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Car loan to credit card
QUESTION
Asked by “tvman”
Doing a balance? How much $ can I save if?
my balance on my car is 2884.58 at 10.16 %. My c.c. is currently 8.99 % variable (washington mytual). What should I do? How much could I save? I am planning on paying 300 mo. until its paid off or for five months, may have extra cash then.
ANSWER
Dear “tvman”:
Well, “save” would not be a word I use when talking about loans! That’s a joke. I’d reserve the word “save” for when you’re collecting the interest. If for no other reason than to keep your thinking straight. :-)
So, to confirm I understand the opportunity, it APPEARS that 0.1016 minus 0.0899 equals 117 basis point for possible savings.
I’d suspect that they tiny “savings”, what really should be called “cost avoidance”, are illusionary.
First, when car loans are give, they often use a method interest calculation called the “Rule of 72”. Without going into too much detail. You pay the interest more in the front of the loan’s term than the end. It’s like a penalty for prepayment. So, moving from the car loan, may not avoid any interest.
Second, the credit card is variable. You didn’t say what the adjustment interval was AND credit cards have a lot of “spring loaded traps” that can send the interest rate into “orbit”.
SO, I’d recommend NOT transferring. Stay with what you know.
If you want something to ACT on, I’d suggest that you find a credit union to do business with. They can help you shift from “borrowing” to “saving”. Credit Unions don’t use the 72 or any other such trickery; most use daily calculations which are most favorable to the borrower. They do low cost banking with education.
Hope this helps. I’m interested how it works out for you. Drop me a note sometime. My blog may have helpful “stuff”.
Ferdinand J. Reinke
Kendall Park, NJ 08824
SOURCE
http://tinyurl.com/3bjcq3
http://www.creditunionsonline.com/…
http://www.aicpa.org/
http://www.reinkefaceslife.com/…
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UPDATE Just notified that this was “Best by Voters. One vote; one answers. Not overwhelming, but I won’t decline the 10 meaningless points.
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Reinke Faces Life 