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Paying off CC with personal line of credit

post #1 of 34
2/3/11 at 4:26pm
Thread Starter 
Is this generally a good idea? I joined a credit union recently and could get a personal line of credit for around 9%. My credit card APR is 19%. Are there any glaring downsides to doing this? It's a relatively small balance and I could pay it off within a year.
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post #2 of 34
2/3/11 at 4:32pm
I too am interested in this.
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post #3 of 34
2/3/11 at 4:35pm
Uh, why are you paying 9% interest? That's kind of retarded.
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post #4 of 34
2/3/11 at 4:36pm
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Originally Posted by Valor View Post
Uh, why are you paying 9% interest? That's kind of retarded.
I just checked, it's 8.75%. That's high? Seems like average from what I know.
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post #5 of 34
2/3/11 at 4:38pm
Does it matter what your interest is if you pay off your balance every month?
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post #6 of 34
2/3/11 at 4:38pm
If you can, you should pay off your debts, because paying 9% interest is way more than you could get with savings unless you were a fairly savvy investor or very wealthy.

If you have student loans odds are the interest rate is way lower on those than 9%.
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post #7 of 34
2/3/11 at 4:40pm
Personal lines are always high as it is harder to underwrite them. Why are you paying 19%? Are you in the penalty box for missing a payment? The ideal move is to pay it off, that not being realistic and assuming credit is available, apply for a 0% balance transfer card. Pay the fees to transfer and be diligent about paying it off over the term of the deal.
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post #8 of 34
2/3/11 at 4:42pm
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Originally Posted by StephenHero View Post
Does it matter what your interest is if you pay off your balance every month?
Huh? I'm carrying a balance and I can only afford to pay slightly above the minimum each month. That is changing soon, as I am collecting a paycheck, but it will stay take a while to totally pay it off.
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post #9 of 34
2/3/11 at 4:42pm
9% is better than 19%. Go with the personal line of credit, assuming no other hidden costs (balance transfer fees, early payment penalties, for example). If you do this, don't use it as an excuse to go out and charge a bunch of new shit on your credit card just because that money has opened up.
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post #10 of 34
2/3/11 at 4:44pm
Live like a monk for 2 months and pay off your credit card debt, and in the future, don't spend money you don't have.
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post #11 of 34
2/3/11 at 4:44pm
If your in a position where you can afford the monthly payment you might consider it. The nice thing with the credit card is that if your low on money you can just pay the minium payment for that month or if you get a large amount of money you can pay off the entire card in a day. I am living off my credit card right now, but I am currently unemployed (have resumes out but no job offers) and going to college full-time and if I didn't have this line of credit, I wouldn't have text books or have food for my fridge. It's a bad situation but it's what I have to do to get through college. My student loans are at 6% and 5% for reference.
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post #12 of 34
2/3/11 at 4:48pm
Quote:
Originally Posted by harvey_birdman View Post
9% is better than 19%. Go with the personal line of credit, assuming no other hidden costs (balance transfer fees, early payment penalties, for example).

If you do this, don't use it as an excuse to go out and charge a bunch of new shit on your credit card just because that money has opened up.

+1. I was going to ask if you were solicited for a 0% balance transfer for any credit cards. You could transfer the balance and pay no interest for a year, then make a dent in it.
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post #13 of 34
2/3/11 at 4:50pm
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Originally Posted by TylerDurden View Post
If your in a position where you can afford the monthly payment you might consider it. The nice thing with the credit card is that if your low on money you can just pay the minium payment for that month or if you get a large amount of money you can pay off the entire card in a day. I am living off my credit card right now, but I am currently unemployed (have resumes out but no job offers) and going to college full-time and if I didn't have this line of credit, I wouldn't have text books or have food for my fridge. It's a bad situation but it's what I have to do to get through college. My student loans are at 6% and 5% for reference.
Yeah, that's a good point. If I wanted to do the line of credit and pay it off within about a year, I'd have to pay around $125/mo. I'm living at home right now so I could easily devote several hundred dollars per month to the CC balance. At that rate, I'd have it paid off in around 6 months. Maybe I should just work on paying it off ASAP.
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post #14 of 34
2/3/11 at 5:15pm
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Originally Posted by Connemara View Post
Yeah, that's a good point. If I wanted to do the line of credit and pay it off within about a year, I'd have to pay around $125/mo.

I'm living at home right now so I could easily devote several hundred dollars per month to the CC balance. At that rate, I'd have it paid off in around 6 months. Maybe I should just work on paying it off ASAP.

The problem with the credit card deal is that they also have some very high penalties for late payments. that also insures that you are assigned to interest rate hell for several months.

Get the line of credit at the credit union. You might not even have a payment due date if you are below the credit line so no late charges. another option would be to call up the credit card operation and get them to lower your rate to 5%. I just got an offer for a zero rate card on both balance transfers and purchases for a year. BTW, most cards hit you with a balance transfer fee of 3% or 4% up front. If you consider that you are really going to pay the deal off in 12 months then the average balance will be 1/2 the beginning balance. so that a 4% fee upfront is the same as 8% computed monthly on the declining balance. And if you pay it off sooner then it is less. It would seem that you must have a balance of $2000 or so. Pay it in 4 months and be done with it. Thank your parents for the free rent that lets you do it as they will appreciate it.
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post #15 of 34
2/3/11 at 6:11pm
Quote:
Originally Posted by Connemara View Post
Huh? I'm carrying a balance and I can only afford to pay slightly above the minimum each month. That is changing soon, as I am collecting a paycheck, but it will stay take a while to totally pay it off.

You got problems then. 9% is your enemy.
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