Advise Needed with Debt/OSAP

[untaka]

Here is the situation:

My car is coming of age, I just got off the phone and it seems I’m looking into a lot of money to fix it up. Anyway I basically have around $11,000 left on my osap loan, with around 5gz in saving. I already have 2 credit cards (1 older one with almost nothing on it) and I just ordered one this week.

I’ve been thinking about getting the Citi 0% card and them killing off my osap loan with the card and some (not all) of the money in my savings. Then just pay back the card instead of osap. I need to generate more money for savings at the same time, so 12 months no interest is good for me. However I’m really worried about my credit rating, as this will be my 3rd credit card.

Also now I have to think about money for a new(used) car (roughly 10k) It will take several months to save up, however not sure how much longer the car can hold on.

Please advise.

I've worked hard to kill off osap which is 7.5% interest now, I can put on this month easily over 1k on either loan to completely remove it

[UrbanPoet]

i used CITI 12month 0% promo to pay off my OSAP loans...
It only took me a few months working f/t to pay it off.

[untaka]

I think my major concern is having 3 credit cards hurting my rating. Plus I just got one this week if I get one next week who is to say I will be approved.

[UrbanPoet]

I think my major concern is having 3 credit cards hurting my rating. Plus I just got one this week if I get one next week who is to say I will be approved.

MBNA and Citi bank are CREDIT whores... I make a lil under the $35k mark and those mofos @ mbna approved me for $5500 then upped me to $7500 after O_O

I dont think it'll hurt your credit card that bad. IT wont be good... But then again just think about what your gonna do in the near future... A mortgage? More loans? Not likely since you wanna pay off that OSAP asap.

It wont take too long to rebuild your credit after that.

[joe1487]

Are you anticipating a need for credit soon? If not, why worry about your rating when there are savings to be had? At any rate, having plenty of credit lines available to you with a static debt level makes your credit rating better, not worse, as your total debt to credit limit ratio decreases.

Furthermore, you should never possess savings at the same time as you are paying non-deductible interest. Paying off a loan at 7.5% interest equates to investing in a GIC at 10.7% interest, assuming a 30% marginal tax rate. Where else can one obtain that kind of return? At any rate, even if you don't pay any tax, 7.5% is a much better guaranteed return than whatever you're earning in the bank - likely between 1-3%. I don't know why people cater to the banks' business by borrowing money from them at a high rate and then lending it to them at a lower rate.

First, apply your savings directly to the OSAP loan. You will save $375 in interest per year at an opportunity cost of $150 at most. Then, use the 0% promotion (if you can obtain it with your credit) to pay off as much of the OSAP loan as possible. Because that amount will not be accumulating any interest whatsoever, make only minimum payments on the 0% card while putting all your spare cash toward retiring the OSAP loan. When the OSAP loan is gone (hopefully within 12 months), start paying down the 0% debt. Always pay off your debt with the highest interest first, and don't start saving until your debt is gone.

When the debt is retired, you'll be able to start saving again, and you'll have $835/year that you were formerly paying in interest charges. IMO, unless you can get a very low interest rate, hold out on the car until you can afford to buy it outright. If that's not a possibility, so be it, but make sure you're not any longer in the situation where you are paying interest on debt and have savings lying around.

[untaka]

Thanks Guys :D

I only have savings in case I lost my job or something, it is enough to cover my bills until I would get another position (hopefully).