| P2P personal loans to pay off credit cards |
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indebted
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| P2P personal loans to pay off credit cards |
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Hi - I'm asking for this advice a bit too late, but now that I have the $ I'm a bit nervous and could use some input.
I took out a peer to peer loan from Lending Club to pay off 2 credit cards - one had a balance of 12,758 at 16.99% and the other 2,141 at a promotional 0% interest rate, but the credit limit was only $3,000. The interest rate on the loan is 13.99%. I was paying at least $600 monthly to these credit cards previously - my payment on the loan is $465. I have not used my credit cards in years - a while ago I opened these last two at 0% interest rates to consolidate and transfer balances from other cards. I now use only my corporate Amex card, which I pay in full each month.
It seems to make sense, assuming I'll continue to have a job and that my salary will continue to go up and I'll continue not to use my credit cards. However, I can't figure out what it will do to my credit score/ profile. I'm planning to leave the cards open with $0 balances - one has a $25K limit and the other $3K.
Does anyone know how banks/ the credit agencies view p2p lenders? Will the presence of this loan on my credit report lower my score, make it hard to get a mortgage if I wanted to one day, etc. ??
Thanks for your time!
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Tue Jun 21, 2011 5:19 pm |
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littleroc02us
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The best way is to pay down all of your debt first and worry about credit score later. Unfortunately to have a credit score you have to borrow money and pay it back, so you need to play the game. All you have to do to have a good credit score is to keep one cc and put a little bit on each month and pay it off each month. As for bills just pay for them with auto bank tranfers and don't miss any payments. It will take a few years, but it works.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jun 21, 2011 5:44 pm |
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coaster
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"Paid as agreed" on your loan is positive.
Unused credit is positive.
I don't really see anything negative in your description of your situation.
You might be able to find a more definitive answer on the www.myfico.com website.
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Tue Jun 21, 2011 6:03 pm |
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oldguy
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You didn't actually :pay off credit cards", you just moved the debt around. Your new loan is for about $14,800, probably 40 months. If you stuck with your $600/m payments, it would knock about 12 months off of the loan.
As for the credit scores - it only matters if you plan to take out a loan - and hopefull you won't do that. I always borrow/repay in a way that makes the most money for me, I don't 'game' th escoring system. And yet my scores stay above 800. I have only one cc, I use it for everything, I never use cash - but I hae never borrowed money from them, I pay it when due.
I would close theh cc's that you don't need/use - and pay the $600/m. That 14% rate is brutal, you will be poor forever if you borrow at those rates.
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Tue Jun 21, 2011 6:04 pm |
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indebted
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oldguy - but the 14% rate is better than the 17% rate my credit card was charging me, no? - I was paying about $100 more than the minimum payment due each month and the balance barely went down each time....in my view, I now have a definitive end date on this debt at least, at a lower rate. I would love to have paid the credit cards off in full and be debt-free, but I don't have that kind of money at my disposal. I do however plan to pay the loan off sooner via bulk payments when I can (with bonuses, tax refund, etc.).
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Tue Jun 21, 2011 7:22 pm |
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littleroc02us
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quote:
Originally posted by indebted
oldguy - but the 14% rate is better than the 17% rate my credit card was charging me, no? - I was paying about $100 more than the minimum payment due each month and the balance barely went down each time....in my view, I now have a definitive end date on this debt at least, at a lower rate. I would love to have paid the credit cards off in full and be debt-free, but I don't have that kind of money at my disposal. I do however plan to pay the loan off sooner via bulk payments when I can (with bonuses, tax refund, etc.).
Why are you getting tax refunds? That's money the govt is borrowing from you tax free and you aren't making anything off of it while they use it for their pork projects.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jun 21, 2011 7:36 pm |
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oldguy
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quote:
Why are you getting tax refunds?
LOL - my thought exactly, you beat me to it. 
The average 2010 refund was $3000. Now why in the world do people overpay their taxes by $250/mon all year so that they can have their own money refunded to them the following Feb or March? Even scarier - some of those people pay HRBlock an extra $50 to get their refund early.
indebt - fix your W4 at work, get that extra $250/m in your paycheck, and use it to pay your cc's during the year.
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Tue Jun 21, 2011 8:39 pm |
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indebted
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How can you make statements like that when you have no idea what I do or how I'm paid?
I was asking for concrete advice, not condescension. You have absolutely no idea how or why I'm in the financial situation I am, and yet you somehow feel entirely justified in providing snarky, holier-than-thou remarks. Being financially secure does not make you a better person than me - are either of you aware of that I wonder?
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Tue Jun 21, 2011 8:48 pm |
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oldguy
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quote:
You have absolutely no idea how or why I'm in the financial situation I am, How can you make statements like that when you have no idea what I do or how I'm paid?
That's right, we don't know about your situation - you haven't provided any concrete numbers about income, what you borrowed the money for, etc. So that's why we must answer based on averages - eg, the average 2010 refund was $3000.
So tell us - how much was your refund? And what did you borrow the $15,000 for? And do you have a good income?
And then we can give you concrete answers.
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Tue Jun 21, 2011 9:10 pm |
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oldguy
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Cash: $ 309.30
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quote:
You have absolutely no idea how or why I'm in the financial situation I am, How can you make statements like that when you have no idea what I do or how I'm paid?
That's right, we don't know about your situation - you haven't provided any concrete numbers about income, what you borrowed the money for, etc. So that's why we must answer based on averages - eg, the average 2010 refund was $3000.
So tell us - how much was your refund? And what did you borrow the $15,000 for? And do you have a good income?
And then we can give you concrete answers.
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Tue Jun 21, 2011 9:59 pm |
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indebted
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my income is about 90K, but nearly 30K of that comes in bonuses throughout the year, so my take home pay is only about 60K. I have a student loan payment of about $350 per month as well, and I live in the most expensive city in the country. I borrowed the money to pay off a high interest rate credit card, as I said. My tax refund has nothing to do with this. I merely wanted to know if p2p lenders are viewed negatively for any reason - the way credit card "consolidation" companies are.
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Tue Jun 21, 2011 10:35 pm |
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oldguy
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quote:
I borrowed the money to pay off a high interest rate credit card, as I said.
No - I meant what did you use the original cc loans for? Ie, can you sell any of the things that you bought?
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Tue Jun 21, 2011 10:51 pm |
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indebted
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No - the credit card debt accumulated because I was attempting to live at a young age in a city that was too expensive/ rents far too high for my means. I don't own anything - I was simply living off of credit cards for a long time, and have been carrying and consolidating that debt from 0% card to 0% card since I began earning a higher income and no longer needed to live off the cards, but still couldn't afford to pay them off in full. I paid $8,000 of it down with a loan from my 401(K) which has about $21K in it now, not including the outstanding loan. But I'm not eligible for another 401k loan until this loan is paid off. (about 6500 left, taken from my paycheck monthly).
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Tue Jun 21, 2011 11:23 pm |
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oldguy
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Well, the current $90,000 annual income puts you in a good place to fix your mistakes. If you're single, your Fed Income Tax is about $16,000/yr, your SS/Med is $6900/yr - so that leaves about $67,000 after taxes. You probably invest $7000/yr of that $67k into your 401k?
The p-to-p & 401k loans are about $23,000. The SL must be in the $50k range? Anything else - car loans? Keep the loans that are 'long & low', long term, low interest (probably your SL) and prepay loans that are 'short & high' (such as the p-to-p).
IMO you need to hang on to the $21,000 401k. That $21k (@11%) will be ~$500,000 in 30 yrs. If you are adding $7000/yr, that will be $1,500,000 more. That $2M is where your wealth will be as you near retirement, so it is important for your far-future to protect it. And if you skip some years, that opportunity is lost forever,
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Tue Jun 21, 2011 11:54 pm |
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indebted
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Thanks oldguy - I'm not sure how you come up with $2M for the projected value of my 401k? I think I'm contributing more like $6,000 per year at the moment. But I've used Fidelity's projection tools to see where i'll be in 30 years and it comes up with about $610K total.
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Thu Jun 23, 2011 5:33 pm |
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