Adding an installment loan -- the Share Secure technique

[dmFICO8]

Thanks OP for this great guide!

I applied for Alliant CU membership this Sunday(4/23), everything went smoothly until last step where you are supposed to setup online access, then it went membership pending (requires manual review). Next day Monday afternoon (4/24) received Welcome to Alliant Credit Union email, just today few hours ago received an email Your New Member Welcome Kit is fresh off the presses and on its way to you. I can't wait!

Now I have a loan interest question. I know opening $500 or $5000 Share Secure loan won't make a difference in score calculation, though I prefer a bigger loan considering $1000 or $2000 as they will seem more normal, but with bigger loan the interest will be more. For easy calculation say I open a $5000 loan, but I pay it down as soon as possible to $144 (auto-payment is probably around $92.40), wait for first auto-payment to go through then pay down to $44, from now on will I pay the same interest as if it were a $500 loan? At least that's how I understand as long extra payment goes to principle. Thanks in advance.

[Anonymous]

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@dmFICO8 wrote:

For easy calculation say I open a $5000 loan, but I pay it down as soon as possible to $144 (auto-payment is probably around $92.40), wait for first auto-payment to go through then pay down to $44, from now on will I pay the same interest as if it were a $500 loan? At least that's how I understand as long extra payment goes to principle. Thanks in advance.

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Yes.  All that matters is what the interest rate is and your current balance.  If a $500 and a $5000 loan each have a 3% interest rate (say), then after the loan balances reach $44 then the monthly amount of interest in actual pennies is the same.

Note, however, that the $44 figure is not a magic threshold for all loans.  It was chosen so that you would be < 8.99% of an original amount of $500.  If you chose an initial loan amount of $5000, however, then you could have a balance that was much higher, e.g. $449 -- if you wanted.

[dmFICO8]

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@Anonymous wrote:

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Note, however, that the $44 figure is not a magic threshold for all loans.  It was chosen so that you would be < 8.99% of an original amount of $500.  If you chose an initial loan amount of $5000, however, then you could have a balance that was much higher, e.g. $449 -- if you wanted.

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Thanks you for your reply, CreditGuyInDixie!

Yes, I understand where $44 is from, I just use it for easy comparison. I am considering $2000 and pay it down to $100 or $50 after first auto-pay, don't want to leave $179 (8.99%) as balance, as I will pay $20 interest, with $100 or preferable $50, I only pay $11 or $5.5 interest, now that's a cheap loan!

[Anonymous]

Just registered to this forum to say a BIG thanks to CreditGuyInDixie! THANK YOU!

Now here ae my timelines:

+ Applied for Alliant CU membership, everything went smoothly until last step where you are supposed to setup online access, then it went membership pending requires manual review). Next day morning received Welcome to Alliant Credit Union email, A day after received an email "Your New Member Welcome Kit is on the way in USPS" mail.

+ Received the USPS mail package 5 days after:

+ As soon as I received the mail from ACU immideately set up my online access and transfered $500in my ACU savings account, took 4 bsiness days to see the amount as "Available Balance"

+ Applied for loan on the same day and recived the the email from LO next morning asking for Auto Payment date and account for deposit the loan and account for auto pay.

+ Got email next morning from another Loan Cordinator for siging up loan documentation (electronically) and loan money was in my account after 30 minutes.

+ Received an email and he also left a meassge on my machine for "Welcome"

+ Paid $420 from my account and now waiting for the "results"

This whole process was completed well before 6 busines days before the end of the month so hopefully it will show up a bump in my scores next month.

I must say this process was very complecated for me but with the help of CreditGuyInDixie excellent writeup and detailed explanation it become a piece of cake for middle aged guy like myself. Thankyou!

I also wants to confirm that that LO did NOT called me for approval process, it was all done thru email!

[Anonymous]

What a great guide, thank you very much!

Quick question for a married couple: can you open a joint loan, or do you need to repeat the process twice?

We don't have any installment loan yet, and a credit score in the 780s. 

Thanks!

[Anonymous]

I seem to remember that there were reasons not to do a joint SS loan with Alliant.  My dim memory is that they may have a policy that when a loan has a co-signer then that triggers hard pulls.

I would just do the loan with your spouse.  The pay down will liberate the money in question and then you can do it for you (with the now unlocked funds from her account). 

[Anonymous]

Thanks. I actually have no issue funding 2 accounts at the same time - I do not need to wait for the funds to be released. 

So - I will open one for me, and one for her then.

[Glen_M]

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@Anonymous wrote:

Signed my $500 online loan docs 4/11 and docs say first payment of $9.24 due on 5/26, does this length of time between signing and first payment sound normal?  

...

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When I was setting mine up I asked if I could get an earlier first payment due/statement date, since I would make it online anyway.  I was told there was a legal requirement to allow at least 30 days between signing and the due date, that sounded familiar so I let it go.

[Anonymous]

Not sure if this has been covered or not, but if anyone knows can you tell me if my situation would benefit from doing this.

I have previous auto loans (x2) and personal loans (x4) that were all paid/closed/never late. Unfortunately my most recent auto loan (repo) and personal loan were charged off 3 years ago with an open balance, reporting monthly. Currently, I'm a student with open deferred loans ($200k - medical student) that won't become payable until about 1.5 years from now. These student loans are my only open installment loans right now (not including the 2 monthyl reporting chargeoffs). I was also denied a small auto loan ($6000) from all 3 of my Credit Unions because of my installment loan history/repo

Will having this current secured loan help with my installment history?

[Anonymous]

Somebody is testing the SL issue right now and should have an answer by May 15.  That is, all of his open installment loans are student loans in deferment.  If the Alliant SS loan he added two weeks ago (and paid down immediately) gives him no benefit, then that will answer the question for you as a No.  It means SLs in deferment are scored normally as any other installment loans.

If he gets a substantial score boost, then your case becomes more interesting.  It depends in part on how much the balance is on the charged off car loan.  My guess is that the balance is substantial.  Suppose it is $5183.  Then even if you got an SS loan for $5000 and promply paid it to (say) $50, the installment util would still be....

       ($5183 + 50) / $5000

.... which would be > 100%.  The charged off balance would count in the numerator (all installment debt currently owed counts) but the original amount of the car loan would not count in the denominator (since the loan itself is now charged off).  If you got a number of large SS loans (10k each say) and paid them each to a small amount you might be able to create a big enough denominator so that you got a total installment utillization below 49% say, but golly that's a lot of work to chase a scoring benefit that may be a complete phantom anyway.

All this involves a lot of speculation on my part, but I think that is how it might all play out.