Earlier this week I received a letter from Prosper saying I had been pre-approved for a loan of upto $35,000 with a 5.99% interest rate hook. I get loads of credit card and loan offers each week, but this one from Prosper actually peaked my interest, so I decided to check them out… and… more on that later.
Before I signed on the virtual dotted line with Prosper, I decided to see what my bank would offer me. I was looking for a $10,000 loan which would cover all my credit card balances and pay the $3,000 tax bill I recently received. My bank, Meritrust offered me a refinance of my car loan, which would yield the $3,000 needed to pay off the tax bill and a signature loan worth $4,500 to cover my Discover and AMEX balances, BUT I would have to close both of those credit cards as a condition of the signature loan.
This would not work for me as I want to clear the balances on all my credit cards and effectively do a reset for the start of 2016 after a disastrous year financially for my family, unemployment, unexpected costs and extortionate medical drug costs due to crappy medical insurance. A single $300-400 payment is easier to manage than paying 3-4 accounts, it’s not a matter of being able to pay, it’s about manageability.
Closing the Discover and American Express credit card accounts is not viable for us and the Meritrust loan offer would mean that our Meritrust VISA credit card would still have a near maxed out balance. If I were to get rid of a credit card it would be the Meritrust VISA, it has the lowest limit and no cash back benefits.
Additionally, I don’t want refinance my car loan, I did this once before, transferring from Capital One to Meritrust. The end result was that I ended up back where I started after already paying over $4,000 on the car, basically adding $4k to the cost of the car albeit at a lower interest rate and monthly payment.
Back to Prosper, I decided to go ahead and apply, the 5.99% interest rate didn’t exist for me with a 700+ credit score, it offered me 10.06% for a three year loan of $10,500. Why $10,500 you ask when I wanted $10,000? well, Prosper charge a fee for setting all this up, which on $10,500 is $525 or $500 on a $10,000 loan. Now I just have to wait to see what happens, basically it’s a crowdfunding loan system, where people who actually have spare cash loan you money in return for a small ROI, e.g. interest payments.
It’s not a disaster if the loan request does not get funded on Prosper, I’ll just have to work harder to pay off the credits cards and close the Meritrust VISA. Stop spending on the credit cards and pay them off slowly over time at maybe $100/mo each, leaving more money in our checking account to live on.
Update [Nov, 7 2015, 14:24]: I have decided to withdraw my request for a loan. Prosper are now asking for information and documentation that I do not feel comfortable giving to them due to the nature of how loans are funded, I don’t know who my information will be shared with. I also don’t have or need a checkbook and despite it being a joint bank account, statements and checks only show my wife’s name.
I am now looking at using my Discover card which has a $8,400 credit limit ($6,000+ available) to pay off the Meritrust VISA card and then cancel that card. Partially because Meritrust have left a bad taste in my mouth trying to force me to close my outside credit card accounts. But mainly because the card doesn’t give me any sort of tangible rewards plus I get charged “periodical” fees and balance transfers are costly.