Money Matters

First of all, let me say right off the bat, that I'm no financial genius. I was always good at math, but put a dollar-sign in front of a number, and start getting all "interest this" and "compound yearly amortized" that, I go into dumb-dumb land.

So...

For a while now I've been thinking that it would be a good idea to consolidate my debt. I've got a student loan, a line of credit and I've been carrying a fairly large balance on my VISA card (which I've switched to a low-interest card in the past year). And then, out of the blue, my bank calls me and asks if I'd be interested in getting a low-interest loan to consolidate my debt. Great timing!

So I spoke to a rep about it, and we discussed options. They offered a loan at 8% interest, which is lower than my student loan (~10%), LoC (8.5%) and card (10.5%). Over 4 years, the monthly payments would be only slightly lower than what I pay on the combined debt now. Except that, in an attempt to more aggressively reduce the balance on my VISA card, I've set up my bank account so that on each bi-weekly pay day, an extra $100 gets paid to my VISA account, over and above the minimum payment. So, if I were to pay off the card with the consolidation loan, I would have that $200 a month back in my pocket.

Now this seems like a no-brainer to me, but I told them I wanted a little while to consider it. There are a few things on my mind:

1) I have a natural distrust of the big banks. Not to the extent that I stuff money under my mattress. I'm not that paranoid. (Besides, that's the first place they'd look.) But I do question their motives. (These are the people who charge us outrageous service charges for letting us access our own money.) What's in it for them? Do they stand to make more money off me in the long run with constant monthly payments over four years? After all, if I keep paying off my VISA balance, the payments will get smaller and smaller. Or are they simply being proactive in a competitive financial services sector? Trying to maintain me as a continued customer for their products?

2) Should I try to talk them into giving me a better interest rate? Can I do that? I think I may want a longer term: five years instead of four years, meaning somewhat lower monthly payments, but longer to pay it off.

3) What's better, a fixed rate loan, or a variable rate loan. If I go with a variable rate, as I understand it, are interest rates expected to go up or down significantly in the forseeable future? Maybe a fixed rate is safer?

4) I probably should check out some of the other banks to see if they have a better offer, no? If I can get better terms from them, I should go with them, right? Or can I use that to haggle with my bank? "Hey, BMO has a 7% loan. Can you meet that, ya bastards?" I mean, minus the "ya bastards" part.

If any of you loyal readers have been down this road yourself, or have any advice to share, I would appreciate your comments. Thanks.