It is that time of the year when a lot of us are cleaning house on our budgets to get ready for a new year. As I was doing so I was thinking about the new categories I need to include this year: there is the husband fund (explain in future post), the Christmas fund and the date fund (woo hoo!). But I also came across these four nagging credit/store cards we carry in our budget spreadsheet. Here are the terms:
|Card||APR||Amount Owed||Payment per month|
CC #1: doesn’t even account for the rate increase I recieved in the mail today.
Store #2: 0% Financing ends 1/1/2010 and jumps to 17.99% owing approx. $200 in finance charges
We’re slowly piddling these cards down with a huge whopping APR combined. I asked myself, “why have I not taken a personal loan for debt consolidation on these cards?”.
I’ve done it in the past with my Dell, BofA, HD, and FFCU cards. Saving myself a good deal in interest. I decided to calculate the terms to see if it’s worthy to consolidate; entered the 4 cards, corresponding APRs and the amount paid per month.
- If the hubby and I stay on the route we are on then it will take 33 months paying $1728.00 in interest.
- If the hubby and I apply for a (personal loan for) debt consolidation at approx. 9% – 11% it will only take us 24 months paying $500 – $600 in interest..
(please see update terms below)
*Changes/Updates I made due to comments below. I seemed to have confused taking out a ‘debt consolidation loan’ to taking out a ‘personal loan for debt consolidation’:
“why have I not done a debt consolidation loan with these cards” to “why have I not taken a personal loan for debt consolidation on these cards”
I went ahead with the approval process to see what would be offered (I have not yet accepted the loan):
Origination fee: 3.75% or $187.50
The payments would actually be extended by 3 months, but the payment would be $20 less than the current. I have the option to PIF the LC loan early without being penalized.
I would end up paying $771.51 in interest with $187.50 origination fee – total equalling to $958.51 saving us $769.49 in interest.
The other point: The hubby and I are not making any major purchases in the next 6 months. I am actually cancelling the store/cc cards after they are PIFd. I don’t want any more credit cards (except for one emergency card). A decreasing credit score is not of concern at this time.