Peer to Peer Lending & Debt Consolidation Part 3
After I get my P2P loan, what then?
What happens next…? Well, once you pay off all your credit cards, your issuers will FREAK OUT, thinking you are going to do what MOST people do once free from the clutches of credit debt … close the credit cards FOREVER. (Never, NEVER close a credit card if you care about your credit score, more on that in my book CreditWise)…then they’ll start sending you all these AMAZING offers of LOW, LOW balance transfer interest rates and credit limit increases. Seriously, your mailbox will be FULL of these offers.
The “Balance Transfer, Cash Advance”
Now pay attention… if you accept those new “balance transfer” offers with those low interest rates they will usually require you to transfer the specified amount to another credit card that they DO NOT own… in other words you can’t balance transfer from one bank’s credit card to ANOTHER credit card issued by the same bank. But, what happens now that you’ve paid off all your balances with your P2P loan… you can’t balance transfer a balance that doesn’t exist right… hahahah, Yes you can with a little creative help from your personal Credit Guru. (Now usually they will not allow you to pay off a P2P type of loan with those offers, and sometimes you can because they just send you a check you deposit in your bank) So, if they don’t provide a check for you to use for the “balance transfer” simply use a dollar amount which is smaller than the limit on the receiving card and transfer (Yes, you can transfer a balance to a credit card that has been paid off!). You’ll end up with a CREDIT on that credit card, a POSITIVE balance. You can now request a check from the receiving bank and that is the “Balance Transfer, Cash Advance”.
I’ve already reduced my interest rate, why go through all this?
If you are a typical client you’ve reduced your rates from 14-29% and are now in the 8-15% range, and for me as your coach it’s just not low enough. So by using the “Balance Transfer, Cash Advance” method you’ll get money to pay down the Peer2Peer loan (Yes we’re going to pay that down as fast as we can) from the same card companies that wouldn’t lower your interest rate from 14% and now they are begging you to borrow at sometimes ZERO percent, yes, it’s still out there. Just move the low interest “Balance Transfer, Cash Advance” money back to the P2P loan (no pre-payment penalty, BTW) and you can usually use that low interest money for 6 months, which coincidentally is how long you’ll have to wait to apply for another P2P loan. Then just “lather, rinse and repeat” till the whole debt is paid off. (You’ll save hundreds or even thousands in interest)
Be very careful, there are several missteps you can make along the way, and unless you are fearless or very experienced, please be sure you read all the fine print on those loan docs and balance transfer agreements as things change and different companies have different policies. I’d be happy to ride along with you if this is your first “Credit Rodeo”. Here are a couple things to be aware of:
- If the credit card companies or YOU close or reduce your credit limits significantly, your score could drop.
- If these new P2P loans do report on your credit report, (remember, positive trade-lines stay on your report for ten years) and they end up being SHORT term items (you pay them off fast), they WILL lower your average number of months which can have a significant negative impact on your score for a very long time. I call these types of “Positive” items “Illusionary Positives” (Much more on that in my upcoming book CreditWise.) So basically we don’t want to create TOO many of these items and you should evaluate how many you can do before it WILL do harm to that part of the score.
- If you charge up the credit cards with new purchases, YOUR SCORE WILL GO DOWN… Duh, but hey, I’ve got to say it.
- Wow, if you are in the middle of purchasing or refinancing an existing mortgage, you could RUIN you chances of closing if you make a misstep, please, please be especially careful under those circumstances.
- 5, 6, 7, 8… Etc. There are lots more potentials to watch out for, just be aware or get REALLY good coaching.
Sounds like work…What do I get for all that work?
In a nutshell, you’re going to save money on interest, and your score is going to SOAR, and once that happens, you’ll save even MORE money on every loan you take out in the future.
So, let’s say you want to buy a home or refinance, will you save money? WOW, YES! By moving your credit card debt to this new P2P loan and increasing your score as above with this example, a median home price of $200,900.00, and a score increase from 660 to 760, you’ll save about $59 a month on a 30yr fixed/80% mortgage, or about 21,000 bucks!! (Those are obviously today’s figures)
What about that hundred GRAND you mentioned?
Yes, Most importantly if you took that $59 a month and put it back into P2P lending for that same 30yr period, you could end up with more then $120,000. Just from Consolidation… MAN I SO LOVE that word! (Also today’s numbers which of course are likely to change in the future)
I hope you got some value from this 3 part series, and can see the “P2P light”. As always if you have questions PLEASE ask, I’ll do my best for you. And if you DON’T have a high enough credit score to use Peer to Peer lending, LET’S get you one, call me today so we can get started on your CreditWise future with credit repair, credit restoration and credit consultation services from Home Solution.
For your Health, Wealth and Liberty