21 month BL with 3% fee

[Deleted]

I just got an offer for 0% for 21 month with a 3% fee. I have no credit card debt but do have a SL with a rate of 5.75%. My federal effective tax rate is 3% but my top tax bracket is 10%. I am wondering if I should transfer a portion of SL to this card? Would it be worth it?

[gobermitcheese]

It would be an effective interest rate of about 1.7%. Which is way less than your student loan interest even with the tax deduction. The determining factor really is if you can afford to pay it off in 21 months. If not it is not worth it to pay at least 12% 21 months from now.

[busymom]

I'd be figuring out how much you could afford to pay on the credit card for 21 months, so you'd have a zero balance by the time the rate goes up. Transfer that amount only to the card.

[dancinmama]

Jul 5, 2011 22:36:21 GMT -5 busymom said:

I'd be figuring out how much you could afford to pay on the credit card for 21 months, so you'd have a zero balance by the time the rate goes up. Transfer that amount only to the card.

Where will the payoff money be coming from and how stable is that source? In this economy, you never know when the other shoe is going to drop and 21 months is a long time. Twelve months ago, everything looked peachy at the company DH works for; in the next couple of months they will be laying off 8% of the workforce in his division.

Can I ask which issuer gave you the offer? Several months ago I was getting 0% offers with a 3% fee which I totally ignored because I have no debt other than a mortgage. A couple of weeks ago, I started getting offers for 0% with no fee. Maybe if you hold out, one of those will come your way.

[haapai]

That 10% bracket leaps out at me and hits me over the head. Is that your 2010 bracket or your projected 2011 bracket? Are you still in school? Is your extremely low taxable income the result of manipulating your AGI?

[haapai]

Is the SL in question subsidized? Do you live in a state that has an income tax? If so, what is the marginal rate?

[haapai]

If your 2011 taxable income will put you in the 10% federal bracket and you were not a full-time student any part of that year, you might want to check out the retirement savings contribution credit and consider exploiting the hell out of that instead.

[mithrin]

If you make a big payment to your SL, will they count that as your next X months worth of payments, or use it to knock down the principal and still require monthly payments?

If you can pay 21 months worth of your SL payment via the BT, and the SL will push your next payment due date out 21 months, you could use the money normally going to the SL payment to pay off the CC over the 21 months. In the end, your SL balance will be lower than if you made the 21 payments once a month since there would be a lower balance accruing interest after the up-front payment.

[haapai]

This message has been deleted.

[Deleted]

The loan is not subsidized at the moment, I however am trying to get into grad school and if I get in it will go back to be subsidized.
Haapai, my husband is a full time PhD student, Danci because my DH is a grad student his income is legally guaranteed for three more years. Our state has a 4-6% tax rate. I think we pay a little less than 4% with the deductions. The 10% is both 2010 and projected 2011 rate.
Mithrin, they will not count it as next X worth of payment, I just called and checked. Thanks for the idea though.
Dancin, I was going to use some of our extra money, it normally just goes into savings. I am at lab so I do not have the insurer in front of me, I'll check later. What issuer sent you the 0% for no fee?
Busymom, I will not transfer more then I can safety pay off in 20 months, promise.

[haapai]

They'll usually consider it your next X number of months of payments and they'll stop charging you interest on it. My God, mithrin, you've got it.

It's tons less risky than going the BT route and making payments that are four times the size of what Aunt Sallie wants (I'm assuming this SL is from 2008-2009) or having to pay usurious rates when the teaser rate expires.

[Deleted]

Jul 6, 2011 13:41:15 GMT -5 haapai said:

They'll usually consider it your next X number of months of payments and they'll stop charging you interest on it. My God, mithrin, you've got it.

It's tons less risky than going the BT route and making payments that are four times the size of what Aunt Sallie wants (I'm assuming this SL is from 2008-2009) or having to pay usurious rates when the teaser rate expires.

I'm confused.

[haapai]

Mithrin, they will not count it as next X worth of payment, I just called and checked.

That might not be entirely correct. (You always get such accurate and helpful answers to these questions by phone. <heavy sarcasm>) You can always test it by pushing an extra payment at them and seeing whether they suck the usual payment out of checking on the next payment date.

[haapai]

I used PMT. I calculated the payments on a 120-month loan at 5.75% and a 21-month loan at 0%. The 0% loan requires you to make a payment that is over 4 times larger or face an eye-watering rate at the end of the teaser period.

[Deleted]

Haapai, I would be transferring $1000 to the card and paying $50/month. I pay $30 now and it goes up to $80 in 2 years.

ETA: I'll talk to my DH about testing it by pre-paying once.

[haapai]

This is separate from the fact that the minimum payments on the credit card are probably at least double the minimum payments on your SL.

[Tiny]

Chase has 0%, no fee offers... got such an offer from both my Freedom and Slate cards.

[Tiny]

Chase has 0%, no fee offers... got such an offer from both my Freedom and Slate cards.

[haapai]

Ah, I hadn't considered the possibility of you being on an income-sensitive/contingent plan.