@Anonymous wrote:
Implementing the SS Loan Technique:
Step By Step
Read all of these instructions and make sure they make sense before you start implementing any of them. You should try out the links to Alliant as well and play around on their site. The steps are:
(1) Open a savings account with Alliant
(2) Apply for the loan online
(3) Finalize the loan with a loan officer
(4) Pay it down
(5) Wait for it to report to the three CRAs
Each step is separated by at least 2 days, sometimes more. (For example, between finalizing it and it reporting might take several weeks.)
The steps are discussed in detail below. Good luck!
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STEP 1: OPEN A SAVINGS ACCOUNT AT ALLIANT
(a) Make sure you have $520 dollars of cash available for the initial funding of the account (which includes a possible $10 donation to a nonprofit and $10 beyond that just for safety). That should definitely be enough to secure the loan when you later apply for it.
(b) Go to this link:
https://www.alliantcreditunion.org/bank/high-yield-savings#features
Read about the savings account, and note that you'll be getting a nice interest rate too.
(c) When you are ready, click on the button that says OPEN AN ACCOUNT NOW. If you have never had a relationship with Alliant before, you will have to establish eligibility. For most of us, that means donating $10 to a non-profit called "Foster Care to Success". You'll have a chance to do that after you click on the Open An Account button.
NOTE: In the Mother's Maiden Name field, you cannot use spaces, special characters, or numbers. Good security practice is always to choose a weird phrase that is not in fact your mother's maiden name, since a good hacker could easily do a little research on you and find out what your mother's maiden name is.
(d) Set up online banking for your savings account. You'll need to give a username and a password of course. Once you are successful, you will see a screen that says
HELLO YourFirstName,
Your membership number is: ******* Show Number
Click on SHOW NUMBER and write it down in a place that is secure
Then scroll down and you'll see some buttons with options. FUND YOUR ACCOUNT is one of them. You don't have to fund it right away if you don't want to, but if you can it's worth doing so you can keep things moving forward in preparation for applying for the loan.
NOTE: Alliant does not permit members to fund their accounts with a credit card. Most people choose to do a transfer from an external checking account.
It will probably take 3 business days for the $510 to appear in your account.
When you have finished that, sign out and then log back in. You will probably be asked to create a bunch of security questions this time. You should probably locate the link that says Confirm My Email Address.
OPTIONAL:
Some people choose to set up a checking account with Alliant at the same time or a few days later. Sometimes there is a promotion for doing this (e.g. $50 bonus or even more). You can do this or not, strictly optional, not needed for the SS loan. If you do, you'll want to play around on the Alliant site before you open the savings account, researching the checking account options, etc. You may want to use Google to see if there is a promotion being offered and if so what the code might be for it.
FINAL NOTE:
In 1-2 days after you open your savings account, you will very likely get a telephone call from an Alliant customer service rep (CSR). The agent will ask if there is anything he or she can help you with, or questions you have. The best answer is a friendly "No, thanks. I am doing fine, but if I have any questions I will give you guys a call and let you know." Some members here on the Forum have run into trouble asking this CSR questions about loan products -- they end up getting inadvertently told they can't get a $500 SS loan, etc. You should use the online tools for applying for loans and accounts wherever possible -- getting a CSR involved should be the last resort. (Though in general Alliant's CSRs are better than average.)
* * * * *
STEP 2: APPLY FOR THE LOAN
(a) Locate and review the loan we have in mind:
* Go to this page:
https://www.alliantcreditunion.org/borrow/get-a-credit-union-personal-loan#compare
You do not need to be logged on to your online banking portal to look at this page.
* Scroll down slowly and look for a section called Choose the right personal loan.
* Beneath that headline you will see some language urging you to call or apply for a loan. Do not do that yet.
* Beneath that initial language, you will see a table describing several loan products: Unsecured, Savings Secured Short, Savings Secured Long, etc. The one you want is Savings Secured Long.
* Review this product. When you apply in a few days, you'll want to choose the longest possible term: 60 months.
* Don't get seduced by the lower interest rate of a couple of the other products. As you will be paying off almost all the principal early in the life of the loan, it doesn't matter if the longer term option has a slightly higher rate. In the end you will be paying very little interest.
* In this case study, we are basing this on you opening a $500 loan. You could do the same kind of thing with a $1000 loan too. And indeed, just as with the $500 loan, you will pay off most of the principal early on, which will cause a corresponding amount of money in your savings account to become available; so it doesn't matter much which you choose. A $1000 loan requires a $1000 initial deposit, of course.
(b) Give your deposit time to fully materialize in the Alliant savings, maybe 3 business days. When you log on, the landing page is the Account Summary page. You should see your savings account listed with both a Current Balance and an Available Balance. The Available Balance will tell you whether you are ready to apply for the loan. You want to have at least $510 available ($501 is probably enough).
(c) Log on to your Alliant account. Look to the right and you should see 4-5 links. Choose APPLY FOR A LOAN.
Under SELECT LOAN look for the choice at the far right. That should be SHARED SECURED. Click on that.
You will see three options. Make sure you are careful to find the right one. You want the one that is for up to 60 months. That is Shared Secured. Do not choose Term Secured or Certificate Secured. Click on APPLY NOW for Share Secured.
The rest of the application is straightforward. Make sure you choose $500 and 60 months. You will also be asked to choose the reason you want the loan from a menu of 20+ possibilities. The reason you want is probably placed toward the end of the list and reads something like Building Or Rebuilding Credit. You will have to wait for a day or two after you finish the online application, and you will then get a call from the loan officer (LO) to finalize the loan.
Note: our current research indicates that there is only a soft pull (inquiry) for this loan when done via Alliant. That has been confirmed by multiple people who applied during Jan-March 2016. Some other similar lenders also use only a soft pull, though some might use a hard pull. Even Alliant could change their internal process and make it a hard pull, so don't apply for this loan if a hard pull would be a huge problem for you.
* * * * *
STEP 3: FINALIZE THE LOAN WITH A LOAN OFFICER
1-2 business days after you finish your online application, you will receive an email from a Loan Officer (LO). In the email the LO will invite you to give him or her a call to finalize the loan.
When you do talk with the LO it should go very smoothly. Most people report the conversation takes about a minute. One of the things that the LO will ask you is when you want your first payment to be. The LO will be setting up an autopayment (a "scheduled transfer") from your savings account to your loan account. Be prepared for the question and have a day picked out in advance. For example, if you applied for the loan on April 5th, and you are talking to the LO on the 7th, you might choose April 20th as the date (in which case your payment will always be scheduled on the 20th). Or you could choose May 3rd for the first payment. Same principle.
Do not object to the autopayment in your conversation with the LO. It's their standard policy so just agree to it and give him/her a date.
The LO will explain that he's about to email you a bunch of documents electronically (after he hangs up). Actually he'll email you a link to a portal where you can read and sign them. It's all straightforward. Most people just sign them and are done with it in a few minutes.
An hour later you will have the $500 loan deposited in your account. Thus your account will have a little over $1000 in it, of which $500 is frozen and inaccessible. As you pay down the principle on the loan, a corresponding amount will get unlocked and become "available."
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STEP 4: PAY IT DOWN.
To start with, you will want to make sure you locate where the new loan account is on your online banking portal. Just log in to the Alliant portal with your username and password and you will by default be taken to the Account Summary page. You will now see your Share Secure Loan as a new account, along with the Savings account that you are used to seeing.
You will see a DUE DATE and PAYMENT AMOUNT for that loan. For example, the due date and payment amount might be May 9 and $9.19. Write both of those down (whatever the date and amount are). Hopefully you chose a date that is maybe 7-10 days from when the loan was approved. Later is fine too.
Next you want to locate the Autopay that was set up by the loan officer. To do that, go to the TRANSFER MONEY tab at the top of the page. Then look to the far right margin. You will see several links. Look for the one that says Scheduled Transfers. Click on that. You will be taken to a page that shows an automated transfer from the Savings account to the Loan account. That's a way of automatically paying the amount due each month. Do not try to delete it or change it. You can't do that -- yet. The test cases we have done so far seem to indicate that you need to pay it ahead a good bit AND also wait for the first transfer to go through before it will permit you to delete the transfer.
Next pay off a good chunk of the loan. Personally, I would start with something really simple. Like pay off $420 of the loan amount ($500). Your eventual goal is to get it down to just under 8.99% (i.e. a loan balance of $44). But more than one person has reported that it can take a few months to get the autopay turned off and then confirm that it is really turned off. So if you start with $420 you should still have a good buffer if a few more autopayments go through.
The way to make a payment (whether big or small) is to go to the TRANSFER MONEY tab. Just set up a one time transfer of $420 from your savings to the loan. Simple.
When you have executed that, go back to the Account Summary page. You will see that the Current balance is very low -- around $80. You will also see that the Due Date has been pushed out way WAY into the future.
The next steps are easy.
(a) Wait for the first autopay to go through. If the autopay has changed so that the next "scheduled transfer" date has been pushed way ahead in time, ignore that. It is likely that your autopay will still go through on the first date that you agreed to. Wait until a couple business days AFTER that date. Then look in your savings account. You should see that the payment still went through. Your loan balance is now smaller, maybe $71 or so.
(b) Now go back to that recurring transfer that your loan officer set up. If you try to delete the autopay before it has gone through once, most people report getting a big red error message. So now that you have waited till after the first autopay, you can delete it. Just click DELETE. It will ask you if you are really sure. Say yes.
Your autopay should really be deleted. But if you REALLY want to be sure, give it another month and see if it goes through again.
(c) Make a final payment to bring your loan balance down to $44. Your amount owed will then be < 9% of the original amount, which is what this technique is all about.
Finally, you'll need to figure out a plan for keeping your loan and your savings account "active" so that they do not receive a fee for standing inactive/dormant for a long time. Here are some options:
* MANUAL. Just remember to sign on to your Alliant account and manually initiate a transfer of $2 every six months from your savings account to your loan account. If you are confident you'll remember, that's simple and easy.
* AUTOMATIC: Use billpay from a checking account to make a $2 payment to your loan every three months. The checking account can be an Alliant checking or one from an external bank. If it is an external bank, you should also set up a billpay to your Alliant savings account to keep it active as well. Note that, because you have deleted your monthly autopay, Alliant seems unwilling to let you set up another autotransfer from savings to loan. So if you want to go the automated route, you'll need to use a checking account.
Regardless of the approach you choose, sign in once a year to make sure things are going OK. You may need to tweak your payments a tiny bit, especially toward the end. It's very important for your payment plan to avoid paying off the loan way earlier than you intended, but also important not to make such small payments that you eventually fall behind Alliant's schedule for paying off the loan.
FINAL NOTE: Many savings accounts have a maximum number of six withdrawls that can be made monthly without incurring a penalty (federal law). This has no practical impact for this technique, unless you decide in the first month or two that you want to experiment with several smaller payments. Always keep the total number of payments to five or less each month. Of course, the appeal of the approach is you only really have to make one big payment and then you are set for a very long time.
* * * * *
STEP 5: WAIT FOR THE LOAN TO REPORT
If you don't have a tool that allows you to pull your credit reports for free at least once a month, you should probably get one. Credit Karma is a good cost free choice, though you can ignore their scores and any recommendations they give you. It's hard to beat as a free method for seeing your reports, which Karma will give you as often as once a week.
Look for your loan. Alliant reports all its loans for all consumers to the three credit bureaus on the last day of the month, In theory if the LO finalizes your loan at least three business days before the end of the month, it would likely be reported at the end of the month. That seems plausible anyway. But it's also possible that they have to do some extra housekeeping before it reports the first time.
Remember too that just because Alliant reports your loan to the credit bureaus on a certain date, it could take 3-4 business days before it appears on a particular bureau's report. Some people here on the forum have experienced longer wait times than that for all kinds of accounts. Just depends on the CRA, what its servers are doing, etc.
Finally, if you need the reported balance to also be low, you should make sure that the new balance has fully registered a few business days before the end of the month -- just like with a credit card or any other account.
If you are really interested in how much benefit the loan will give you, you should get your credit profile looking as good as possible before you apply for the loan. Most importantly you will want your profile to be stable -- in other words you want it to look the same before and after except for the new loan. The same total CC utilization, the same number of cards reporting a balance, etc. Otherwise you can't know, when your score changes, how much of the change is the loan and how much of it is something else.
FINAL THOUGHTS:
The approach as outlined above should enable you to do this painlessly and without involving a customer service rep at Alliant. (The exception being when you talk to the loan ofice for one minute a few days after you apply online.)
Avoiding bothering the CSRs is good policy when you can, especially when you are doing something clever like this. It's absolutely fully legal and fully within Alliant's loan terms, but it's probably also a good idea to minimize the extent to which you are pushing it onto the CSR's radar. Some people here have run into CSR's limiting their options when they do that.
Many thanks to all the people here at the Forum who have pioneered this approach in 2015, especially Revelate.
