Monday, May 27, 2013

Day 19: Credit Transfer vs Personal Loan

I made the very exciting decision to start a program in the fall to train for becoming a hospital/hospice chaplain. I am thrilled! I am also aware that this is the opposite of my plan to find a job that pays me more than I was making. This makes my need to be budget conscious a much more intense goal.

As I mentioned a few posts back I created accounts on Mint and Credit Karma. From what I can tell I have a few options and things I need to consider. I need to reduce the interest I am paying on my debt in order to get it paid back in a reasonable amount of time. I also want to lower my payments, and oddly my credit score should improve if I take out more credit (not more debt) and diversify my credit  in order to reduce the percentage of credit I am using and prove my ability to pay back multiple forms of credit.

For months/years I have received pre-approved offers for personal loans and credit transfers. I am working on determining the pros and cons of these two options.

Credit Transfer:

  • Zero interest for 6-18 months feels like a great deal
    • Con- if I can't pay the full amount in 18 months the interest come back to get me
      • pro- I could possibly do a follow-up transfer of the remaining amount before the interest kicks in
        • Con- the market could change in 18 months and I might not be eligible for the second transfer
    • Con- if I use the card for anything else, the payments I make will go toward the new balance not the old, so I can't use the card at all 
      • pro- I don't plan to use the card and I have other cards I could use if I NEED to, but only if I need to
    • Con- balance transfer fees
Personal Loan:
  • More time to pay but has interest the entire time
    • Con- interest
      • Pro- much lower interest than I have now
    • Con- It is a set amount, I can't save money by paying it faster, it is what it is once it is set
      • the interest is lower so the set amount is lower in the long run
    • Pro- it diversifies my debt
      • Con- I have never had a personal loan and new things scare me (that is a fake con- me being scared isn't a valid reason to not make a wise financial choice)
    • Pro-it moves me to only paying one payment each month (less payments to think about means fewer chances for me to miss a payment)
Things to think about:
  • How much can I afford to pay?
  • How fast do I think I can reasonably pay it?
  • How will it impact my credit?

Even though I really love the idea of zero interest I am leaning toward having more time to pay and diversifying my debt. Also, the zero interest plan does require I pay a transfer fee and that might end up being really close to the interest I would pay with the loan.

Now, for todays photo: Today is a dreary day and I need to spend all of it indoors cleaning my room. Therefore, there will be no selfie. I am wearing 9+ year old velour pants and an overpriced striped t-shirt, but my dog is really cute all wrapped up in my blankets.

 This is Ella, she is my favorite. 

Please note: I am not a credit councilor, and I am not giving you advice. I am talking about what I am doing to figure out my credit/debt situation.

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