Crummy Credit Line Switch and Bait

Each month, I chip away at a little bit of principal on my Crummy Line of Credit. Little by little, the total balance due shrinks. However, the process has been slow-going and quite frustrating. The loan itself is a monster, and with an interest rate at almost 30% (29.99% to be exact) it’s disappointing to see how much interest I’ve paid over just this year alone: a whopping $1,557.98. I’m terrified to actually pull a Quickbooks report and find out how much I’ve paid on the life of this loan to date.

But……I’m happy to report I managed to secure a much, much lower interest loan and pay off more than HALF of the crummy line’s balance. Whoo hoo! Of course, I’m just moving half the total balance due to another financial institution that I have to pay as well, but at an incredibly low rate (and zero percent to start), I can focus on getting the crummy line’s balance paid off.

Here’s what I did; I paid off $3,500 of the remaining $7,626.77 using the new, low interest loan. Because I made a whopper of a payment, the financial institution offered me a “settlement” amount that is $1,480 LESS than the original loan balance for a total of $2,646.56 remaining. The $3,500 loan is zero percent interest for a year, then a low 7.5% fixed rate.

The remaining $2,646.56 is no longer generating interest charges, but it is generating a daily fee of $5.99. I agreed to make two more payments of $1,323.28 and will have this baby paid off by the end of October. Not too shabby compared with the 32 months it would have initially taken me and the interest I would have paid, $3,526. Yikes!

According to Credit Karma’s calculator, the $3,500 low interest loan will take approximately 10 months to pay off at a monthly payment of $350 and zero percent in interest if I stick to my plan of paying it off in 10 months. Here’s a quick comparison:

• Total paid in fees on the remaining crummy line of credit: $359.40
• Total amount of time until zero balance: 12 months
• In contrast, if I had kept the crummy line of credit I would be paying $3,526 in interest over 32 months. Yuck.

For those visual learners out there, here’s a quick visual aid:

By calling the Crummy Line of Credit’s customer service and explaining that I wanted to make a large payment, I was able to negotiate a “settlement” amount. If I had been able to pay off the complete loan balance, I would have saved an additional $359.40. If I can pay if off sooner than expected, I save approximately $5.99 per day.

For now, I’m happy with the idea that this sucker will be completely paid in full and no longer generating balloon-interest payments.

Have you negotiated lower balances or “settlement” amounts to reduce a debt? What was your experience?