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Technical
- ✓ On paper, it looked like a textbook win.
- ✓ Lower rate, single monthly payment, immediate breathing room.
- ✓ Then I looked at the closing disclosures and origination fees.
- ✓ Not quite the clean escape he thought he bought.
When reviewing client portfolios last month, I pulled a file belonging to a mid-level manager who took out a $35,000 personal loan at 11.5% APR to wipe out four revolving credit card lines averaging 24.8% APR. On paper, it looked like a textbook win. Lower rate, single monthly payment, immediate breathing room.
Then I looked at the closing disclosures and origination fees. Not quite the clean escape he thought he bought.
Here is the cold math. He paid a 5% upfront origination fee ($1,750), which was deducted directly from the loan proceeds. That meant his actual cash disbursement was short of the target payoff figure, forcing him to scrape together his own cash to cover the remaining card balances. Miss that detail, and you leave active revolving lines open with small residual balances that continue to accrue interest.
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