Paying off debt…help~~?
I financed furniture from a furniture store. It was financed with 0 interest until Jan. 2008. I have paid the original balance down to about 3,000.00. I owe about 4,000.00 on my car. I have a credit card with a a balance I pay on of around 1,000.00.
Here is the temptation. I was offered (and accepted it) a line of credit for 20,000 from Bank of America. I am tempted to pay these things off to raise my credit score and consolidate the balance to one account…BUT the interest rate is flippin 15.99%. NOW..the interest on the furniture in January will be HIGHER than that. Should I continue making payments on the furniture until Jan 2008 at 0 percent and THEN pay the balance with some of this 15.99% money??? It seems clear to me that If I pay it NOW, while at 0% I will be screwing myself into 15.99% before it is really necessary.
Should I just blow the 20,000 off because of this interest rate/? Any other suggestion
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That sounds like a good idea - only use the line of credit for the more expensive debt when the 0% deal runs out, then try to pay off all of your debts according to the most expensive interest rates first - then you will be paying the lowest possible interest on all debts.
what is your monthly disposable income? (meaning, after the bills and necessities are paid, how much $ do you have left?) the first most important step is to sit down and create a budget. when you do a budget, you will be able to see how much $ you have for disposable income. next, it’s generally recommended that you pay off your debts smallest to largest. for you this would mean attacking the $1000 credit card first while making your minimum monthly payments on your furniture loan and car loan. however, in your case, i would probably start with the furniture loan and try to pay it off before january (remember: they’ll backdate the interest for the ENTIRE span of the loan, not just start charging interest in jan). however, DO NOT take out a new LOC (line of credit). this is just adding to the problem because you are not modifying the behavior (aka you’re still adding debt). if you’ve already taken it out, close it. it will be too much of a temptation. some ideas to get things moving faster that you might want to consider is having a rummage sale, pick up an extra job for a couple months delivering pizzas or newspapers, or selling your car for a less expensive used one. i know these ideas may not be so pleasant, but believe me, they help. just remember: YOU CAN DO THIS!!! using ballpark figures for you min monthly payments and interest rates, if you had a monthly disposable income of $500, you could be DEBT FREE by March 2008!!!
Here are some hints that may help you.
Make MINIMUM payments on your lowest interest rate loans.
Make maximum payments, as much as possible, PLUS the interest showing on your statement for higher interest rate loans. That way you are not paying INTEREST on the INTEREST. At the very least, pay the minimum payment PLUS the interest stated.
Generally, always try to pay the LOWEST interest rate no matter what. If you can do so, pay off the higher rate loans with lower rated ones.
Make sure you make all of your payments on time. That will make your credit score go UP.
By the way, NEVER be late with a payment, some credit ‘establishments’ have a universal default clause in the fine print that allows them to jack up the interest rate on THEIR loan if you are late on ANY of your payments, including your car payments, mortgage payments, utility bill payments, or credit card payments. They can jack up your rate without telling you– to 30%, and all because you were 5 days late with a payment.
Pay a LOT of attention to your due dates and always pay them a few days early.
If you have a ‘zero interest’ deal until January, make SURE you pay the balance OFF at least a few weeks before the deal ENDS, otherwise you will have to pay all of the interest that has accrued on that sum of money since the purchase of your furniture was made! The financier that has made the sweet deal to carry your ‘free interest deal’ knows that many people will NOT be able to pay it off and will charge all of the interest accrued and then stick you with a 28% interest rate on the balance. “Free is not FREE” if you miss the deadline.
When you pay the balance off, use the ‘other’ line of credit if you have to. Shop around to credit unions, etc, because If your credit score is good, you should be able to ask for a LOWER interest rate on a ‘line of credit’ before you have to use it.
Sounds like you will be a victim of ever increasing loans forever .If i were you i will pay off all those loans quick and fast and start thinking how to save.
Or maybe its not what you want to hear?
If you were approved for $20,000 through Bank of America, you should easily be approved elsewhere for a similar amount. There are credit cards that offer 0% for 12 months, then after the 12 months, if you still have a remaining balance, it would be a fixed low APR. I recently had a similar situation, and went with blue from americanexpress. Here’s the summary of the card:
* Fee-Free Rewards Program
* 0% APR for up to 15 months
* No Annual Fee
* Low Balance Transfer APR — 4.99% Fixed APR for the life of the balance.
* Blue is your launch pad to standout shopping and entertainment rewards and one-of-a-kind experiences.
For almost all 0% offers there is a paragraph in the contact that states if you don’t have every last dime paid off by the end of the offer you will be charged all of the interest going back to the purchase date. Are you sure this isn’t the case in yours? I would call the finance company to be sure. Obviously if this is the case you want to get this paid off by that date.
Don’t be concerned about your credit rating so much. If you make payments on time you will have good credit. I wouldn’t open the line a credit unless you are disciplined and will not use it. 15.99% apr is a lot of interest. There no benefit to consolidating to one payment. What’s your credit score? Maybe you can move all this debt to a 0% credit card.
There is a great place to go with this. I was in a very similar situation.
This is getting help from real people without the use of banks or credit card companies. Good Luck!
http://www.prosper.com/join/lzc5wh