Averett

I'm considering getting a loan from my bank. I currently have over $15,000 in credit card debt (eeeek x infinity) and about $3,000 left on my car payment. I don't believe that I could do a home equity loan since I don't have a home. So my question is this. What exactly is an unsecured personal loan? Would it make sense for me to get an $18,000 - $20,000 unsecured personal loan to pay off all of my credit card debt as well as my car payments, and leave myself with one monthly payment?

I just want to get a handle on this and be as informed as I can be before I go to the bank and look into this with them.

Thanks for the help

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Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

onetime2

Unsecured personal loans are often very hard to get and even when they are available the interest rates can be outrageous (although probably not quite as outrageous as the credit card rates). Further, many lenders will try to force you into shorter terms which can mean very high payments.

Do your homework on the lenders, make sure the APR is "reasonable" to you, and I'd probably just keep the car loan separate.

Good luck.

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Strive to be more curious than ignorant.

Averett

Thanks

It's through my credit union, and the rates right now are 8.99. My lowest CC APR is 12.99, and the highest is 17.99...

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Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

Yakk

A line-of-credit/loan, even unsecured, is probably a better deal than a credit card.

Your car loan is probably a better rate than any unsecured loan you can get: at least, I assume your car loan is (at least partially) secured against your car. While car's depreciate fast, it is better than unsecured debt from the bank's perspective.

But, get the hell out of credit card debt if there is any way you can possibly do it.

Note: The above advice is based off my knowledge of Canadian credit. I do know that American credit works differently, I just do not know how exactly. . .

But, with Credit Card debt, you are paying both for the convinience of the debt and for the lack of security on it.

(security on a debt means that if you default/go bankrupt, the people lending you the money get first dibs on part of or all the thing you secure your debt against. Morgages are a classic example of secured debt (against the value of the home.))

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

Averett

Thanks Yakk. I'll take the Canadian advice Your explanation of secured/unsecured loans helped a bit. I just hope I can get the loan! It really will help me out a lot.

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Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

NoSoup

One more option you may want to consider is refinancing your car and putting as much debt as you can on that.

However, keep in mind that you probably only want to do this if your car is in good running order and you feel that it will last until the end of the loan term. That way, you can take advantgage of the lowest interest rates, then just make your required payments on the vehicle loan and put as much money as possible towards your credit cards.

As far as unsecured loans go, it probably will be difficult to get one for that high of an amount, at least without going through a finance company (read extremely high interest rates) without a fairly high income and a low debt to income ratio.

If you decide to forgo the loan, concentrate on paying off your cards one at a time, starting with either the lowest balance or preferably the highest interest rates. Once that card is paid off, roll the payments on to the next card. You'll pay them off quicker than you thought you could

If you have any more questions, just ask

Averett

That's good advice. As it is I've been killing myself trying to make high payments on all cards. Maybe I should just make high payments on one card and the minimum on the others for awhile. If I don't get the loan I think I'll do something like that.

I really don't want to refinance my car. I'll be done paying that in about a year so that'll be extra money to go to the credit cards.

Thanks for the advice

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Absence is to love what wind is to fire. It extinguishes the small, it enkindles the great.

Yakk

You'd refinance your car because the rates on the car will be much lower than on your credit card: the car loan will be somewhat secured against an asset (the car).

When you refinance the car (increase your car debt), take the money you get and pour it into your credit cards. Total debt stays the same, it just changes flavour.

Think of it as moving debt from a high % debt (credit card) to a low % dept (car debt). Your total monthly interest is now lower, which means you have more money to spend on reducing your debt every month.

Damn, that NoSoup knows his stuff. =)

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

NoSoup

Lol, I thank you very much

It seems that you also are familiar with the finance industry...

Yakk

Averett, apologies for hijacking your thread. I'll keep it brief.

Not in a formal capacity.

4 to 5 friends of mine recently bought a house/condo, and I've spent time learning about their trials and tribulations.

I had an econ teacher that used to tell stories about how he played with credit (apparantly, managed to bootstrap a credit card to "buy a car" levels).

A positive net worth has made me have to work at learning how managing money works on a practical level.

Then there is also my hobby interest in the theory of economics (I'm only reading undergraduate texts as yet, but after another 2 I'm gonna seek out some meaty stuff).

Possibly I should prefix my posts here with "I Am Not An American, Nor Am I A Finance Industry Professional".

IANAANAIAFIP!

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

j8ear

Certainly some wise sages offering advice on this thread.

From my own personal experiences:

1. You can often renegotiate high debt credit card APRs by taking your debt elsewhere on zero APR transfers. Huge amounts begin to catch up fast as it's a shell game, really. None the less, I've successfully turned a 14.99% 5k debt into 0.0% for a year, and I didn't have to do any transferring what so ever. Just some sweet talking on the phone.

2. Avoid 'debt cosolidation' schemes at all costs. They drastically reduce a persons paper creditworthiness, and often lead to unforseen future debts resurfacing. If your CU is going to throw you 20k at 8.9% over 2 years, that's about 920 per month, and that might make sense over 10, 12, 14 or 21.99%APR credit cards. Make sure it is not a debt consolidation loan. They could very well make you insure all your household effects, after you inventory it for them, and use it as collatoral. Could dig deeper into your car ownership too.

3. Your car is likely worthless. I don't say this to disparage you, but instead because almost all cars are. DO NOT borrow against your car. Borrowing against a car has insurance requirements which are unreasonable and unneeded. Total cost of using an automobile as collatoral is rediculous, imho. Return is minimal. Cars are the worst investment every single one of us makes. Exponentially so if you buy new cars.

4. Debt is a burden, with a huge financial cost. The numbers when everything gets washed out are mindboggling. $350.00 for a dinner for two or $1400.00 for your $550.00 tv. $40,000 for your 27k car

5. You must make wise decisions now to address your growing debt burden. Make a budget, earnestly pick away at your debt with as much as you realistically can, and eliminate it.

Your credit worthiness is one of your defining characteristics in our society. Airlines, credit cards, lawyers, law enforcement, insurance providers ALL use this to evaluate and rate you. You do not want to be put on any lists.

A steady mind to you, fair maiden. I hope someday to learn of you listening to happy songs. Closer to fine comes to mind

best,

-bear

Forgot to add. Make sure to make at least your minimum payment on ALL YOUR CARDS. DO NOT CHOOSE TO neglect one or more of them.

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It's alot easier to ask for forgiveness then it is to ask for permission.

GreyWolf

Averett

If you can get an unsecured loan, take what you can get (assuming it is a lower rate than any of your credit cards), and apply it to the credit card debt, highest percentage rate first, and work your way down (in interest rates). If you can, eliminate ALL the credit card debt. As most have pointed out, unsecured loans tend to be higher than secured loans, but right now banks and credit unions are desperate to lend money to creditworthy customers. No one is buying, and the cost of capital is low.

Like credit cards, the unsecured loan is a consumer loan, payable at any time without penalty. Pay it off as fast as you can... don't just string out short-term credit card debt over 15 years because the CU will let you. If you can, make extra payments. Remember, ever extra dollar you put on the loan EARNS you that interest rate in AFTER-TAX dollars. That means you are getting the equivalent of an investment return equal to the interest rate on the loan times your marginal tax rate (on an 8% loan, with a marginal state + federal tax rate of 25%, you are earning 10% on every extra dollar).

Finally... pay off any new credit card bill every month IN FULL. Under no circumstances should you start to build up credit card debt again. I used to give a 15-20 minute lecture to people I was counseling just about the use of their credit cards, usually restricting them to just one.

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The secret to great marksmanship is deciding what the target was AFTER you've shot.

The_Jazz

Uh, GreyWold, do you realize that you're giving advice about 5 years too late? This thread got bumped by a spammer.

__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo

GreyWolf

lol... no, I didn't even notice that... sorry about that :P

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The secret to great marksmanship is deciding what the target was AFTER you've shot.

The_Jazz

Nothing to be sorry for. I just didn't want you to think less of Averett for not crafting a well-deserved "thank you". She's not around much anymore (although she occassionally shows up). You obviously read the OP but missed the date.

__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo

Halanna

Wow I did too, thinking while I'm reading, why are people recommending checking the APR on an unsecured personal loan? What bank in the USA is still writing those? Until I got to your post.

Interesting to read back though and see how the economic climate has changed in a relatively short period of time.