I got an offer when I signed into my bank account the other day.  It was for a “free” vacation with a loan of $25,000 or more so intrigued I called up the bank about the offer.  Essentially, it is a 3 night stay at any hotel in the United States (restrictions apply) for taking a loan out of at least $25,000.   The key question to ask here is what is the loan rate….so I asked and got an answer back of 7.9% for 36 months or 6.9% for 24 months.

Let’s do the math!

Borrowing $25,000 for 36 months at 7.9% will yield monthly payments of $782.26.   So if we take $782.26 and multiply that by 36 = $28,161.23.    So if we subtract the total payments of $28,161 from the original loan amount ($25k) we get = $3,161.23.    So that “free” hotel costs $1,053.74 per night!

Borrowing $25,000 for 24 months at 6.9% will yield monthly payments of $1,118.18.   So if we take the $1,118.18 and multiply that by 24 = $26,836.36.  So if we find the delta we get $1,836.36.   If we divide that by three then we get $612.12 per night!

Certainly a 24 month loan is better than a 36 month loan for the “free” vacation but still, $612 per night is pretty expensive.   Am I going to sign up for the loan?   Actually, I may do it but with a few caveats; first I need to find out if there is an early pre-payment penalty.  The smart thing to do is get the loan, use the free vacation and pay it back immediately or within a month.   A month of interest is only $76.50 so even going out a full three months will likely result in a break even point.

Also, I intend on doing a magic trick in turning a non-dischargable debt (student loans) into dischargable debt bank signature loan.   In the event I have to file bankruptcy (for any reason), I won’t need to worry about student loan debt piling on….and that’s how you get rich slick kids.