Jul
24
curious126 asked:
Here’s the situation: I have about $30,000 (of $114,000 total) in 3 student loans at 7.5% (variable rate). These loans are private and that’s why I could not consolidate them. I have a balance transfer offer for 4.99% until paid off on one of my credit cards and am tempted to transfer as much of the 30,000 as i can to that card. I don’t use this particular credit card for anything else, so this would be the only balance on this card My concern is that this will show up as consumer debt on my credit report as opposed to education debt. Anyone know what kind of impact this will have on my credit score? Worth the saved money in interest and consolidated payment? Any other advice or commentary?
Jorge
Here’s the situation: I have about $30,000 (of $114,000 total) in 3 student loans at 7.5% (variable rate). These loans are private and that’s why I could not consolidate them. I have a balance transfer offer for 4.99% until paid off on one of my credit cards and am tempted to transfer as much of the 30,000 as i can to that card. I don’t use this particular credit card for anything else, so this would be the only balance on this card My concern is that this will show up as consumer debt on my credit report as opposed to education debt. Anyone know what kind of impact this will have on my credit score? Worth the saved money in interest and consolidated payment? Any other advice or commentary?
Jorge
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5 Responses to “Consolidate private student loans on lower interest credit card?”
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Florence
Important question.
I would say in general swapping debt at 7.5% for debt at 5% is generally good; however, I would not do this unless you can pay off the credit card quickily.
Why? There are other consequences to the debt swap. First, unless you are making big bucks your education loan interest is tax deductible. So, your 7.5% interest is actually helpful unless you make >180K married or about half that single.
Secondly, there are better ways to swap debt than to credit cards. If you own a home using a home equity line of credit can get you a lower interest rate. Interest from this idea is an item that can be deducted from your taxes if you itemize.
Thirdly, somethings change. I mean how many of us try one job and 10 years later we go back to school for a different life/occuptaion. If you ever went back to school you may find you could qualify for other financial aid.
Lastly, make sure the terms of the credit card are similar to your educational loan. Some intro loan rates change on balance transfers later (3 years down the line for example).
I hope this helps!
Angela
Household borrowing has risen almost 60 percent to $6.5 trillion in the past five years.* It’s all too easy to whip out a credit card and purchase items you really can’t afford. While it’s true that overcharging is clearly the cause of most credit problems, there are some additional credit mistakes that can really cost you. Take a look at the top five mistakes listed below.
*The Wall Street Journal, July 5, 2000
1. Not valuing your credit.
Good credit is a valuable commodity in today’s economy. Bad credit, including a bad credit record, late payments, etc. can be a negative financial profile that can surface when you have a legitimate need to borrow. Buying a home is a necessary use of credit that few people can avoid. Abusing short-term credit obligations, or over-extending through short-term debt, can cause a mortgage lender to reject your application for a home mortgage.
2. Allowing a need for status to overrule common sense.
Most credit card companies now offer a “status” card, targeted to the consumer’s desire to have the very best of everything. Status cards often have higher credit limits, more frills and the largest annual fees– from $75 to $100. Avoid paying extra for status. The basic card from the same company offers the same basic features, and a much lower annual cost.
3. Raising credit card limits
If you use credit cards, avoid raising your limit. An increase limit is merely an increased temptation to buy. Many companies notify you that they are raising your limit. Take such notices as a warning, signal if your such a good customer the card company wants more, chances are you’ve been using your credit card for more than emergencies. To refuse an increase simply call or write the card company and say, “Thanks but no thanks.”
4. Stretching out an installment loan to get lower payments
When using an installment loan, people often want to stretch out the life of the loan. Their objective is lower monthly payments, but the result is higher interest charges over the life of the installment loan. You should always select the shortest payment period possible to avoid overpaying. If making the payment will be a struggle, (for a car, appliance, etc.) ask yourself whether the purchase is really a good idea.
5. Not knowing your interest rate and fees
Fees vary widely among cards. Always make sure you know what the rate and annual fees are before you accept the card. If you have existing cards, check the rate you are paying, and if it is high, shop for a card with a lower rate.
These common mistakes could cost you hundreds of dollars — dollars you could instead be using to build future security.
Mary
Take a look at this information page it lists types of cards and information, it should also answer your question.
Yvonne
Sallie Mae consolidates private student loans. The interest rate is credit-based, so if yours isn’t great, it can help to get a cosigner with good credit. Student loans (even private ones) generally have better terms than credit cards, so please fully explore the consolidation option before transferring the balance to a card.
Esther
Here is an article i found on debt consolidation with some information and different plan options.