Mothering Forum banner

1 - 11 of 11 Posts

·
Registered
Joined
·
6,123 Posts
Discussion Starter #1
Besides paying it off, that is <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/winky.gif" style="border:0px solid;" title="Wink"><br><br>
We owe about $5000 on the birth of our son. Before the pregnancy, we took out an equity line of credit to pay the medical bills (and get the pre-paid rates). So that is where the debt is now. It is not entirely locked-in (a portion is, but not all.....had to pay different providers at different times, and have to pay each time to "lock in" a rate). Dh, who is handling the bills right now, says we are being charged 8.25% interest at this time.<br><br>
Dh would like to transfer this balance to a low-interest credit card (we get offers in the mail every day). We have no credit card debt, so I'm not sure how I feel about that. Yes, the interest will be lower....but will it hurt our credit? (we have excellent credit). Are there hidden risks with the low interest credit cards?<br><br>
FTR, we have a lot of equity in our home, and this is our only equity loan. We also have 14 mo left on a car loan, and I have a small student loan payment.<br><br>
What is the smartest plan?<br>
Thanks!
 

·
Registered
Joined
·
2,606 Posts
No matter what you do, what can you afford to pay toward it each month? If you are paying off only $20 at a time, it might benefit you to move it to a lower APR. If you can send $500 a month, you will pay it off in less than a year. The interest paid will be relatively insignificant in the long term, and you won't have to mess around with a cc.
 

·
Registered
Joined
·
6,123 Posts
Discussion Starter #3
Right now we are paying about $60/mo on it--the minimum payment. We can not afford to pay more at this time, but will be able to in about 14 months (when the car is paid off). We might even be able to pay more in the fall, but certainly not this summer.<br><br>
One more thing.....there is the possibility that we could move out of this area in 12-24 months. We are exploring that option. If we did that, we would obviously pay it off at the time of sale.<br><br>
So many things to consider....I should add that, in my gut, I just feel more comfortable with a home equity loan than a credit card balance.
 

·
Registered
Joined
·
2,485 Posts
What interest rate is the car loan and can you pay it off quicker if you just pay the min. on the med. bills? In all honesty you may have been better off waiting and paying the med. bills as they came in b/c they usually have a low or no interest rate. I'd look at your monthly bills and try to squeeze out as much as you can to pay toward both the car and the med. bills/LOC. How much do you actually owe on your car? If you can figure out a way to pay it off quicker, you can add the car payment amt. to the LOC payment. There have been some CC companies that offered that low/no rate, and then when you transferred they bumped it up immediately due to your credit score/debt-income ratio. I have heard this happen to several people, and while I don't know the exact circumstances, it makes me leary of all those type offers.
 

·
Registered
Joined
·
6,123 Posts
Discussion Starter #5
<div style="margin:20px;margin-top:5px;">
<div class="smallfont" style="margin-bottom:2px;">Quote:</div>
<table border="0" cellpadding="6" cellspacing="0" width="99%"><tr><td class="alt2" style="border:1px inset;">
<div>Originally Posted by <strong>Free Thinker</strong> <a href="/community/forum/post/7995936"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">In all honesty you may have been better off waiting and paying the med. bills as they came in b/c they usually have a low or no interest rate. .</div>
</td>
</tr></table></div>
I considered that, but I think we will fare better this way. When I had dd (at the same hospital....but 6 years ago), our hosp bill alone was $6000+ (I had maternity ins with that birth). By prepaying (and self-paying), I paid the hosp only $1700 this time around. I would have had a 40% discount if I selfpaid later, but that is about $3600--almost double. Also, the OB expected to be paid in full by the birth, so we had little flexibility there--but got a $900 discount for paying early.<br><br>
I don't know. I think we would pay less interest on a low interest credit card....but I just hate the idea. How badly would it hurt our credit? Esp since we are considering moving, and may be taking out another mortgage in a couple years.
 

·
Registered
Joined
·
1,285 Posts
we have about 5K on a 0% card for the next 13 months. We've done it before, and it works out well ONLY if you never, ever use the card. If you ever use it, the payments you make automatically come off of the 0% balance and never off of whatever you charged onto it- that accrues interest until the entire 0% balance is paid. Make sense? So we never use the card, we just make the payments, and will pay it off at the end of the year. I would only recommend it if you're disciplined enough to use it to your advantage.
 

·
Registered
Joined
·
2,520 Posts
I second Vanilla. A few years ago I started my own business and had to make a fairly sizeable investment up front. I kept transferring the balance to credit cards with 0% interest, no balance transfer fees, and no annual fee. Over the long run I ended up paying about $100 in interest for the couple of times I forgot to switch it over before the promotional time ended (6-12 months, depending on the card).<br><br>
But like she said, you can't use the card for anything else. I always paid $100/month, and more when I could afford it, then we finally paid off the balance with our tax return a few years ago. I never made a profit with the business, but I did almost break even. <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/shrug.gif" style="border:0px solid;" title="shrug"><br><br>
It didn't affect our credit negatively at all. We have a very high score, hence all the 0% offers coming in on an almost daily basis!
 

·
Registered
Joined
·
8,198 Posts
Maybe you could use one of the 0% financing cards and then cut it up when you get it. That way there are no temptations to use it.<br><br>
You probably know this already, but also read the fine print. A lot of these offers have some sneaky clauses in them that could really cause some financial hardship. Like for example, most of them will state that if you are late on just one payment, the interest rate increases to like 15.99% or something. Some say you have to have at least one transaction per cycle or per year to maintain the account. Etc., etc., etc. You have to be so much more careful to toe the line when you use these offers. But if you are paying out nearly 9%, it certainly sounds like it might be worth it, even if your credit score takes a little ding.<br><br>
Good luck!
 

·
Registered
Joined
·
1,417 Posts
Those credit card offers are often so sneaky that they wind up costing big time $. For example if you are even one day late with the payment (slow mail, maybe?) they can ususally shoot up your interest rate to something INSANE like over 20%. Even credit inquiries on your account can change your interest rate. Have you looked into getting a home equity loan (not a line of credit). the interest rate is usually less (I just got one for 6.5%). If your car loan is at a high interest and you have enough equity in your house, you might even save money by including the car loan in the home equity loan with the medical bills. If you could save enough by doing so, maybe you could put some extra toward the debt each month, and retire it faster. If you do decide to go with the credit card (and I have done it myself and it worked, but i REALLY had to stay on top of it and I believe they are worse now), maybe you could put some of the loan on the card, rather than the whole thing because you would not want to run the risk of having all of that $ on a high interest credit card if you couldn't finish paying it before the end of the low interest rate term. Having too many credit cards or opening up many accounts in a short time can hurt your credit scare, but getting one new one will probably not do too much damage.
 

·
Registered
Joined
·
6,123 Posts
Discussion Starter #10
<div style="margin:20px;margin-top:5px;">
<div class="smallfont" style="margin-bottom:2px;">Quote:</div>
<table border="0" cellpadding="6" cellspacing="0" width="99%"><tr><td class="alt2" style="border:1px inset;">
<div>Originally Posted by <strong>EmsMom</strong> <a href="/community/forum/post/8000736"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Have you looked into getting a home equity loan (not a line of credit). the interest rate is usually less (I just got one for 6.5%). If your car loan is at a high interest and you have enough equity in your house, you might even save money by including the car loan in the home equity loan with the medical bills. If you could save enough by doing so, maybe you could put some extra toward the debt each month, and retire it faster. .</div>
</td>
</tr></table></div>
This might be a good idea....although I would hate to be paying on the car for a longer time. I would just have to pay extra in the beginning, perhaps, to make sure i pay off the car loan principle in a timely fashion. I think we are paying 8% on the car, too, and owe 3-4 k on that.<br><br>
I just don't trust the credit card thing, I guess. Although, if they did shoot up the interest, I could always pay it off with the LOC (and be back to square one, lol).
 

·
Registered
Joined
·
1,513 Posts
I've been able to make out on the 0% or low apr credit cards, but make sure you read the fine print. Like Vanilla said, don't use the card for anything else. Also, make sure you pay EVERY payment on time or they might "revert" you to the 25% interest rate. And make sure you can pay it all off before the 0% or whatever deal ends. If you can do all of those, you should be okay using the cc. It doesn't seem to impact your credit, from what I can tell.
 
1 - 11 of 11 Posts
Top