Could use some expert advice on this. I received an offer in the mail from BOA today. They call it the Zero Balance Credit Card Debt Consolidation Plan. It's a cross between a credit card, HELOC and BT. I can borrow between 5k and 30k at 8.99-21.99% - which varies based on my creditworthiness. It's a non-variable APR (not tied to prime) BUT the issuer "reserves the right to change your APR, fees or other credit terms at our discretion." That last part leaves me a little uneasy. If I can get this "loan" for even 12% I'll save money by paying off my CCs - but I don't feel good about the changing everything when they feel like it. Also, I may not be able to use this to pay off BOA cards (I have 2). Anyone have thoughts on this? FYI, I can't get a home equity loan because I don't have enough equity. Thanks.
Companies offer these rates as teasers -- enticements for you to switch credit card vendors. Much of the time, card companies target consumers with better credit, so that may leave someone struggling with debt without this option. Even if you do qualify for a zero-percent or similar single-digit rate, it won't last forever. Make sure you know when it will end and what the rate is expected to jump to when it does. The low rate also lasts only if you pay on time. One late payment and the credit card company will jack up the rate. Also look for hidden fees and charges that can increase the actual cost of credit. It's a short-term fix. The only way it works is if you are really meticulous about paying it and stay on top of it and then move onto another credit card before the low interest rate expires. Opening new credit card accounts every six months, however, could negatively affect your credit rating. And to successfully lower your debt load, you'll need to pay far more than the smallest amount the card company will accept, especially after that zero rate disappears. Paying the minimum for a $20,000 debt won't cut it. Also, instead of getting ANOTHER loan, set up your bank account to autmatically pay a good portion of each of your CC's. And just act as though that is a payment coming out for your "new loan". In essence, this is the same thing as getting a loan.
response I work for BOA and that's called the "gold option" unsecured line of credit. The last line is the clause which basically reserves their right to increase the APR if you default/pay late. The only other time they would ever increase your APR is if something significant happens in your credit report that makes you a risk. IE. you default on your mortage. Which means that if you can't even pay your house, you probably won't pay the gold option, which subjects you to a higher interest rate. They don't just change the terms anytime they want to, in fact, the policy is that we must send you a "JSN" notice (short for just say no) that your interest rate is increasing. (For credit cards at least) I am not sure if this applies to unsecured lines, but I would ask the gold option specialist if you apply. JSN means that you can reject the interest rate changes but you forfeit the use of any future activity on the account. The gold option in general is very rarely ever subjected to rate changes, since it's an installment loan. You pick your terms, (36, 48, 60 months etc.) and they'll give you the interest rate and your monthly payment and your full debt will be payed by that date. The only thing I would warn you, however, is I believe gold options charge a fee for the amount that you are borrowing. So you may pay like a 3% transaction fee to borrow the money initially. Once again, clarify this with them specifically about your application if you go for it.
stccc - thanks for the insider insight. The small print does say that there's a 3% transaction fee on each advance. Assume that means the initial "loan" too? I'm actually considering this because I have tons of debt and sky high rates. If they offer something decent, I will save money. I've never missed a payment, never pay late - just have a very high debt-income ratio....At the rates I'm paying it'll never get down, but consolidating everything onto this and have some peace of mind that there will be a light at the end of the tunnel is very tempting to me. At the same time, I'm always leary.... Plus, with the high debt-income ratio, I probably won't get approved for the amount I'd need and my rate would probably be almost as high as the CCs I have now...AND the small print says I might not be able to use this to pay BOA cards - I have 2 of those.
more With credit cards you can deposit money into a checking account. Gold option should be the same. That money is cash and can be used to consolidate _any_ debt. Gold option is maybe less sensitive to high debt to CL ratio specifically... but that will decrease your FICO score which will affect your qualified interest rate. Keep in mind gold option is normally a product that _is_ offered to individuals with a lot of outstanding debt, because if you don't have debt, you would rarely need a gold option when you have promotional rates to deposit cash and credit lines available. Here's a fun little tidbit: if you get qualified for the gold option and eventually pay it off, you will be able to consolidate the gold option "credit line" onto your unsecured card to increase your credit limit So if you have a 5k card in your name, and a 10k gold option, once the 10k gold option is payed you can close it out by increasing the credit line on your BOA card to 15k. A lot of nifty things!
