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Thread: Lump sum payment to credit card

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    God/dess Mare's Avatar
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    Default Lump sum payment to credit card

    My credit union credit card was just informed I'm not in the credit union. They are giving me 45 days to opt out in which I can pay off at the rate I have been paying off. But the account will be closed.
    Or i can keep it and pay variable apr. (18%?)
    I owe 12,000.
    My fiance is willing to lend me some $ to offer a lump sum payment.
    What should I do?
    I have never had to negotiate a lump sum payment.
    Also I am reading to get it all in writing and ask that they delete the item from my credit report. How do I ask them to do this in a way that will work to my benefit?
    Do I just take the first offer or can they go lower than that? Do I go over the head of the first person I talk too?
    Thanks.

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    Banned Melonie's Avatar
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    Default Re: Lump sum payment to credit card

    I'm not clear exactly what this credit union is proposing. Are they saying that you have 45 days to make a decision ? Are they also saying that if in the next 45 days you opt to stay with your existing interest rate, that they will close the account to new charges but they will allow you to pay down the $12k balance over a period of months or years under the original terms and interest rate of that account ?

    Offering a lump sum payment in exchange for a negotiated reduction in balance is probably NOT going to draw a whole lot of interest by a credit union. The reason is that, unlike commercial banks, they probably are not sitting on a ton of bad subprime mortgage or business loan debt for which they are in dire need of 'cash' to meet regulatory reserve requirements. Credit Unions were NOT subject to the same consequences of the Community Reinvestment Act that prompted commercial banks to approve risky 'subprime' loans, and as such their balance sheets are probably in reasonably good shape.

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    Default Re: Lump sum payment to credit card

    Melonie!!!!
    I was hoping to hear from you.
    The letter says: You may opt out withing 45 days of this notice. When we recieve your notification you r account will be closed.You will be obligated to pay your account in full or by making periodic payments under the terms of your cardmember agreement in effect on the date you recieved this notice.
    I guess if I choose to keep it open :
    non member apr - the variable non-member apr is based on the prime rate plus 9.99% spread and would have been 14.99% as of oct 1, 2008.
    I'm sure you're right on the lump sum payment. I'd probably have to be in default anyway. I have been faithfully making my payments.
    But if they double I will have a problem making them I think.
    I am leaning towards closing the account and maintaining my same payments. And then if I can come across extra $ to use that to pay it down. Or we could pay it down by half and I would be able to pay him back and not owe him interest.
    If I close the account will that screw my credit report? I'd hate to think after all these years of paying faithfully they will just screw me. But I also wouldn't be suprised.
    We plan on moving soon and I don't want a glitch when the rental companies are trying to get us into an apt.
    Thanks for reading all this. sadly i don't have much of a financial clue about all the fancy stuff. I really need to stick to cash.

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    Default Re: Lump sum payment to credit card

    Also right now my apr is 9.99%.

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    Default Re: Lump sum payment to credit card

    ^^^ well if indeed this credit union is offering to allow you to pay off your $12k balance at a 9.99% interest rate over a period of years, this will be FAR less expensive than converting to a new active credit card account at 15% interest ... which could easily increase above that amount with future changes in interest rate climate / universal default etc. But on the negative side, electing to close the existing account in order to keep the 9.99% terms will essentially lock you out of obtaining another credit card account at a different bank (due to debt to income ratio).

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    Default Re: Lump sum payment to credit card

    Will it screw up my credit report? What if I do that (close the account) and then use the loan to pay it in 1/2? I'm thinking that is best right now.
    Will that hurt our chances of finding an apt?

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    Default Re: Lump sum payment to credit card

    what loan ? A private loan from your BF ? Certainly this would save you the 10% interest, but it will also affect your BF's asset ratio.

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    Default Re: Lump sum payment to credit card

    Yes, A private loan from my fiance. he would rather me pay him w/ no interest than carry the debt.
    If we do that what are the tax rammifications?

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    Default Re: Lump sum payment to credit card

    Quote Originally Posted by Mare View Post
    Yes, A private loan from my fiance. he would rather me pay him w/ no interest than carry the debt.
    If we do that what are the tax rammifications?
    If you do not pay the loan and between lovers - probably seen as a gift and he would owe the taxes on it.

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    Default Re: Lump sum payment to credit card

    ^^^ but I think that <= $11000 per year in gifts is exempt from the tax.

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    Default Re: Lump sum payment to credit card

    Thanks Melonie!!! Now you're thanked 2 times in posts. Just wanted to say I love your advice and look for it.

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    Default Re: Lump sum payment to credit card

    The exempt amount goes up to $13000 in 2009. Also, if the gift is less than the exempt amount no gift tax return needs be filed.

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    Default Re: Lump sum payment to credit card

    I closed the account.

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