where can I get a loan to pay off a credit card?
February 16, 2015 8:14 PM Subscribe
I bought a computer through Best Buy using their deferred payment plan (i.e. no interest if balance paid in full before one year). I should have been able to pay it with some easy monthly payments, but a perfect storm of events basically means that I'll need a few extra months to do so. Is there a good place I can go to get a loan for this kind of situation? If not, what are my options? My credit score is ~650.
I used my local credit union for a computer loan a few years back. My credit score was around the same at the time and I got a rate of 10%. FWIW, I lived in Brooklyn and that alone qualified me to become a member of People's Alliance Federal Credit Union (PAFCU). I'm sure there's a similar credit union in your area. I have had a number of positive experiences using credit unions for loans.
posted by anthropoid at 8:37 PM on February 16, 2015
posted by anthropoid at 8:37 PM on February 16, 2015
You could try Lending Club or Prosper. Your interest rate won't be great, but you'll only have to finance the remaining balance and there should be no problem paying it off early (check the fine print on this of course). How long do you have before you hit the one year mark?
azpenguin: Usually the way these deferred payment plan credit cards work is that they defer the interest for a year, but if you don't pay off the balance in full after the end of the year, they'll retroactively charge you all the interest from day 1. Correct me if this is not how your card works. That means Ain will likely be taking a much bigger hit by just continuing to make the payments than if he found an alternate source of credit and paid off Best Buy before the year is up. This will still be true even if the new loan has a high interest rate as long as there's no prepayment penalty and Ain is reasonable sure she/he can pay it off in the not too distant future.
To illustrate, let's pretend we're talking about a $1000 purchase and the Best Buy card charges 25% (this is sadly not at all an unbelievable rate here). If you can pay it off in 12 months (12 payments of ~$83), you'll pay $1000. If you pay it off in 13 months, you'll pay more than $1250 because the interest for months 0-12 will be applied retroactively.
So say you're at month 11 with the Best Buy card and have made payments that reduce your balance down to $200. If you do anything besides pay off the balance, you'll get hit with $250 in extra interest charges next month and that interest will compound from there. If you get a $200 loan, you can pay off Best Buy right away and pay ordinary interest to your new lender. Unless your new loan has a nasty prepayment penalty or an interest rate north of 100%, you'd still come out ahead.
posted by zachlipton at 8:57 PM on February 16, 2015 [2 favorites]
azpenguin: Usually the way these deferred payment plan credit cards work is that they defer the interest for a year, but if you don't pay off the balance in full after the end of the year, they'll retroactively charge you all the interest from day 1. Correct me if this is not how your card works. That means Ain will likely be taking a much bigger hit by just continuing to make the payments than if he found an alternate source of credit and paid off Best Buy before the year is up. This will still be true even if the new loan has a high interest rate as long as there's no prepayment penalty and Ain is reasonable sure she/he can pay it off in the not too distant future.
To illustrate, let's pretend we're talking about a $1000 purchase and the Best Buy card charges 25% (this is sadly not at all an unbelievable rate here). If you can pay it off in 12 months (12 payments of ~$83), you'll pay $1000. If you pay it off in 13 months, you'll pay more than $1250 because the interest for months 0-12 will be applied retroactively.
So say you're at month 11 with the Best Buy card and have made payments that reduce your balance down to $200. If you do anything besides pay off the balance, you'll get hit with $250 in extra interest charges next month and that interest will compound from there. If you get a $200 loan, you can pay off Best Buy right away and pay ordinary interest to your new lender. Unless your new loan has a nasty prepayment penalty or an interest rate north of 100%, you'd still come out ahead.
posted by zachlipton at 8:57 PM on February 16, 2015 [2 favorites]
Work something out with Best Buy, if you possibly can. Believe me, you do not want to get into a situation where you are paying somebody so you can pay somebody. That way lies madness. (I say this as somebody who got a loan from Carecredit to pay my cat's veterinary bill, and is still paying that damn thing off going on a year since we had that cat cremated.)
posted by Ursula Hitler at 9:18 PM on February 16, 2015 [2 favorites]
posted by Ursula Hitler at 9:18 PM on February 16, 2015 [2 favorites]
Well a new low balance credit card with a 0% introductory apr would let you do this. They'll either hand this as a balance transfer or with some of those credit card checks. You're only likely to delay the inevitable for 6-12 .o this max, but that may be enough from the sounds of it....
posted by chasles at 3:43 AM on February 17, 2015 [5 favorites]
posted by chasles at 3:43 AM on February 17, 2015 [5 favorites]
There are good ideas so far--Prosper might work, or Lending Tree, or a new credit card with 0% interest. You could talk to your bank about a personal loan (that's the "this is a loan to help me out of a bind, and will not be secured by a car or house" loan that you want). Bankrate can help you find options, too.
posted by Pater Aletheias at 6:46 AM on February 17, 2015
posted by Pater Aletheias at 6:46 AM on February 17, 2015
Yeah, I'd see whether you can find a credit card company offer you a balance transfer with a 0% promotional rate. You'll pay a balance transfer fee (usually about 3%), but that'll still be, I'm guessing, much less than whatever the interest rate on your loan is about to get jacked up to.
posted by decathecting at 7:54 AM on February 17, 2015
posted by decathecting at 7:54 AM on February 17, 2015
Seconding a credit union. Their interest rates are decent, IME.
posted by Enchanting Grasshopper at 9:29 AM on February 17, 2015
posted by Enchanting Grasshopper at 9:29 AM on February 17, 2015
You're not saying how much the balance is, so it's a bit difficult to gage this accurately.
Hindsight being 20/20 and all this is the perfect example of why one should avoid buying what you can't afford right now. I'd chalk this up as a life lesson and never enter into one of these type of programs again. They might work for some people, but obviously you're not one of them, and enough people are unable to do it to make it profitable for retailers. Retailers have run the numbers, and know they are going to be the winners in this deal. No one has ever become a millionaire off 0% interest and rewards programs.
This said, I would do whatever I could do to get my short term income up. Try to think of what you can do in the next few months to grab some extra cash: shovel walks, walk dogs, get a job as a pizza guy, take a part time job at Best Buy.
Sell some stuff. Hit eBay was a vengeance and see if you can't part with some crap you no longer want to get that thing you do want. If you have to sell the computer and take what profit you make to get a netbook and start saving for the more expensive one. Then pay cash for it.
Dave Ramsey calls your situation a Stupid Tax, but don't get hurt by that description. Even the best finance guys out there have paid their share of these taxes (I know I have). The trick is to learn form them and not repeat them.
posted by cjorgensen at 10:05 AM on February 17, 2015
Hindsight being 20/20 and all this is the perfect example of why one should avoid buying what you can't afford right now. I'd chalk this up as a life lesson and never enter into one of these type of programs again. They might work for some people, but obviously you're not one of them, and enough people are unable to do it to make it profitable for retailers. Retailers have run the numbers, and know they are going to be the winners in this deal. No one has ever become a millionaire off 0% interest and rewards programs.
This said, I would do whatever I could do to get my short term income up. Try to think of what you can do in the next few months to grab some extra cash: shovel walks, walk dogs, get a job as a pizza guy, take a part time job at Best Buy.
Sell some stuff. Hit eBay was a vengeance and see if you can't part with some crap you no longer want to get that thing you do want. If you have to sell the computer and take what profit you make to get a netbook and start saving for the more expensive one. Then pay cash for it.
Dave Ramsey calls your situation a Stupid Tax, but don't get hurt by that description. Even the best finance guys out there have paid their share of these taxes (I know I have). The trick is to learn form them and not repeat them.
posted by cjorgensen at 10:05 AM on February 17, 2015
This thread is closed to new comments.
One option you have is just to continue making payments to Best Buy. You'll take the hit on the interest, which sucks. But as long as you make payments on time it will not hurt your credit score. One of the worst things for your credit is late payments. Just make the payments that you can and pay it off in as short order as possible.
Another option - if you have savings you've been trying not to touch (don't know if this is applicable but some people who have these kinds of situations are trying everything they can not to tap their savings) then you may be able to do a secured loan through your credit union. Basically they hold your money until you pay the loan off. This way you keep the savings account intact, you pay a low net interest rate, and you can pay it off as soon as you can or make the scheduled payments.
Whatever you do, avoid taking out another high interest loan to pay this off.
posted by azpenguin at 8:30 PM on February 16, 2015 [1 favorite]