Transferring remaining balance of DVC loan to lower interest cc?

[kichan]

I didn't realize that the APR on my DVC loan is over 11%. I have credit cards with lower APR's. Has anyone transferred the balance of the DVC loan to a lower interest credit card? Any positive negative experiences??

 

[gppnj]

You can deduct mortgage interest from your taxes, but you can't deduct credit card interest. That might or might not tip the scales in favor of keeping the mortgage. It depends on your specific circumstances.

 

[RobDoc]

You can easily pay off the loan with a credit card payment. You would not be able to deduct the interest paid on the CC in most cases - whereas the Disney mortgage loan would likley qualify.

If possible, you might want to get a home equity loan, which would usually qualify for the interest deduction. As always, check with your personal tax advisor regarding any tax issues.

 

[Cruelladeville]

The thing with a loan thru Disney is that the loan does not show up on any credit report, as long as you stay current, while the credit card will impact your credit report. The other thing is that once you use your credit card, if you are late on a payment, they can bump up the interest much higher than Disney's rate. I paid off a Disney loan with my credit card, 0% financing, and I thought it was a good move, until my payment was a day late at Christmas, and they bumped up the interest to 19.4%. Then, when I tried to get a car loan, that credit card came back to haunt me--I was carrying too high a balance! It was the same amount that I had had all that time thru Disney, but nobody knew it because Disney doesn't report to credit companies.

 

[Dean]

I'd raise the question whether paying off the loan would be treated as a purchase or a cash advance. This often affects the terms of the CC and many times bypasses the cheaper interest rates as well as generating fees from day one rather than past the payment date. It also would tend to generate fees on all purchases on that card. So if one normally pays off the card monthly, uses it for this type of purchase and continues to use the card for other items, one could eat up several percentage points difference in a hurry and in some cases, kick up to the highest level of the card, ? in the 18-21% range for many cards.

 

[Groucho]

I was thinking about this myself... my DVC is at 9.75% and Chase keeps sending out checks that I can use for 3.99% for life, putting it on my Subaru Mastercard. I worked numbers every which way and discussed it with my folks (my mother has run a small investment club for about a decade now plus is a tax preparer) and finally decided to leave it as is.

Not only are there the issues of the interest being deductable, it not affecting credit ratings, and so on... my mother pointed out (very astutely, I thought) that if I pay it off too early, I'll just want to jump in and buy more points!

You have to decide for yourself if that's a good thing or not.

 

[M4travels]

my mother pointed out (very astutely, I thought) that if I pay it off too early, I'll just want to jump in and buy more points!

And this, dear people, is why I NEVER listen to my mother!

Michael

 

[mikey13v]

We used those checks from Chase for a fixed rate of 2.99%, wrote it for $20,000, and charged a $30 fee. Cutting our interest to 1/3 what is was before. It was much better than being able to deduct it on our taxes. Saving us about $850 in the first year ($1320 in interest savings, loss of $470 in tax savings). Just make sure you don't miss a payment, your rate will go way up. We use our bill payer account to make our minimum payment twice a month, just to make sure!!

I agree that the credit score for many could be affected poorly, but for others the impact from the savings could greatly outweigh the credit issue.
We could always shift the debt to our HELOC at 5.7% if we need to.

By the way, we first paid off our DVC loans with our BofA rewards card, then used the check from chase. Thats an extra 20,000 air miles or $200.00 reward. Just a one time bonus to sweeten the deal.
Be careful if you try to do this, you can't use one of these checks to pay off the balance of a debt to the same bank. i.e. write a Chase convienience check to pay off a Chase loan/credit card.

 

[brasey]

I went the route of using some tax money 1/4 of the price and the rest out of a 401k at 7% over 5 years. The payment ended up around what Disney wanted but 5 less years and I get the money.

 

[Groucho]

Be careful if you try to do this, you can't use one of these checks to pay off the balance of a debt to the same bank. i.e. write a Chase convienience check to pay off a Chase loan/credit card.

Actually... I think you can get around that. At least, that was my plan. I have a Chase Disney that's going to start getting interest in a couple weeks, which has a balance on it. Since you can't write the check from the Chase Subaru to the Chase Disney, my plan was to write the check to myself/my bank, which they definitely state that you CAN do and that it should be counted like any other transaction (same interest, terms, etc)... I'd take the 3.99% money (within a grand or two of the credit limit) and pay off the Disney card and put the balance towards the DVC loan. Since it's coming from my bank account, they can't complain that I'm using one Chase card to pay the other.

Like I said, I eventually decided not to do it... but only because if I make good-sized payments, I can pay off the Disney card pretty soon, and besides, I hate to lose the 3% back from the Subaru card. (That alone nearly pays for the higher interest I'll have by not transferring balances.) If I pay off the DVC as early as I hope to, the difference in cost really won't be too terribly much, so I'll just leave that as is. And my mother's probably right - even though I haven't been able to use any of my points yet, I can easily see the temptation to pick up some more... you can never have too many!

 

[jacejace]

is there any penalty for paying off the dvc loan early?

 

[TSM1993]

is there any penalty for paying off the dvc loan early?

My understanding of this is there is no penalty for paying off early.

 

[mikey13v]

is there any penalty for paying off the dvc loan early?

You can pay any amount over your minimum payment. You may use any form of payment as well, personal check, bank check, credit card, and I would assume cash as well.

 

[fluffykim]

hello-

I think the MOST important thing not addressed here is straight line amortization versus compound.

Your loan is straight line, which means the interest plus the principle will be the same every single month.

Your credit card is compound, which means it recalculates every month the balance (made up of principle and previous interest) and gives you a new balance. THis is why people get into credit card hell. They try to pay minimum or a little more than minimum and never make headway. Straight line makes much more sense than compound anyday.

Plus, you can always pay extra monthly on your loan and it will go straight off the principle.

Good luck