Author Topic: Save over $1200 in high student loan interest with this one cool trick!  (Read 2058 times)

extremedefense

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In 2016 I had a private loan in the amount $3,310 at 10.49% Interest (9.775% APR). My wife had a private loan for $6000 from Sallie Mae for 8.875% interest and one for $9337 at 10.49% interest (9.93% APR).

On $13k, over 12 months it would have accrued $1363 in interest at 10.49%.
For sallie mae it is $291.50 for a year.

Holy shit, thatís $1655 worth of interest over 12 months. That is $4.53 in interest PER DAY!

I had just started a job making $55,000 annually, and we knew we could pay off the full balances in 12 months. We had a combined $30k in credit card limits, so we paid the 3% balance transfer fee for 12 months of 0% interest (which we thought of as a 3% APR loan for 12 months).  My Bank of America card only had a 2% balance transfer fee.

The fee for $16400 was $156 (boa 7.8k) and $258 (citi and cap1 8.6k) total $414. $1655 - $414 = $1241.

Then if you can put the money that WOULD go towards the $16k of transferred student loans into an Ally 1% savings account, you save even more. We have the funds to pay off the credit cards, but make the minimum payments until the promotional APR expires in May.

So yes, it's super easy to Balance Transfer your student loans onto a credit card, but I would only recommend it if:
  • Your student loan APR is >10%
  • You 100% know you can pay off the cards before the 0% promo ends
  • If you are planning on buying a house in 12 months, don't do it. Your credit score (FICO) will temporarily go down ~100 points since your utilization will go wayyy up.

Any questions?
« Last Edit: February 13, 2017, 01:25:12 PM by extremedefense »

ketchup

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  • You 100% know you can pay off the cards before the 0% promo ends
If your credit is good enough, even if you don't finish paying it off completely, you could get another 0% deal and kick the can an extra year down the road.  You'd definitely still come out ahead.

extremedefense

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If your credit is good enough, even if you don't finish paying it off completely, you could get another 0% deal and kick the can an extra year down the road.  You'd definitely still come out ahead.

Absolutely, but then you're looking at 2 years of 3% APR loans, with the interest paid all up front.

Another thing to note, you don't get credit card rewards for it, and our credit scores went from high 700s to the mid 600s because our utilization went from <5% to >50%.

DailyGrindFree

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  • You 100% know you can pay off the cards before the 0% promo ends
If your credit is good enough, even if you don't finish paying it off completely, you could get another 0% deal and kick the can an extra year down the road.  You'd definitely still come out ahead.

You are absolutely right. As long as your credit is good, there will be more offers.

A few months back I paid the 2% balance transfer fee for 12 months of 0% interest for $15K+. Even though I still owe more than $15K and my credit limit is only $16K the same credit card already sent me additional checks for 3% balance transfer fee for 12 months of 0%. Twice.

There is a down side though. My FICO credit score went down 40 points that month. But next month went up 10 points (The reason could be me getting another Chase card). 

ducky19

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Re: Save over $1200 in high student loan interest with this one cool trick!
« Reply #4 on: February 13, 2017, 03:17:22 PM »
I actually consider my credit cards to be my emergency fund for the moment. I have over $300k limit from several years of churning, and I am constantly getting balance transfer and cash out offers from multiple cards. Most have a 3% fee (one was as high as 4%), but I have a Barclay's that was freakin' 1%!!! I was tempted to cash out $15k and invest it at that rate but decided the potential gain wasn't worth the hassle. Still, it's nice knowing if the shit hit the fan I could survive up to 18 months on a single card before having to switch it to another without doing too much damage to my utilization ratio.

DailyGrindFree

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Re: Save over $1200 in high student loan interest with this one cool trick!
« Reply #5 on: February 13, 2017, 03:35:56 PM »
I actually consider my credit cards to be my emergency fund for the moment. I have over $300k limit from several years of churning, and I am constantly getting balance transfer and cash out offers from multiple cards. Most have a 3% fee (one was as high as 4%), but I have a Barclay's that was freakin' 1%!!! I was tempted to cash out $15k and invest it at that rate but decided the potential gain wasn't worth the hassle. Still, it's nice knowing if the shit hit the fan I could survive up to 18 months on a single card before having to switch it to another without doing too much damage to my utilization ratio.

I have been keeping $25K-$30K in my checking/savings accounts for possible investment opportunities and rainy days for years. Lately, I also started applying for credit cards for their bonus points and other perks. I was thinking about closing them before the next annual fee dates. Are you telling me you keep all those cards open? I just assumed that you have many since you have over $300K limit. :-)

Ebrat

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Re: Save over $1200 in high student loan interest with this one cool trick!
« Reply #6 on: February 13, 2017, 03:40:55 PM »
I've done this on a few student loans (my rates weren't that high though). Most recent was Discover, only 1% fee.

The Money Monk

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Re: Save over $1200 in high student loan interest with this one cool trick!
« Reply #7 on: February 16, 2017, 02:18:19 AM »
I actually consider my credit cards to be my emergency fund for the moment. I have over $300k limit from several years of churning, and I am constantly getting balance transfer and cash out offers from multiple cards. Most have a 3% fee (one was as high as 4%), but I have a Barclay's that was freakin' 1%!!! I was tempted to cash out $15k and invest it at that rate but decided the potential gain wasn't worth the hassle. Still, it's nice knowing if the shit hit the fan I could survive up to 18 months on a single card before having to switch it to another without doing too much damage to my utilization ratio.

I have been keeping $25K-$30K in my checking/savings accounts for possible investment opportunities and rainy days for years. Lately, I also started applying for credit cards for their bonus points and other perks. I was thinking about closing them before the next annual fee dates. Are you telling me you keep all those cards open? I just assumed that you have many since you have over $300K limit. :-)

I also do credit card churning, and currently have over 100K in available credit on all my cards. I only ever cancel the cards that have annual fees. I don't see any reason to cancel them otherwise.

link_417

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Re: Save over $1200 in high student loan interest with this one cool trick!
« Reply #8 on: February 17, 2017, 07:16:18 PM »
I actually consider my credit cards to be my emergency fund for the moment. I have over $300k limit from several years of churning, and I am constantly getting balance transfer and cash out offers from multiple cards. Most have a 3% fee (one was as high as 4%), but I have a Barclay's that was freakin' 1%!!! I was tempted to cash out $15k and invest it at that rate but decided the potential gain wasn't worth the hassle. Still, it's nice knowing if the shit hit the fan I could survive up to 18 months on a single card before having to switch it to another without doing too much damage to my utilization ratio.

I LOVE the Barclays 1% offers! I used one to pay off a chunk of my car loan. Back before I had this card, though, I used 2% and 3% balance transfer offers to help pay off my student loans (over 8%), too.