Financing was declined...trying hard to not take it as a "sign"

[travelplanningnerd]

I had an offer accepted, woo hoo!

So, I had submitted for a loan. I was stunned to get the response that it was declined. I have good credit. I have a decent amount of cash on hand....I could pay for the purchase in cash....I just would prefer not to. Our home and vehicles are owned outright. Yes, there is some credit card debt, but not a massive amount, and we have exactly one credit card. It's not like there are 5 credit cards with debt on them. Just one. So, again, I'm a little shocked I was declined.

I'm working with a local bank on getting a loan against my vehicle. If that doesn't come through, and I can't imagine why it wouldn't, but who knows...then at that point, I'm not sure what to do. I could go with Monera. I could just pay it outright. I'd rather not do either of them. But...it is what it is. BUT...at that point (I am one of those people who believe in "signs") I start to wonder if it's meant to be, it will be. And...if it's not working out the way I want it....maybe it's not meant to be.

Any other alternatives I haven't thought of?

Wait, what?

You have enough cash to pay for DVC but you carry a credit card balance? Why are you so ok with paying finance charges when you don't have to.

 

[Starport Seven-Five]

Reading through the thread I really wonder if you're overestimating your financial position. I base that on the credit card debt comments in the original post, the decline of the loan applications, and the mention of a HELOC for home improvements. Could be completely wrong on that but something doesn't seem quite right.

DVC will be around in a few years and I doubt the prices will outpace the 10% interest that Monera and others charge. Save your money and buy when you're ready to pay cash.

 

[Disney Dad ADL]

Wait, what?

You have enough cash to pay for DVC but you carry a credit card balance? Why are you so ok with paying finance charges when you don't have to.

Hmm, I didn't notice that. Yes, OP should absolutely use the cash to pay off the credit card debt. There's certainly no valid reason I can think of to pay 15-20% interest or more just to keep some cash in the bank. Pay off all the credit cards, if you have still have enough to pay for DVC, then buy it, otherwise consider backing out of the DVC purchase if you still can.

 

[Matty B13]

Hmm, I didn't notice that. Yes, OP should absolutely use the cash to pay off the credit card debt. There's certainly no valid reason I can think of to pay 15-20% interest or more just to keep some cash in the bank. Pay off all the credit cards, if you have still have enough to pay for DVC, then buy it, otherwise consider backing out of the DVC purchase if you still can.

My parents for some unknown reason use to do this as well?????? I think they thought it helped their credit score, never understood why. They always had the money to pay it off, maybe they got some bad advice when they were young.

 

[mmackeymouse]

Certainly I can understand the need to maintain liquidity, but if you go with places like Monera, the interest rates are pretty high. According to their website, their no credit check rates *start* at 9.9% For a $10k loan at 10% interest for 5 years, that's $2748 of interest you are paying over 5 years to maintain the liquidity. That's a lot to pay for just in case IMO, maybe more reasonable the interest rate were car loan or home loan levels (0-4%). I would much rather go with the HELOC if that is on the table assuming that the interest rates are < 4%, or just pay cash since you have it. Just my opinion.

You make a great point. I definitely don't like those interest rates, for sure. But, I anticipate being able to pay it off early. And, spreading the interest amount over the course of 34 years...it makes it a lot more palatable.

Have you run your credit report do you can see the details? You can get it free annually from each of the reporting agencies. Maybe there are errors you can address

Yes, I monitor my credit pretty regularly. That's why I was kind of surprised to get the results they stated.

If you have cash on hand and your house is paid off, what if you put half down on the contract and use a HELOC for the rest? Pay off the rest of the DVC contract on the HELOC fast, and then you have some cash on hand cause you only financed half of the contract AND you have a home equity line of credit available as more things will inevitably go wrong on your older home. Would that work?

Definitely an option. I'm considering all options right now...and any combination of solutions. Honestly, part of me just wants to pay in cash and be done with it.

This should be a warning to people who think that because they pay cash for everything that they are a good credit risk. Just the opposite. FICO and other scores are based upon the perceived willingness and ability to make timely payments. Most of the formula weight is given to the last 36 months of payments on term loans (cars, boats, etc...), mortgages, and revolving accounts like credit cards. You get a boost to your score by paying everything on time. You get a decrease if you pay late. You get a boost if you can show you can handle multiple payments each month (e.g., a mortgage and car loan, or a car loan and a credit card). You get a decrease if you have only one payment per month (which is why many of those companies which offer credit card consolidation are ineffective at boosting your score). If you have a $15k credit limit, but regularly only use $3k, you're wise and get a boost. If you have a $15k credit limit and regularly use $14.5k of it, you're over-leveraged and a bad risk.

For the OP, you're too late for the following strategies because you're on a time line to settle on the purchase, but these are what I'd suggest you do to fix this for the future:
1. Get a second credit card, use it a little each month, pay it off entirely when it comes due. If you don't have a Disney Chase Visa, this would be an excuse to get one (that, and the discounts you get using it at WDW).
2. Request a higher credit limit on your existing card to reduce your utilization rate
3. Don't carry a balance on either card

This makes sense, as those loans have been paid off for a while now, so for the last 36 months, really the credit card has been the only account.

Do you know your credit score? Maybe some one has been using your ID. Get a copy of your credit report and see what's going on.

I do. Depending on the agency, it would be considered great or excellent. That's why I was so surprised, but I am learning a lot through this thread that there is so much more than just the score that goes into those decisions.

Reading through the thread I really wonder if you're overestimating your financial position. I base that on the credit card debt comments in the original post, the decline of the loan applications, and the mention of a HELOC for home improvements. Could be completely wrong on that but something doesn't seem quite right.

DVC will be around in a few years and I doubt the prices will outpace the 10% interest that Monera and others charge. Save your money and buy when you're ready to pay cash.

While I appreciate your concern, I think I've decided to do a cash purchase. Yes, DVC will still be around, but I have done that before. I was in the market 8 or 9 years ago, and pushed it off, pushed it off. Then, I found myself kicking myself as the prices escalated in the years since. I don't want to do that again.

 

[mmackeymouse]

My parents for some unknown reason use to do this as well?????? I think they thought it helped their credit score, never understood why. They always had the money to pay it off, maybe they got some bad advice when they were young.

YES! This is exactly what I have been told over the years. Must have gotten the same advice your folks got.

But, yes I was always told that paying off a card completely and often hurt the credit score more than helped it, and that leaving a small balance on the card is more helpful in the long run.

This thread was definitely an eye-opener, but I am glad to know I am not the only person who had heard that advice before.

 

[D-Trick]

But, yes I was always told that paying off a card completely and often hurt the credit score more than helped it, and that leaving a small balance on the card is more helpful in the long run.

I believe the advice you've been given was misinterpreted. Yes, you should have a balance on the card at all times, but that will always be the case with consistent use. Each month, pay the full amount due for that bill.

 

[zavandor]

While I appreciate your concern, I think I've decided to do a cash purchase. Yes, DVC will still be around, but I have done that before. I was in the market 8 or 9 years ago, and pushed it off, pushed it off. Then, I found myself kicking myself as the prices escalated in the years since. I don't want to do that again.

There's a big difference between now and 10 years ago. The market trend is downward. You might end paying now more and financing, rather than pay less cash later.
Also, we don't know when WDW will be back to normal (all shows and meet and greets, no mandatory face mask...). Skipping a year, save the money you would have spent for the trip and pay cash in 6 months could be a good strategy.

 

[WebmasterPete]

LightStream

Lightstream is owned by SunTrust (who recently merged with another bank and have renamed themselves Truist because apparently they have no marketing department). I bank with SunTrust, and have not had any issues (I have a loan, credit card, and multiple bank accounts with them). I do know from several people that they have significantly tightened up on new loans right now. In general, Lightstream wants excellent credit, so if there are any blemishes on your credit report, they will decline you.

 

[mmackeymouse]

Lightstream is owned by SunTrust (who recently merged with another bank and have renamed themselves Truist because apparently they have no marketing department). I bank with SunTrust, and have not had any issues (I have a loan, credit card, and multiple bank accounts with them). I do know from several people that they have significantly tightened up on new loans right now. In general, Lightstream wants excellent credit, so if there are any blemishes on your credit report, they will decline you.

Thanks, Pete for the unique insight. Yeah, it makes sense that banks have tightened up things for now. In my pea brain, I think I thought banks would actually be relaxing their standards and just trying to get through it. But, it makes sense why they didn't.

Ultimately, I was able to get a good loan with a local bank, and I felt comfortable enough to use cash on hand for the rest.