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Credit Experts, line of credit question?

alkemyst

alkemyst

No Lifer
I am looking to buy a house in February. I have been improving my credit to get the best rate possible.

I have about 10k in CC balance left and just recieved paperwork that could give me an $8000 line of credit for 21.040% APR. I have a few 24% cards from college, and a 19.99 one, my others are below 14% but I don't have balance transfer ability.

I was thinking since this is a line of credit (you get checks, not a card) it's a lot more versatile than CC's in the future (I use my CC"s for large purchases now due to the protection they offer, and my debit for all smaller ones).

I was thinking use it to pay off my CC's except the low APR ones, then pay it off and use it for emergency only.

I am going to call around monday for better deals, but this is basically an unsecured personal loan and I think at a decent rate.

 
21% for a line of credit, even unsecured is utterly bizzare. If it's a good bank and your credit rating is half fast decent, it should be prime +1 or +2 depending on your bank.

Christ, my friggen Visa card is 9.9%
 
Originally posted by: bernse
21% for a line of credit, even unsecured is utterly bizzare. If it's a good bank and your credit rating is half fast decent, it should be prime +1 or +2 depending on your bank.

Christ, my friggen Visa card is 9.9%
Click to expand...

That's a great rate assuming you really have a limit ($2k or better) and it's not a treaser rate.

From BankRate.Com today for CC's

Standard Card Fixed Rate: 13.30% Variable: 13.53%
Gold Card Fixed Rate: 11.48% Variable: 11.52%
Platinum Card Fixed Rate: 9.95% Variable: 11.87%

A CC is WAY different than getting an account of free money you can use with checks though.


 
Originally posted by: alkemyst
Originally posted by: bernse
21% for a line of credit, even unsecured is utterly bizzare. If it's a good bank and your credit rating is half fast decent, it should be prime +1 or +2 depending on your bank.

Christ, my friggen Visa card is 9.9%
Click to expand...

That's a great rate assuming you really have a limit ($2k or better) and it's not a treaser rate.

From BankRate.Com today for CC's

Standard Card Fixed Rate: 13.30% Variable: 13.53%
Gold Card Fixed Rate: 11.48% Variable: 11.52%
Platinum Card Fixed Rate: 9.95% Variable: 11.87%

A CC is WAY different than getting an account of free money you can use with checks though.
Click to expand...

Most Prime banks such as MBNA or Citi give you balance transfer checks for the whole amount of your line of credit at 0% APR for 6 months or a year. Then you are at their standard rate. The rate on my Merrill + is 5.9% fixed and the rate on my Citi is 7.99 Variable. Highest rate card I have is an Amex with a 12.99.
Mos
 
Your idea is good (using the LoC to pay off high interest CCs) but your interest rate on that LoC is ridiculous - try again at another bank.
 
A CC isn't horrible if it's short term. I use my CC to help me fix up houses. I never keep the debt long term though.

-Amp

p.s. 20% sucks, though sometimes you can get more credit if you'll take a higher rate
 
Originally posted by: Mill
Most Prime banks such as MBNA or Citi give you balance transfer checks for the whole amount of your line of credit at 0% APR for 6 months or a year. Then you are at their standard rate. The rate on my Merrill + is 5.9% fixed and the rate on my Citi is 7.99 Variable. Highest rate card I have is an Amex with a 12.99.
Mos
Click to expand...

I had an MBNA card, my wife uses Citi for the international banking...I will call them and see what I can do.

Ideally I'd love to transfer my $10k to a 6 month 0% interest plan...I send $2k a month to credit cards now.
 
Originally posted by: alkemyst
Originally posted by: brxndxn
a loan at 21.040 APR??? WTF are you smoking?
Click to expand...

what kind of rates are you used to for a *personal* loan/unsecured line of credit?
Click to expand...

im 22 and i got one at 13%, had a cc with 1100 balance and a mortgage

21 is insane. 13 might be a bit high, im not sure, but 21 is just nuts.
 
Originally posted by: xSauronx
Originally posted by: alkemyst
Originally posted by: brxndxn
a loan at 21.040 APR??? WTF are you smoking?
Click to expand...

what kind of rates are you used to for a *personal* loan/unsecured line of credit?
Click to expand...

im 22 and i got one at 13%, had a cc with 1100 balance and a mortgage

21 is insane. 13 might be a bit high, im not sure, but 21 is just nuts.
Click to expand...

at 23 (10 years ago) I had a line of credit and a mortgage at like 7%....with a house it's easy.

if I had a home now, I imagine 6-7% would be easy.

I am talking unsecured.
 
Good lord, someone is still paying >20% CC interest.

I throw away all the offers thats not 0% and I get plenty of offers for ~2.99% for the life of the balance.

I just put all my balances in those 0% for 6-12 months and when those are up, I just apply for other cards at 0% introductory and start again from there.

I even got a 0% from Citibank for the life of the balance but thats very rare.
 
Originally posted by: CTrain
Good lord, someone is still paying >20% CC interest.

I throw away all the offers thats not 0% and I get plenty of offers for ~2.99% for the life of the balance.

I just put all my balances in those 0% for 6-12 months and when those are up, I just apply for other cards at 0% introductory and start again from there.

I even got a 0% from Citibank for the life of the balance but thats very rare.
Click to expand...

i have CC offers but they either don't allow balance transfers, or if they do it's short lived.

If I needed a new card it'd be easy...if I do that new card and want a balance transfer, 20%+

I have some high APR cards. I got them without income in college, like 25%, I wasn't working though. i had a nice bank account and a good credit score.

 
Originally posted by: alkemyst
Originally posted by: bernse
21% for a line of credit, even unsecured is utterly bizzare. If it's a good bank and your credit rating is half fast decent, it should be prime +1 or +2 depending on your bank.

Christ, my friggen Visa card is 9.9%
Click to expand...

That's a great rate assuming you really have a limit ($2k or better) and it's not a treaser rate.
Click to expand...
Fixed rate, $35000 credit limit.... although the most I've ever had on it was $2K. Paid off everymonth so the rate doesn't mean a hill of beans to me regardless.
 
1) Go to a real bank and get a real loan. You can easilly beat the 21% APR. I was seeing loans in the 7% range - I don't know if you'd qualify for that though.

2) You really need to rethink your CC use.
 
Wow, for once i feel lucky.. My LoC is 6.5% on 25k, and my Visa is 9%.

We also just moved into a new home, and have that mortgaged at 4%
 
Originally posted by: dullard
1) Go to a real bank and get a real loan. You can easilly beat the 21% APR. I was seeing loans in the 7% range - I don't know if you'd qualify for that though.

2) You really need to rethink your CC use.
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I have never needed a personal loan, however, this 'offer' was interesting.

where did #2 come from?

I used them most while in college. I wasn't working so they were used to supplement income. Currently I use cards for their protection on purchases and usually transfer the money straight to them from my bank account. I do not add to my balances currently.

If I am down to my last $10k on credit, however, I am also saving for a house in February or so, about $2k goes to the cards each month and then I put away about that as well.

About next year this time I should be down to mortgage and school loans only as far as any type of 'credit/loans' go.

 
Originally posted by: alkemyst
If I am down to my last $10k on credit, however, I am also saving for a house in February or so, about $2k goes to the cards each month and then I put away about that as well.
Click to expand...

Why February? Why not pays those cards off as fast as possible and *then* start saving for your house?

Interest is killing you man. Make it go away as fast as possible unless you've got some utterly incredible investments that are paying you more in interest then your cards are charging you.
Seriously.
 
Originally posted by: alkemyst
where did #2 come from?
Click to expand...
You have multiple credit cards with multiple balances and you use them as loans. That is not a healthy way to use credit cards.

Option A) Student loans at <3% interest, with tax deductions, grace periods without interest, and looked at favoribly by mortgage bankers.

Option B) 14%+ CC loans plus fees and looked at negatively by mortgage bankers (your credit score gives them a range that they can offer you, but the banker has the personal choice to give you at the top, middle, or the bottom of that range).

Clearly, you should have pushed option A a lot harder back in college. But that was the past, now you have to move on with that mistake. You are potentially making that mistake worse. Most credit cards charge interest the day you make a purchase if you didn't pay off last months bill in full. I'll make up some numbers as an example. If this doesn't apply to you exactly then I'm sorry; hopefully it'll help another person on this forum.

Suppose your 19.99% credit card has a $500 balance and has the best customer protection. Customer protection is one of the best reasons to use a CC, so suppose you use that card for a $1000 purchase. Suppose a month later the bill comes and you immediately pay off that $1000. Guess what, since you carried a balance from last month, you just paid $16.66 interest on that $1000 purchase in addition to the $8.33 interest on that $500 balance (this is true for most CCs, there might be a rare exception). Total: $24.99 in interest. But instead, if you had used your $1000 in the bank and paid off the $500 first, waited for a $0 bill, then made the $1000 purchase you'd have paid no interest at all. $24.99 isn't much. But multiply that by all the big purchases you've made and by all the months since you started carrying a balance. It adds up quickly.
 
Originally posted by: bernse
Originally posted by: alkemyst
If I am down to my last $10k on credit, however, I am also saving for a house in February or so, about $2k goes to the cards each month and then I put away about that as well.
Click to expand...

Why February? Why not pays those cards off as fast as possible and *then* start saving for your house?

Interest is killing you man. Make it go away as fast as possible unless you've got some utterly incredible investments that are paying you more in interest then your cards are charging you.
Seriously.
Click to expand...

Well since I am living in reality here and not playing armchair financial planner I will explain. I really think you don't know financial planning at all, esp with putting off getting into a house...but such is life.

1) my lease is up in February. Not buying in Feb will then put me out to Oct on a short term lease. You understand how a lease works and the need for a place to live I hope.

2) getting into a house is by far one of the largest equity growing investments right now. Things are definitely not getting cheaper. The house next door was relisted within the same day of selling at $100k higher and is still getting constant traffic looking at it. If I kept my house in 1995 here, instead of allowing it to go with my divorce (I was looking at going back to renting as it's simple and you don't have to take care of anything), I would be sitting on about $500k in equity right now. Making $500k in 10 years off $40k down to me is a no-brainer.

3) how much interest is $10k going to amount to over 6 months anyway (about $600-700). My 'bad cards' have about half of it on it, my other cards are low apr. They amount to about $50 in interest charge over single digit interest rate cards. $50 is not breaking my pocket at all.

this thread is getting way off on a tangent that has nothing to do with what unsecured credit lines are costing today. I am not talking CC's, home equity lines nor mortgages.

 
Originally posted by: dullard
Originally posted by: alkemyst
where did #2 come from?
Click to expand...
You have multiple credit cards with multiple balances and you use them as loans. That is not a healthy way to use credit cards
Click to expand...

hmmm how so. I used them in the past as that. Like I said currently (for the last 3 years at least since I graduated a second time) I have not added to my balances in any given month.

Option A) Student loans at <3% interest, with tax deductions, grace periods without interest, and looked at favoribly by mortgage bankers.

Option B) 14%+ CC loans plus fees and looked at negatively by mortgage bankers (your credit score gives them a range that they can offer you, but the banker has the personal choice to give you at the top, middle, or the bottom of that range).
Click to expand...

I don't know what you are talking about, I have been in the mortgage industry since a child, my father has been in it for 30+ years...we don't care what rates you have on credit cards really at all. It has to do with the front and back income ratios as well as the loan payment in relation to what the borrower is currently used to paying.

Most normal banks I know of including the mortgage company I am working at have a definite rate out there for a normal borrower. (660 middle credit score or better usually will get that rate if all other things work)

Clearly, you should have pushed option A a lot harder back in college. But that was the past, now you have to move on with that mistake. You are potentially making that mistake worse. Most credit cards charge interest the day you make a purchase if you didn't pay off last months bill in full. I'll make up some numbers as an example. If this doesn't apply to you exactly then I'm sorry; hopefully it'll help another person on this forum.
Click to expand...

I was in college about 9 years. There are only so many loans you can get in a given period of time...mostly the first few years I qualified for not much of anything due to my parent's income. I elected to do college on my own though, I didn't want them paying for it.

Suppose your 19.99% credit card has a $500 balance and has the best customer protection. Customer protection is one of the best reasons to use a CC, so suppose you use that card for a $1000 purchase. Suppose a month later the bill comes and you immediately pay off that $1000. Guess what, since you carried a balance from last month, you just paid $16.66 interest on that $1000 purchase in addition to the $8.33 interest on that $500 balance (this is true for most CCs, there might be a rare exception). Total: $24.99 in interest. But instead, if you had used your $1000 in the bank and paid off the $500 first, waited for a $0 bill, then made the $1000 purchase you'd have paid no interest at all. $24.99 isn't much. But multiply that by all the big purchases you've made and by all the months since you started carrying a balance. It adds up quickly.
Click to expand...

I don't know what cards you have, but the first month of any purchases I have made have never had a finance charge. Only when the balance enters that second bill period does it get interest added. I have one card that is always 0 balance that I use for my purchases. It's got a terrible rate on it (I think 24.99), but I paid that one off first. I use it for $2000 in purchases, I pay online $2000 that month, my next statement is $0.

I don't know of cards that charge on non-carried balances. Perhaps it could be that I usually pay my bills before they arrive though...usually within a few days of purchase.

However, I don't carry any new balances.
 
Originally posted by: alkemyst
Originally posted by: bernse
Originally posted by: alkemyst
If I am down to my last $10k on credit, however, I am also saving for a house in February or so, about $2k goes to the cards each month and then I put away about that as well.
Click to expand...

Why February? Why not pays those cards off as fast as possible and *then* start saving for your house?

Interest is killing you man. Make it go away as fast as possible unless you've got some utterly incredible investments that are paying you more in interest then your cards are charging you.
Seriously.
Click to expand...

Well since I am living in reality here and not playing armchair financial planner I will explain. I really think you don't know financial planning at all, esp with putting off getting into a house...but such is life.

1) my lease is up in February. Not buying in Feb will then put me out to Oct on a short term lease. You understand how a lease works and the need for a place to live I hope.
Click to expand...

All financial advisers are armchair advisors. 🙂

Listen friend. I'm trying to help you with advice. You're speaking to a person who's house is getting paid off within the next year and I am presently virtually debt free (with the exception of my mortgage) so believe it or not, I am not a total retard and in a slightly better financial position than you.

If you say you have $10K on your cards AND you can put $2K per/month towards your cards and do all this and still save for your house, you could have those cards paid off in how long if you put everything towards them in what..3 months? 4 months? Man, pay those things off as soon as you can. Even if your interest you're paying is going to be between (lets say) $700-$1000, that's still money you're throwing away. Then, if you want a place in February, you still have basically Nov, Dec, Jan, Feb to save all your monies for your down. As well, you'll have a new months with no credit card balances on your credit report which will almost certainly improve your FICO score and give you a probably qualify you for a better mortgage rate to boot.

Unless there is something else you can't pay off that you haven't mentioned?
 
you are making too many assumptions to offer the advice you are.

My goal was to still pay off my debts, however; having $8000 I can write a check from if I ever got into a jam was an interesting concept.

Saying you are paying off a home doesn't really tell us a whole lot either, nor saying you are 'virtually' debt free. Also of course there is other money going places than just the $4k I am splitting between credit and savings. Banks will look at how long money has been in an account. I could pay off all my cc's first then save for like two-three months, but having a growing savings account over a history of a year, while paying debts that surpass the future mortgage I am looking at help my situation.

Currently I pay $500 for rent, it's a steal in this market. However, that is going to work against me if I had that as my only responsibility each month. I will be left with a $220 school loan payment and that's it at the time I do a mortgage.

All that said, even in the financial situation I am in currently, I would have had my house paid off I bought about 10 years ago about a year or so ago. Mine would be worth $500k roughly now in a $325k average market.

I use my money wisely, however; I don't know the line of credit market for unsecured loans.

That is my question here.
 
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