Borrow vs Payments

Borrow vs Payments…

Easily once a week I get a customer who will come in and say I’m paying way too much in payments. So we will sit down and have a conversation, I start by asking give me a whole number, how much are you in debt total? A lot of the time I will here we are about $10,000 and it’s just too much. It is too much… kind of. Now give me a break down how did we get to $10,000? Credit cards, cars, other loans? Here is a long story short you need to take a long look at all of your accounts and see where your money is going. If it is credit cards, know what is on the cards next is see what your interest rate is. There are some credit cards out there that a consolidation loan will not be able to beat. Before running out and getting a loan to pay off all of these other debts, I had a customer who wanted to do a consultation loan last week. I asked if she could get a statement, she jumped on the app and found the most recent statement. Her everyday interest rate was 7.50% actually was 4% above Wall Street Prime. I said at best we are going to be looking at a 7.49% interest rate. I can’t tell you no I won’t take an application but you are going to trade one for one. I can tell you it wouldn’t make sense for my my personal life to do this loan. She said she did have 2 other credit cards she wanted to get paid off at the same time. Ok well lets see what we can do… The credit card she was holding had an available limit of $15,000 which was way above where she needed to be to pay everything off. On that one credit card she had an offer of 0% for 12 months consolidation OR 5.99% for life. So we took all 3 options side by side. In total she wanted to pay off $10,000. My loan way would have her paid off in 3 years for $311 a month the 5.99% would have her paid off in 3 years at $304 per month. And the 0% would be $800 a month because the debt has to be paid back in just 12 months or you back date all of that interest and you start way over! I asked what she was paying in total between the 3 cards right about $400 ok well if it’s me I’m going to take advantage of the 5.99% offer, I’m going to continue to make the same $400 payment making that little bit extra payment will have you out of debt in 27 months and save you almost $250 in interest.

I had another couple who was in about $10,000 worth of debt they had just gotten married and was in to change the name on all of the accounts and wanted to get joint accounts and talk about a loan we are going to get all of our debit knocked out in 3 or 4 years. Great idea! So during our conversation and consolidation of accounts I start asking about a loan payment how much they are wanting to stay around the $350 a month that she is paying on her credit cards. Cool, at least you have a plan. So we keep going and talking. I tell them you’ll have just shy of $7,000 in your savings account. What if you took that down to $1,000? Panic ran across their faces, “why would we do something like that?” Well you can pay off over half of your debt without any extra effort. Explain that to me… ok well you are asking for $10,000 you have over $6,000 in savings right now, if you took that down to $1070 and put that into a CD and we knew that we aren’t going to touch that without an emergency. Ok, but then what? The rest of it is going into your checking account and we are going to pay off these 3 credit cards, and leave $170 on this last card. Then we are going to next month pay $17o to that card and $190 to the next highest card. If we do it this way you will be debt free in 22 months. If you get a loan we are going to be looking at 3 to 4 years of the same $350 payments. But we just finally got to the point to have that much money in savings. I get that I really do, here is where I’m at last month we paid you less than a $.25 in interest your interest payment on that loan is going to be about $200 without getting out my calculator. I would rather see you take your money and do this by yourself in those 22 months. If you do that and you grind it out and you take the same $350 for the next 26 months after you are paid off you will have $9,100. If you stay with the $.25 a month for the next 4 years I’m going to give you $12 in interest. You can do this without me, if you want to get a new car or something like that come see me but you will be in a good enough place without me to do this all on your own. Just believe in yourselves just keep telling each other $9,000. Make sure you both have the same goal and dig in.

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