General loan against TSP

[KevinD]

Theres another radio talk show that I listen to, John Adams. He's an Atlanta real estate guy. He says that debt/mortgages/lending is like electricity. If you stick your finger in the socket you get a jolt. But if you use it right it is a tool to be used to build wealth. He mostly talks about single family rental houses.

The commercial real estate market is a situation where property owners are playing with electricity. In the past a property owner wouldn't pay out right for a strip mall or an apartment complex. Who in their right mind would pay cash for a commercial property? In this situation, if I had a million dollars I wouldn't pay out right for a commercial property either. From what I hear the commercial real estate financing is about to hit the fan this year.

I do see where letting a credit card company float your expenses and give you cash back and you pay it off every month that you can make a buck or two but this false economy we have seen has ground to a stop and people like me and alevin and luv2surf need to pay off accumulated debt and learn to live within our means.

Good conversation!

 

[Rod]

I do see where letting a credit card company float your expenses and give you cash back and you pay it off every month that you can make a buck or two

This is exactly what we do. We have a no-fee CASH rewards card from Pentagon Federal Credit Union which pays the following rewards:

- 5% cash back on gas paid at the pump
- 2% cash back on supermarket purchases
- 1.25% cash back from all other purchases

Since we NEVER EVER carry-over a balance, we charge every living expense we can (including utilities) in order to take full advantage of the rewards.

We average $60.00 cash reward each month. I've seen it as high as $75.00 when gas prices were higher.

Can't beat FREE money!

https://www.penfed.org/productsAndRates/creditCards/RewardCards.asp

 

[Rustynutt]

Thanks to all the replies. I agree about the strict budget. Without the budget, spending will get out of hand and it did for fairly long time. I don't actually know where all that money has gone to. I am a family man and the wife does the shopping so it is my fault for not overseeing and doing a little bit of the shopping myself.

I have already put the request in for the loan. But, I will back down my contribution to 5% like you said.
thanks again :cheesy:

Saw your questions on another site a couple of weeks ago, there you provided a bit more information about your situation. Actually, a lot more information :worried:

All of this aside, and that now you have applied for the TSP loan, hopefully you have taken the time to write your budget down on a piece of paper with what comes in and what goes out. The current state of the economy will not only dictate your family living on a budget, it will absolutely require it. You and your wife need to work together on it. You need to balance and review it before each payday comes.

Don't recall what you said was available to you, but to really make pulling funds from your TSP work, you'll need enough to pay off ALL of your revolving credit where you are only managing to keep the account out of default. If you don't have enough to say pay off 3 accounts with 10k in debt, pay one off, bring the second down as far as possible leaving enough to drop the third noticeably down. Don't use the funds for anything frivolous, it will be tempting to skim a couple of hundred off the amount for enjoyment. Yea, the math for the interest won't work out on this, but in the event you can't pay all the accounts off, it will bring the minimum payment down on two to help meet your budget needs. Your family still needs to eat, but that extra six bucks for texting isn't a necessity. Get rid of it. Get on a level payment plan with your utility companies, sure you'll be paying a bit more to them during the lows of the season, but as you haven't been able to budget in the past, would be a good buffer against an unexpected high bill. Pay on time, late fees suck your efforts down the drain, don't over draw on accounts and create more cost.
Calculate and claim enough exemptions so as to not be over paying income tax throughout the year.
Auto insurance, pay an additional amount each month so you'll have a couple of hundred extra during November and December. Plan for registration fees, tires and such. Set aside each month to cover for those.
Recycle. Don't laugh, once you start looking what goes into the trash can, a months separation of recyclable goods can bring in a couple of gallons of gas. Eat for lunch what you had for dinner the night before. Shop only for items on sale at the market, use coupons. It all adds up.
What ever you do, you need to keep your budget in the positive each month, even if all your wife has is 20 bucks to go to the hair dressers. It's going to be tough with only one wage earner in the family.
Don't mean to sound so brash, but in the other off site post you made your situation sound serious. You want to protect your government employment right now above all else. You surely don't want judgments attached to your pay check. Those are non negotiable, and are very hard to create a budget around. You should have just gotten a decent increase in pay this period. Budget and stick to it, next year it could end up as "additional" income in the green. It's going to be a long year for everyone, except for the non-professional fisherman and golfers here.

Sorry, I'm all out of T-Shirts

 

[KevinD]

Nice post Rustynut. Thats what the whole nation is going to have to do. Ain't no stimulus going to bring back spending on credit like "we the people" have been doing in the past. I feel fortunate that I woke up when I did...

 

[momacs]

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest. There's a really good thread on Fatwallet in the finance section, search for IBJanky and it explains it all there.

 

[ChemEng]

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest. There's a really good thread on Fatwallet in the finance section, search for IBJanky and it explains it all there.

But why would you ever want to have $1,000s of dollars of 0% interest debt? Maybe because right now you could park it in a savings account earning at least 3% and make money from the debt. Its the bank paying you for using their debt products (credit cards).

Just pay the minimum payments during the introductory period of the card and pay it off the month before it transitions away from the 0%. Too easy.

 

[KevinD]

But why would you ever want to have $1,000s of dollars of 0% interest debt?

Because it beats thousands of dollars of debt at 18%, 23%, 27% maybe?

Heck, 0% beats 2.125 that you're paying to yourself!

 

[ChemEng]

Ummm. No.

If you can't understand why borrowing money at 0% to invest in a guaranteed 3% can be a good idea, then we aren't going to agree (and that you also have a lot of math to learn). I could run through the numbers but that would also probably be a bridge too far.

Because it beats thousands of dollars of debt at 18%, 23%, 27% maybe?

Heck, 0% beats 2.125 that you're paying to yourself!

 

[momacs]

It is possible to make good money off credit cards if you qualify (excellent credit scores). Not just with the rewards, cash back etc. Even if you don't have any balances for the credit cards to do balance transfers to. Alot of them will just send you a check for the amount of the balance transfer. Then you either buy a cd or what I've done, open up rewards checking accounts that pay high interest. They were paying 6% but of course they've been going down all year as the interest rates have dropped. Most are 3% now, except for a few hold outs at 5 and 6%. $100,000 at even at 3% is still $3000 for 12 months and you're not doing anything except making the payments on time. :nuts: Your credit scores will drop a bit, but as soon as they're all paid back, they'll all go right back up.

 

[KevinD]

I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.

He ain't trying to borrow money to invest.

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest.

She ain't trying to borrow money at 0% to invest.

If you can't understand why borrowing money at 0% to invest in a guaranteed 3% can be a good idea, then we aren't going to agree (and that you also have a lot of math to learn). I could run through the numbers but that would also probably be a bridge too far.

Ain't nobody talking about borrowing money to invest but you. This discussion is about getting out of debt, balance transfers, borrowing money to pay off credit cards WITH BALANCES ON THEM. I don't think there's a credit card in the world that would let you cash out at 0% without it being a balance transfer.

Not everybody is in your shoes but you can't seem to grasp that. Please...lets try to stay on topic.

 

[ChemEng]

Umm no. Borrowing money from the TSP to pay off a credit card or whatever is financially the same thing as borrowing from a credit card to invest in a savings account. It operates on the principal of interest arbitrage. If you believe in being completely debt free, then you don't have access to that arbitrage tool.

He ain't trying to borrow money to invest.

 

[KevinD]

 

[momacs]

My original post was to use the 0% balance transfer money to transfer the credit card balances that he was being charged interest on.
Sorry I took the thread off topic

 

[KevinD]

ChemEng - You have convinced me of one thing. I'm going to look for some sort of rewards card to pay for things that I would normally use my debit/check card for and pay it off in full each month. That would probably be a good thing even for people who have balances on other cards that they are trying to get paid off. Free money, right?

I guess the rest of it is above my head...

 

[alevin]

ChemEng - You have convinced me of one thing. I'm going to look for some sort of rewards card to pay for things that I would normally use my debit/check card for and pay it off in full each month. That would probably be a good thing even for people who have balances on other cards that they are trying to get paid off. Free money, right?

I guess the rest of it is above my head...

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

 

[momacs]

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:

 

[budnipper1]

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:

Wise decision, momacs. I stopped doing business with Amex a long time ago. Biggest crooks of them all!
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[KevinD]

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

Thanks for the heads up!

 

[Show-me]

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:

This is classic, Clark Howard described this exact scenario to a Tee in one of his shows a few months ago. Read between the lines, they are doing risk management and figure if you are using it at Walmart you are hard up. LOL

I went shopping at Sam's and Walmart and my debit card companies called me a few minutes ago checking on my purchases for the weekend. Gas, lunch at Sprouts, Sam's, and Wal-mart. What is suspicious there? Nothing big and all purchases under $100.

 

[budnipper1]

This is classic, Clark Howard described this exact scenario to a Tee in one of his shows a few months ago. Read between the lines, they are doing risk management and figure if you are using it at Walmart you are hard up. LOL
I went shopping at Sam's and Walmart and my debit card companies called me a few minutes ago checking on my purchases for the weekend. Gas, lunch at Sprouts, Sam's, and Wal-mart. What is suspicious there? Nothing big and all purchases under $100.

It is possible that your debit card company's system flagged your account because of multiple transactions during an unusually short period of time.

A few years ago, I bought a motor home and had to pick it up in Virginia. On the trip back home, I stopped to fill up that gas-guzzler several times using my debit card. At that time, the gas pumps had a limit and would shut off at $50. So I had to re-card the pump to finish filling up. Before I got back home, the card company called me on my cell to investigate 'suspicious activity' on my account. Actually, I'm glad they are watching.
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