How many ways are there to raise funds for real estate deals? Many.
Have you ever used a cash advance on your credit cards to finance a deal? This is one quick way to get the financing you need. But here are a number of important things to consider. Some of those include:
- What is the interest rate on the cash advance?
- How long can you use it?
- What is the fee to do the transaction?
When you get a low interest credit card offer in the mail, it can be very tempting. I recently received another 0.99% rate for a year with the cost of the transaction at three percent. I took it and will use the money for a year. Where else can I get money at that rate? And I got a good sized chunk.
However, I have learned the hard way some pit falls to watch out for.
- First, of course, always make your payments on-time; early is better. If you’re late on any, you may pay the higher interest rate on the entire amount borrowed for the entire time you’ve had it. All deals may end once you’ve made a late payment.
- Second, be sure to ask what the transfer fee is. Some charge a percentage of the amount you borrow, some a flat fee. It can be high so ask. You can always ask for a lower fee. Maybe they can!
- Third, how long can you use it? If it’s only 3 or 6 months, it may not be worth it. There may not be time to use it, and get it back, to pay off the loan that quickly.
- Fourth, and VERY important, you may only want to do this on a card where you have a ZERO balance and do not plan to use the card for anything else. If you have anything else charged to this card, the interest rate on that will be higher than the teaser rate you are trying to get. When you send in your payment, some companies may use it to pay off the lower rate first and the other charges at the higher rate continue to grow until the lower rate transfer is paid off. It can take you a very long time to start paying off the fees on the higher rate charges and this is how some credit card companies make so much money from these special offers.
Ask enough questions, get all the answers BEFORE you borrow.
ALWAYS READ THE FINE PRINT!
- Pay on time
- Pay off early
- Ask what the fees and charges are
- Know the true and final interest rate to see if its really worth it to you
- Know how long you can use the money
- Better to get cash advances only on cards with zero balance that you will not use for any additional charges.
Done right, credit cards are a great source of financing.