[thechat] Hey Buddy, Can you Spare a Dime?

Fred Jones fredthejonester at gmail.com
Thu Jul 16 12:34:22 CDT 2009

> What other fees are required to issue the loan? Points? Are you sure
> it's not secured against anything?

Good questions. On the phone she said no fees and no security.

> I would be highly suspicious of this, because the way you lay it out
> is almost a loss to the bank after inflation. Certainly it is a loss
> compared to inflation plus what they'd get if they put that money into
> a fixed income investment with much much lower risk than lending to
> you

Hmm, interesting point.

> There are surely fees or some other catch. That said, as long as it is
> unsecured and the interest rate is less variable, it still may be
> better than your current credit card debt.

Yes, it seems to be far better in fact.

> That works out to be (roughly) an 11.15% interest rate.

Really? I don't follow how. Because after 5 years I'm only paying
130%. Am I missing something?

> I known unsecured loans are pricier than secured loans [1], but even though that may be cheaper than most credit card rates, it still seems a tad steep to me.

Yes, if my calculations are correct, then it's a lot better than my CC.

> I would suggest shopping around (in person) at a couple of your local banks.  Ask about their debt consolidation services.  If that was an unsolicited offer (like in the mail) - put it on the table and ask them to beat it.  Drive the best deal you can get. All that stuff is negotiable.  Get several competing offers before signing up for anything.

Good advice.

If anyone is really interested, here are my calculations regarding my CC debt:

If I use this $ to pay off my Visa bill, then my balance there would
go from $24,600 to $7,100. It would be even less because as it is, I
pay off a bit each month. So let's say I get it down to $6K. That's a
quarter of what it is today.

Today I pay each month over $500. Actually it's going UP a lot
lately--not the balance (that's going down) but the monthly payment.
Once it was ~ $500 but last month they wanted $682 and this month they
want $738!

So let's say it's $600. If my balance was to be a quarter of what it
is today, then my payment would be around a quarter of that which is
$150. So I would be paying that plus the $380 to my bank for a total
of $530. So that's first of all BETTER than what I pay today (600 or
700) AND I am losing each month a huge finance charge to Visa--it used
to be around $250, but now it's going way up the past 2 months. Same
as my payments I guess--even though the balance is going down, the
finance charge goes UP, as in to over $500. Maybe their terms changed.

Anyhow even if I can't find a better deal, this now seems definitely
better for me than Visa.


PS: To defend myself so that I wont' appear to be a complete loser, I
will share that I financed a large part of my home purchase on credit
cards. I took out $70K in very low interest credit cards, as in 1.9%
or lower. It ended up not having enough and so I have this $25K
regular interest card. Overall, however, it worked out better than a
traditional mortgage. :)

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