Financial Expertise Appreciated

Vulchor

Ok my fellow BOTLs with much better math and financial computing skills than me.....PLEASE HELP!!

Wife and I are looking to pay off credit cards. Have a ton of debt however from issues years back. I am looking at around 10k in CCard debt on 3 different cards. The interested rates for each are 15.9, 15.2, and 12.2. Roughly the same amount on each. Standard terms

I am tentitavely approved for a loan, for 10k to "consolidate". BUT the loan is for 17.99 percent making it 361 per month, paid off in 3 years. The difference being... there are early payoff fees, and interest is done monthly---not daily.

I am being advised by some that the 17.99 is the better way to go and I will pay less in the long run...especially if I pay it off early at all, or pay more than my minimum payment.......................Whats the truth and best idea here guys? Im not a mathematical ****, but this is above my ability I think.

SmokySuit

This depends on how much you pay per card now. Are you paying any significant amount more than the minimum on each card each month? Or are you stuck doing the minimum on the cards each month?

sightunseen

As a comparison, you should run monthly payments on your three cards at existing rates and a three-year amortization. If the total payment is higher than your consolidation loan payment, then the loan is the better choice. Some questions to consider:

Do you see yourself paying off the debt early? If so, then I would review the terms of the prepay fee.

Did not research monthly interest versus per diem interest, so I don't know which method would charge cost more. The loans I usually deal with are per diem.

Diamondog

Wouldn't you be paying a combined interest between cards of 43.3% versus 17.99%

Vulchor

I pay more than the minimum----I pay generally 100 per month, per card. Could afford a little more as well. There are no prepayment penalties on this loan btw.

I have also been pursuing a different company, and approved for a loan to pay off 2 of the cards at 12.9%. Again, no prepayment penalty----but this is a daily interest.

I know Im asking a lot, but Im trying to figure basically-----say each card has $3200 at the rates I listed earlier. And I pay 100 per card, or the amount they agreed to (the loan for 10k to pay them all off is 17.9% interest done monthly-----the other loan is about 7700 to pay off 2 cards and it is 12.9% with daily interest)....Which is the best way to go....or better stated

What would be my amount I would have left to pay, or when would it first be paid off, without doing any loan? I know with the 10K loan its around 365 per month for 36 months.....for the other, its 261 per month for 36 months (but I have the 3rd card to still pay off)

The Sniper

Who would this loan be thru - which bank / financial institution / loan shark? LOL

Without crunching the numbers, 17.99 percent seems way high to me.

Like the interest being done monthly instead of daily - as long as it is simple intrest and not compound interest.

NOT AT ALL crazy about the early payoff fees!

I would say (if you havent already) to shop your business around a bit and see what else is out there that you qualify for, that also fits your needs. I think you can probably do better.

smokeater187

I don't know if you have considered a debt managment group..but i am on a plan right now with moneymanagement international....... moneymanagment.org . They find a office near your home and you go in and talk with somebody and set something up. I really don't know much about loans and number crunching only being 23..but i do know that they are saving me a hell of a lot of money that i would have paid in late fees and finance charges and all of the bs that comes with cards. They have a number that you can get via the website that i listed earlier. Their customer service with them has been thru the roof awesome and a start-up fee is basically pennies to what they are saving you. I think that they are a very stand-up company so just thought i would throw this in.

Goldy

Diamondog:

Wouldn't you be paying a combined interest between cards of 43.3% versus 17.99%

No, it would be a weighted average that would come out to 14.3% assuming an equal split in balance between the three cards.

I am crunching some numbers and will report back soon. you may want to post on the forums at Savingadvice.com, they are a great group of people who know everything there is to know about money.

Goldy

Vulchor:

I pay more than the minimum----I pay generally 100 per month, per card. Could afford a little more as well. There are no prepayment penalties on this loan btw.

I have also been pursuing a different company, and approved for a loan to pay off 2 of the cards at 12.9%. Again, no prepayment penalty----but this is a daily interest.

I know Im asking a lot, but Im trying to figure basically-----say each card has $3200 at the rates I listed earlier. And I pay 100 per card, or the amount they agreed to (the loan for 10k to pay them all off is 17.9% interest done monthly-----the other loan is about 7700 to pay off 2 cards and it is 12.9% with daily interest)....Which is the best way to go....or better stated

What would be my amount I would have left to pay, or when would it first be paid off, without doing any loan? I know with the 10K loan its around 365 per month for 36 months.....for the other, its 261 per month for 36 months (but I have the 3rd card to still pay off)

Ok, first of all take a deep breath.

I calculated out the interest between 17.9 and 14.3 based on monthy and daily interest using the formula below

$10,000 x (1 + .179/365)365

The 17.9% loan in monthy interest totals to $1,944 bucks in total value after one year. If you change that to daily interest the amount increases to $1,959 for an increase of 15 bucks which shows that monthy vs daily simply doesnt matter.

If you keep your 14.3% average rate your total interest for one year is only $1,536 which saves you over 400 bucks a month.

I dont see any reason to entertain thoughts of getting that 17.9% loan to cover your three CC's.

letsgowithbob

Okay Vulchor,
I don't know what your credit rating is, but if it is decent your best bet is to get a card that has a 0% interest rate on all balance transfers for 6 months. Some do it for 9 months, but most for 6. You pay every penny that you can afford to pay on the cards for 6 months, then get another card that has a 0% interest rate on all balance transfers....and keep doing that until your cards are payed off.
You have to be really careful about taking a loan out to pay off credit cards. I know that it makes more sense financially, but it also frees up 10000 in credit ability. If you have emergencies come up, you are much more likely to use your credit cards to cover the emergency, verses going without.

The last thing in the world that I would do is go to a credit relief agency. They will help you settle your debt for pennies on the dollar, the only problem is they absolutely kill your credit score. What they normally do is tell you to stop paying on the cards, and that they are going to "settle" with the card companies. What they do is wait 90-120 days, and then ask the card company for a charge off. It is like settling with the card company so instead of paying off your debt, you only have to pay off 1/3 to 1/2 of your debt. It kills your credit....absolutely kills it. There might possibly be some that do it the right way, but very few these days.

Just my very very wordy .02

Goldy

Vulchor:

I pay more than the minimum----I pay generally 100 per month, per card. Could afford a little more as well. There are no prepayment penalties on this loan btw.

I have also been pursuing a different company, and approved for a loan to pay off 2 of the cards at 12.9%. Again, no prepayment penalty----but this is a daily interest.

I know Im asking a lot, but Im trying to figure basically-----say each card has $3200 at the rates I listed earlier. And I pay 100 per card, or the amount they agreed to (the loan for 10k to pay them all off is 17.9% interest done monthly-----the other loan is about 7700 to pay off 2 cards and it is 12.9% with daily interest)....Which is the best way to go....or better stated

What would be my amount I would have left to pay, or when would it first be paid off, without doing any loan? I know with the 10K loan its around 365 per month for 36 months.....for the other, its 261 per month for 36 months (but I have the 3rd card to still pay off)

Use this http://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx

I think that second loan might have some merit to it but until that time I would recommend you pay the minimum on the 12.2% loan and on the 15.2% and concentrate on the 15.9% loan. Assuming your minimum payment is ~75 bucks (caluclated from interest + 1% balance) that would give you 215 dollars to concentrate on the 15.9% loan (assuming you can afford the 365 payment you talked about before). That means the 15.9% loan can be paid off in 16 months. After that you can move your 215 payment + 75 min payment to the 15.2% loan and pay it off in 11 months. Then you can take all that money (now 290+75) to the lowest loan and pay it off in 9 months. All totaled its still going to take 36 months.

One possible option would be to take a HELOC loan out because those rates would be around 6%.

Vulchor

Thanks for all the help guys----Did as much math as I could, and agree Goldy the 17% is out. I have been meaning to sink it into the higest interest first, and just need to start doing it. As far as the consolidation----Ive heard of these companies and looked, but many of them end up not being much more savings than the card you had either. Additionally, credit cards as not as easy to obtain as they once were. I was getting offers/accepted for 12K cards a few years back---didnt take them thank god. Ive never missed a payment, but due to high balances, the rating has gone down. Swapping out no interest cards for other once may not work for that reason though.

Amos_Umwhat

All I have to add is: before you make a decision, look into Dave Ramsey

bigharpoon

Thank god you ruled the 17.99 with early payoff fees, what a ripoff! There are tons of headhunter loan consolidation agencies out there that prey on peoples fear of handling money. They market consolidation, one easy payment, and that sounds good and simple to most people but thankfully you realized that one payment is MORE than you pay now. Ugh!

Only consolidate your loans if you can get a rate that is lower than your weighted average with no early payoff fees. Until then make the minimum payment on your two lowest interest rate cards and use ALL your extra money to make bigger payments on your highest interest card. When that one is paid off use ALL your extra money making bigger payments on your remaining highest interest card until that one is paid off. Then pay off the third card. This is the best use of your money without getting an outright better loan.

Edit: I just realized this is the advice Goldy just gave you, it's good advice.

Fourtotheflush

ok,
so 10 k is manageable.
Here is what I suggest.
One of your current cards should have a balance transfer program (if not discover does.)
The transfers are typically significanly lower than the rates you are paying.
Move all your CC debt to the card that will give you the lowest rate on a transfer.
Then keep paying off more than the interest rate.

Now heres the kicker - this low rate will expire. 6 months to a year or so.
When it does, you move your entire (now lower) balance to one of your other cards that will give you a low interest rate on balance transfers.

Now this typically can be done with an hour or so of work and usually can be done right over the phone.

(did it many times myself when I was younger and in a similar situation)....

Theedge

I second taking a look at Dave Ramsey's site. There's more to it than crunching interest rates.

Click Here For Debt Snowball Plan

Ken_Light

Fourtotheflush:

ok,
so 10 k is manageable.
Here is what I suggest.
One of your current cards should have a balance transfer program (if not discover does.)
The transfers are typically significanly lower than the rates you are paying.
Move all your CC debt to the card that will give you the lowest rate on a transfer.
Then keep paying off more than the interest rate.

Now heres the kicker - this low rate will expire. 6 months to a year or so.
When it does, you move your entire (now lower) balance to one of your other cards that will give you a low interest rate on balance transfers.

Now this typically can be done with an hour or so of work and usually can be done right over the phone.

(did it many times myself when I was younger and in a similar situation)....

Not to be contrarian, but while your math certainly works out, I think that annihilates his credit in the process. That may matter much less when you are younger, because you might have the 7 years to wait for it to clear your credit before looking for a home loan.

I think the standard advice here is to pay off the highest interest rate first and move down from there. And do so as much as you can while still making the minimums on the rest so you don't get charged late fees. That loan is definitely garbage, the rate is higher than even your highest interest card, and no difference in calculation of interest can make up for that. 10k isn't that bad, and even though you'll probably pay more like 12-13 by the time you're out of it's still entirely doable.

Best of luck!

Russ55

Sorry if this has been asked/answered, but are you still using the cards?

Vulchor

Everday Russ........................J/k man, If I did I think I would just shoot myself out of a canon into a large body of water.

Russ55

Haha. I know how you feel. Those damn things are awful. That was the biggest thing for my wife and I, learning to live completely without them. Once we did that, the rest kind of fell into place.

Vulchor

Thats what were getting into now. Finally stopped using about 2-3 months ago......its was haaaaaard to not use at XMas time....although has made the post XMas blues non existant.

jship079

Theedge:

I second taking a look at Dave Ramsey's site. There's more to it than crunching interest rates.

Click Here For Debt Snowball Plan

Dave ramsey does have some good principles. I would say the 17% interest is not the way to go

Mperconte

Do you own a home? A line of credit off the equity in the home with get you 2.8 % while the banks stuggle with rates. THis will last a fewmore yours before rates start to creep up. 10k can be paid quickly if you get a tax return money in April.
Dump the Iphone, the cigars, HBO and the porn sites. Stay out of the bar and cook the chicken at home instead of eatting the 26 oz steak deal that you can never finish.
A part time night job for $150 a week will get you about 450 per month after taxes, thats just over 5k in 1 year, + the $300 per month that you already pay is another $3600.

Tighten the belt a bit and the party is all over in a year. The line of credit would kill it in 2 if you did nothing else.

sittingbull

not sure if this has been mentioned....suggestion only...3 cards 3 payments....consolidation would be good but not at 17%....would rather have somebody else by the nads as oppose to someone having my nads... take the highest card percentage card you have and pay it off first....paying on the min. on the other cards....once you pay one card off start on the other cards.....until this is done pay for everything you can with cash....take the two highest rated cards and put them in a cup full of water and stick them in the freezer....trust me it is nice to be able to pay your credit card bill in full each month.... good luck if you are married might think about a budget.....

Vulchor

Mperconte:

Do you own a home? A line of credit off the equity in the home with get you 2.8 % while the banks stuggle with rates. THis will last a fewmore yours before rates start to creep up. 10k can be paid quickly if you get a tax return money in April.
Dump the Iphone, the cigars, HBO and the porn sites. Stay out of the bar and cook the chicken at home instead of eatting the 26 oz steak deal that you can never finish.
A part time night job for $150 a week will get you about 450 per month after taxes, thats just over 5k in 1 year, + the $300 per month that you already pay is another $3600.

Tighten the belt a bit and the party is all over in a year. The line of credit would kill it in 2 if you did nothing else.

Point taken----although not looking for a lecture........and I can eat a 26oz steak-----check the weight loss thread lol

Mperconte

Sorry, did not mean to insult!!!!!

JZ

Go to any financial type website with calculators. Most have "how long til I pay of a debt" sty;e one available. Enter each card seperately and see how long it would take paying "X" per month. I'd imagine the consolidated option will be much sooner not to mention it keeps you obligated to make that payment no matter what. With the credit card option you always can revert to a lower payment dimming the light at the end of the tunnel.

Vulchor

Thanks Jz....and no problem at all my man, no hard feelings at all.

phobicsquirrel

Amos Umwhat:

All I have to add is: before you make a decision, look into Dave Ramsey

lol, yeah he's smart. My wife wants to give him a whirl. I paid all my cc debt off last year and did it through a debt management program. They really helped. I got my interest rates lowered to about 6 percent from 20. Combined it was like 10,000 and it took 5 years but it's all done. And it was no charge to pay off early (which I did).
Goldy, that was really nice of you to crunch those numbers.