Thursday, March 8, 2012

Debt Earthquake & Aftershocks

Two other ways frequently mentioned in eliminating debt are balance transfers and loans. Neither of these choices are optimal for my personal situation, but maybe they will help you out.

The first option, balance transfers, is pretty simple- Apply for a 0% interest card (and be approved) then transfer your high-interest balances over. Assuming you pay off the balances before the promotional rate expires, you'll have saved a good chunk of change in interest. One cavat to look out for is the fee associated with transferring the balance, usually a flat fee or a percentage of the transfer. lists the following as the Best No-Fee, 0% APR Offers for 2012:
  1. Citi Platinum Select Mastercard - 0% APR for 18 months on transfers and purchases. Transfer fee is 3% of the balance
  2. Slate from Chase - 0% APR for 15 months on transfers & purchases. Slate is one of the only cards with no transfer fee
  3. Discover More - 0% APR for 18 months on transfers and 6 months on purchases. More cards are also part of cash-back program
  4. Capitol One Platinum Prestige Mastercard - 0% APR until June 2013. Balance transfer fee is 3% of total with no minimum to transfer over. The annual APR's are also lower (depending on your credit score, of course)
You can read the full list here. I just opened a balance transfer card in August 2011 (Card 4 on my list) so obviously, opening another line of credit is going to hurt me more than paying off the existing cards . Card #2  just sent me a letter in the mail offering 0% on balance transfers; However, that would take up most, if not all of my credit line on that card which isn't a good idea either. If you only have one or two cards with high balances, can sock extra money into payments, and won't be tempted to use the new card, then this might be an option for you.

The second method would be to take out a personal loan to consolidate the debt into one monthly payment. Generally speaking, the loan rates at the bank tend to be lower than credit card rates. They dip even lower if you have a credit union nearby.

I decided to call up PNC and find out what kind of terms they were offering for a $10,000 unsecured loan. Since I'm already a customer with the bank, they offered me an APR of 8.99% if I have the payments automatically deducted from my checking account. The base APR is 9.24% - still not too shabby. There are no pre-payment penalties associated with the loan, which is good. A three year plan would cost me $318.00 per month and a four year plan would be about $250.00 per month. This would almost seem like a great option if I didn't already have that one card with 0% interest. Plus, another unsecured debt would not look good on my credit report right now.

Some websites even suggest taking a loan out from family members or friends, but I'm of the mindset not to mix business with pleasure. Has anyone ever loaned money to a family member and actually had it all paid back? I know if it's not going to affect my credit score negatively, I would be lax in my re-payment efforts. No need to create unneccessary family drama - we do that well enough on our own.

Just in case the past three days didnt't have enough natural disaster analogies for you (spoiler alert), tomorrow, we'll look at the Debt Tsunami! Hold onto your surfboards.

Day Seventeen Spent:
$5.00 Sally Beauty Membership Renewal
$1.07 Dollar Tree (makeup remover cloths)
Day Seventeen Saved:

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