penalty on this loan and I feel like it could be a good move to make our money work harder for us.
This means I'd have to apply for several cards at once, but I know it is a bit of a risky move, too.
My CSP is my daily driver and I'm looking to ask for a CLI on that to help with utilization, too, but I don't want to go about this all wrong, so I was planning to make all of this happen within a 24hr window. I can tell you almost definitely that we won't be able to pay all of them off by the time the 0% runs out, but I'm hoping that by then we'll be in a much better place and perhaps we can lump them back into one account at either a more competitive rate when the time comes or maybe even keep them at 0% under one roof if the credit Gods shine brightly on us by then.
Either way I was hoping to get some feedback on this idea and see what the far more educated group thinks collectively about this plan.
Yay or Nay, and if nay, why not so I can understand better?

Thanks, everyone!
7 REPLIES 7
Contributor

Re: Debt Dispersion Question

quick question....how recent is the discover loan?


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Message 2 of 8
Contributor

Re: Debt Dispersion Question

for any actionable advice, it is better to give specifics: current balances, limits, percentages, length of terms, for all accounts.

 

loan#aprlimitbalanceterm
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card#aprlimitbalance
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Message 3 of 8
Super Contributor

Re: Debt Dispersion Question

First question is, what APR is the Discover loan, and what is the term, how many months. That's two questions I guess. 

If it is a 5 or 7 year term the payment may look low, but that results in the low principal payment early on. If you want to reduce the debt, you have to figure a way to pay more per month. 0% offers can help, but not if you only pay the minimum. 

And generally, no, you don't want to do a spree in a 24 hour period for a bunch of cards. 

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 4 of 8
Member

Re: Debt Dispersion Question

Without spending the time to share everything there is to know about each of my accounts let me first say that my most recent FICO info available to me is a 715(10/22/19), I'm at 100% payment, over 21 accounts, 0 DEROGs, AAoA 2.1yrs, 1-6HP depending on where I look, and 33% utilization.
Discover loan was opened in Feb 19. I know it is a short time frame, but the APR is 19.98% for either 72 or 84mo., I don't recall right now. The starting balance was 13,000, and I was able to combine 2 loans into one for the same payment as one of the loans previously, so it was helpful at the time, but to pay as much interest as I am is killing me considering I think there may be better options available to me.
I understand I'm looking to get out of this way early. I've had tons of other locked rate loans and I'm fully aware of how they work and what I signed up for, but there is no pre-payment penalty and I think I can do better, so I'm just examining my options.
I would never make just the minimum payments.
The point is to make as much progress as possible, not delay the inevitable.
I realize I may take a sizable hit in my score for a bit considering AAoA would drop, etc., but I'd be willing to do that if it was worth the (literal) payoff.
After the 0% ends, I'd be looking for another personal loan, most likely, just at a more competitive rate.
The money management isn't what I'm worried about, it's more about how my score will perform after the fact.

I guess the biggest thing I'm trying to figure out is if this looks like more of a calculated risk, or certain disaster.
Message 5 of 8
Frequent Contributor

Re: Debt Dispersion Question


@ntenseone wrote:
 I know it is a short time frame, but the APR is 19.98% for either 72 or 84mo., I don't recall right now. The starting balance was 13,000...

There's your problem.  That's a high rate for a loan especially 72-84 months.  You'd be paying a fortune in interest.

 

You can do better, even if it's not 0%.  See if you can get a lower rate loan if nothing else.  If you have equity in your home or car you could refinance that into a lower rate loan.  What are your existing cards and limits and do any of them have a 0% or low rate balance transfer option?  You could move part or all of your high interest loan to those if you have them.  Try a credit union, they usually have lower rates.

 

Maybe app for 1 card, or even 2, with 0% APR offers but I wouldn't do more, depending on your credit profile and what starting limits you'll get.  You may tank your scores based on utilization for a while, but it's better than paying all that interest!

 

Maybe a family member will loan you the money interest free or at a lower rate...something else to consider.

 

Lastly, if you can tighten your budget and pay more on the loan, it will knock the principal down faster.  Do this in combination with lowering your interest and you'll get it paid off a lot faster, and cheaper too.

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Message 6 of 8
Contributor

Re: Debt Dispersion Question

did you really know what you signed up for?

 

aprtermbalancepmtcumipmt
19.988413000−289−11236
19.987213000−311−9409
19.984813000−395−5982
19.983613000−483−4388

 

think about the cumulative interest with a 72/84 month loan. if you can budget 100-200 more a month you can pay it 2-3 years earlier and save almost half the interest. I know, easier said than done.

 

but versus what? 3-5 new cards with 2000-3000 limits, maxing them out, and beating up your score? only to have to do it all again in 12-15 months? you do not say your budget or income, but with your current assumed profile, limits, and without a high income what is the practicality of that scenario.

 

if you are insistant on a new card, I would look into a credit union which is known for large limits, like nfcu.  imagine at three months if you were approved for the platinum with a 10000-15000 limit and 0% bt offer and single digit apr after 12 months.

 

you mention over 21 accounts. neither has a sufficient limit to transfer any of the 13000 over? I have a citi card and they are constantly throwing 0-1.99% bts at me (along with their single digit apr "flex loan"). I do not have amex, but I have read they allow up to $5000 transfers. Bofa, Chase, etc. I think that's why someone suggested listing your accounts, etc.

 

beat up your budget for 6-12 months and dump as much as you can into paying down this loan and if your score improves, shoot for a loan in with single digit apr. there have been many posts about Lightstream, credit unions, etc.

Message 7 of 8
Valued Contributor

Re: Debt Dispersion Question


@ntenseone wrote:
Without spending the time to share everything there is to know about each of my accounts let me first say that my most recent FICO info available to me is a 715(10/22/19), I'm at 100% payment, over 21 accounts, 0 DEROGs, AAoA 2.1yrs, 1-6HP depending on where I look, and 33% utilization.
Discover loan was opened in Feb 19. I know it is a short time frame, but the APR is 19.98% for either 72 or 84mo., I don't recall right now. The starting balance was 13,000, and I was able to combine 2 loans into one for the same payment as one of the loans previously, so it was helpful at the time, but to pay as much interest as I am is killing me considering I think there may be better options available to me.
I understand I'm looking to get out of this way early. I've had tons of other locked rate loans and I'm fully aware of how they work and what I signed up for, but there is no pre-payment penalty and I think I can do better, so I'm just examining my options.
I would never make just the minimum payments.
The point is to make as much progress as possible, not delay the inevitable.
I realize I may take a sizable hit in my score for a bit considering AAoA would drop, etc., but I'd be willing to do that if it was worth the (literal) payoff.
After the 0% ends, I'd be looking for another personal loan, most likely, just at a more competitive rate.
The money management isn't what I'm worried about, it's more about how my score will perform after the fact.

I guess the biggest thing I'm trying to figure out is if this looks like more of a calculated risk, or certain disaster.

It's all a guesstimate without providing the full information of balances/limits/etc.

 

However, if I were to guess, your profile is borderline with the lackluster terms of your Discover loan. I definitely wouldn't go on a CC app spree and risk AA.

 

The information of your accounts/limits/balances is imperative, and the difference between anyone here seeing options for you or not.

Ch 7 Discharge May 2015
Discover/Target/NFCU CLOC/NFCU Cash Rewards/NFCU Platinum/PenFed Power Cash Rewards/PenFed Pathfinder AMEX/Citi Costco Visa - $96k total revolving
EQ/EX/TU: FICO 8's November 2019: 696/679/668, 14% utilization, AZE2 (w/ those 2 cards reporting 30% util), INQ's: 4/2/1
Message 8 of 8
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