Credit cards and Loans.

[Jbleezyj]

Hey everybody! Well I am about to buy a 08 ninja motorcycle from my friend for $3500. I have about $1,800 in my savings and $800 in my checking right now and I have a credit card limit of $1,300 which has no outstanding balances. (I'm a deadbeat most of the times and only 19 btw if you were wondering my limit is so low). Since I was going to buy this bike from my friend in cash I was wondering if I would be able to go to the bank and cash out money from my credit card. Is it possible to do so?

I'm too lazy to go to the bank and ask or look stupid haha. Well yeh. If not would you be able to cash out a loan you get from the bank. Like say I get a 3k loan and then ask the bank to cash it out for me and get the 3k in my hands. Well I hope so. It will allow me to get this bike much more quicker.

[1averagejoe]

Paypal the money to him? I don't think you can withdraw funds from a credit card. I don't have one.

[ecojeanne]

the interest rate would be much higher on a cc than the bank loan. Do you guys have credit unions over there, for small loans like that we would go to a credit union or post office. The bank should be able to give you a loan if you have a job with a reference. Usually over here that would suffice, but the cc will rip you off

it is possible to take cash out with your cc, the charge to do so is ridiculous and then the interest rate after that. cc's suck ass. they will always rip you off by letting you pay the minimum, basically nothing and you end up years later paying the interest rate, when the bike could have been paid for ages ago.

the best way to use a cc is as if its a debit card, use it when cash won't suffice (ie buying something online) and then pay the bill in full, cc's are useful but dangerous.

[Jbleezyj]

Ok cool then. Well I think I'm just going to take out a 3k loan and just cash it out then. Or would I be able to write it of to the seller and have them deposit it in their bank.

[Illusional]

being that you will put a dent on your credit card and probably take a while to pay it off, you're looking at spending a lot more on this bike than you had expected. credits cards live off people like you who are willing to pay interest on your own money.

raverboy

[GrkScorp]

Ok cool then. Well I think I'm just going to take out a 3k loan and just cash it out then. Or would I be able to write it of to the seller and have them deposit it in their bank.

I really don't know if you're serious or you're just trolling..

But let's assume you're serious..

Here is how lending works.. Be it credit cards or a loan..

You.., are an economic entity.. that's right! You big boy.. You have the ability to convert your human capital to financial capital and be productive in some way.. You can produce goods and services through your labor.., and you can be rewarded money.., which will give you purchasing power to buy anything that you need or that makes you happy..

From that point on.., you have 3 choices:

- Invest (to consume later)
- Do nothing & hold onto your purchasing power
- Consume now

If you do nothing.., through inflation.., your purchasing power becomes less and less..

If you invest.., you charge a fee or expect a return for deferring your consumption into a future date..

If you consume now.., you simply do away with your purchasing power.., and if you don't have enough to consume now.., you can borrow.., and pay a fee to use someone else's money to go ahead with your consumption..

That's not always a bad thing.. If you see an investment opportunity.., and expect a 20% return on the assets you invest.., but you only have $10,000 of your own money and the investment requires $20,000 of investment.., you won't be able to realize the opportunity.. But by borrowing.., even at a rate of 9%.., you are still better off..

Most people would think.. "aha! I get 20%.., and I have to pay 9%.., so I would get about 11% in my pocket".. and they would be wrong..

Invested --> $10,000
Return on assets --> $4,000 (20% x 20,000) - $900 (9% x 10,000) / 20,000 = 15.5%
Return on investment --> $4,000 - $900 / 10,000 = 31%

Would you look at that! The return on assets of that investment was just 20%.., but you were able to realize a 31% return on investment through leverage.. You were able to make more money for yourself by using other people's money..

The theory that allows for that to be possible.., is the interest rate determination that the lender charges the borrower..

The lender just wants to be paid back.., they want their money back.., and they are going to adjust their interest rate based on how much risk they expect they are taking on.., and according to how badly you need the money (aka. how much they can rip you off)..

Generally.., ways to reduce the interest rate you pay are:

- Cosigning on debt: allowing the lender to have the extra security of going after a second person to make good on your promise to pay
- Security & collateral: allowing the lender to place a lean or hold a security interest on an underlying asset to which they may take possession of if you default on your debt obligations so that they may satisfy any existing debt you may owe..
- Credit history & financial standing: When Warren Buffet walks into the bank to get a loan.., they first suck his d*ck.., and then give him the money at practically the prime rate.. That's because they know that he has both the cash flow/income (flow variable) and private equity/wealth (stock variable) to make good on the debt.., and has a history of making good on his debt.. (credit history)

Now.., consider the different lenders and rates they would charge..

Bank:

- Good credit & financial standing: 7% (Compounding monthly)
- Average: 9% (Compounding monthly)
- Bad: Get the fcuk out of our bank!

Credit Card: (Credit)

- 800-850: 8% (Compounding daily)
- 700-799: 12% (Compounding daily)
- 650-699: 14% (Compounding daily)
- 600-649: 16% (Compounding daily)
- 550-599: 18% (Compounding daily)
- 500-549: 20% (Compounding daily)
- 450-499: 22% (Compounding daily)
- 400-449: 24% (Compounding daily)
- Default: 29.99% (Compounding daily)

Credit Card: (Cash Advance)

- Anyone: 22% (Compounding daily)
- Default: 29.99% (Compounding daily)

Notice how credit cards represent "unsecured debt".., while banks may secure debt most of the time.. In the case of personal loans.., usually no longer than one year in duration.., you can expect a rate 1-2 points higher..

When I read the part about you wanting to take cash out from your credit card.., I almost cried..

Why? Is your credit history that bad? Unless you REALLY really NEED the money (your current liabilities for this month are past due and they're going to shut off your utilities and foreclose your home unless you pay within the next 3 days).., I find being charged more than 10% interest both insulting.., and nothing less than usury..

Getting a new bike falls nowhere near that kind of need or urgency for financing.. Which means at the very least.., you can go to a bank and negotiate a personal loan for say 9% with the bike as collateral..

For $3,500.., less the $2,600 ($1,800 + $800) you have in your bank right now.., you're looking at a $900 personal loan? That's so small.., the bank won't even give it to you..

So let's say you find a loan officer that's nice enough to negotiate a $1,000 personal loan for you.. Tell him you're trying to kill two birds with one stone.., buying the bike and building your credit.. he'll understand..

Your monthly payment should be roughly $91.38 each month over a 1 year amortization schedule..

Though.., at the end of the day.., whatever you do decide to do.. Just be aware of your purchasing power in life.. Realize that it's limited.. not endless or infinite..

You are on this earth for a finite amount of time.., and in that time.., you can be productive.., and you can realize some amount of purchasing power.. You can choose to use it to consume entirely.., or to consume in part and invest in part.., or you can choose to consume what you produce.., and what you don't produce (borrow to consume more than you even produce)..

Just because I'm of a certain school of thought.., doesn't make one right and one wrong.. I don't have the right to come on here and tell you what to do with your life.., I'm just laying out all the facts.. The choice is entirely yours..

It's possible to survive.., and from the time you are born until the time you die.., to leave this world with having consumed more than you produced..

It's also possible to survive and consume exactly what you produced..

It's also possible to survive and consume less than what you produced.., and leave the rest to your immediate family to ensure their own survival and the survival of future generations to come..

All possible.., none more right than the other.. After you've considered all of them completely.., you'll understand them well enough to be certain in the choices you make for yourself from now on..

[shh!]

$3500 isn't all that much money. I think rather than take out a loan or borrow against your credit card (which BTW is a REALLY terrible idea), you should just save up the money and buy it outright. Since you freely admit you are a deadbeat most of the time, doing otherwise will be risky to your credit history.