A buddy called me tonight with a question about an offer he got in the mail today. It was from MBNA and said it was "exclusively for Volkswagon Credit customers". It's an offer for some type of account (loan/card/checks?) for consolidating your various past due accounts into one "disappearing payment" through MBNA. The terms were no annual fee, amounts from $5,000 to $25k, APR 13.9% to 23.9% depending on your credit history. It didn't say preapproved but did mention something about being prescreened. Offer expires in 7 days. Now I told him I prolly would not do it but he's really interested in getting this--he has never had an account with MBNA nor VW Credit. His only accounts are 3 or 4 retail (Macy's, JC Penney etc) and they are all at least 90-150 days past due. He gets the occasional phone call and pays some $10-$25 to whomever calls "squeaky wheel gets the money" and he wants to pay the entire balance on all these accounts. I'm not sure how to advise him other than if he does get it (I doubt he will) and he insists on paying the full balances, then he should negotiate for removing the accounts or at the least have them rerated as positive...
BTW This wasn't a debt consolidation in the form of a 2nd mortgage...the papers said no collateral was required. As far as buying bad debt, I don't know...the offer didn't mention that MBNA had acquired his accounts either.
I think that MBNA has been doing this for some time actually (at least as far back as 1997). I had a GUaranty Bank Line of Credit, and I began to have problems paying in the summer of 1997 due to illness. They sold to MBNA. It appears that MBNA managed the account on behalf of Guaranty until the beginning of this year. THey then converted the account to MBNA. I am still paying, and it is my best interest rate-8%.
I have one of these accounts. I'm assuming we're talking about the same thing. Ignore the words "debt consolidation" and "loan" and look at it for what it is: a revolving line of credit. See (I know it's your friend and you may not have the mailing in front of you) the talk of how you can re-use the credit after you pay it down or off? And how they will let you write the checks to anyone, including a cruise line or yourself? That means by definition it's revolving. Think of it as a credit card where: 1. you don't get the card; you just get access checks (which do have the normal MBNA fees, although last year at least there was a $30 maximum) 2. you choose how long you want to get to pay off the debt and they set the minimum payment such that it will happen in that time I don't know if it's particularly easy to get a large credit line this way. Maybe because of the large minimums they will go a little farther than they would otherwise, but otherwise it is revolving credit like any other so they may not. I only asked for and got $5,000 at a time when I had cards with limits higher than that. My interest rate was 19.99% which equaled my MBNA Mastercard but beat my two cards with big balances. ($5K+ on Providian at 23.99% and $6K on Discover at around 30% were the big ones. Obviously back then I didn't know what I learned from reading boards like this.) Basically it's extra credit (first aid for debt ratios) that comes with jumbo minimums for those who don't have the discipline to just make large payments without being forced into it. I could see it really screwing up someone who spends a month out of work in the "loan" timeframe. OTOH my situation improved soon after I got it and I had it paid off in a few months -- no prepayment penalties. It is reported to the CRAs the same as any credit card. Unless whoever looks at your report recognizes "MBNA Gold Option" or whatever else they call it it's just like another MasterCard. It stays open indefinitely with a $0 balance -- mine is still open and just past the 6 mo. mark, where it stopped pulling down my FICO. I got my two invitations last year at a time when I had a very high debt ratio including well over $10K in total revolving debt plus a year left on my car. I also had a Mastercard from MBNA which I think was near its max too (MBNA was one of my lower interest rates at the time). IIRC the offers started right after I got a 30-day late from Cap1. In other words my credit report (which they could see from account reviews) smelled of blood and how could they resist?
Thanks for the info! I sent it to my friend, I think he's going to apply for it--I just hope he logs on here like I suggested so he can get some ideas on how to negotiate getting his report cleaned up in the process. We'll see.
