Debt Consolidation – Good or Bad?

It seems that everywhere you look these days you can find ads trying to entice people to consolidate debts.

The usual catch-cry goes something like this: “Put all your personal debt (car loans, credit cards etc) into the home mortgage AND cut your repayments in half!”

Let me tell you – those ads are RIGHT. You really could cut your monthly repayments in half. Imagine how much extra money you’re going to have in your pocket each month if you just called a consolidation company or lender and let them fix it all up. What those companies DON’T tell you is that when you consolidate you could end up paying WAY more money in the long run for something you probably don’t even own any more.

How They Do It

Let’s look at the sales-method calculations used by consolidation companies and see how they really CAN halve your monthly repayments.

Home Mortgage: $120,000 at 7.5% over 30 years = $839.06 per month
Car Loan: $15,000 at 10.25% over 5 years = $320.55 per month
Credit Card: $5,000 limit at 18.25% = $80 per month (interest only plus small nominal payment)

Your total monthly expense for the example above is: $1,239.61 per month.

Now, your consolidation company would tell you that if you put your personal debts into your home mortgage and refinanced them, you could cut your monthly payments dramatically!

If you refinanced your home mortgage to include your personal debts, then your NEW loan amount would be $138,000 ($120,000 + $12,000 + $5,000 + $1,000 closing costs = $138,000)

New repayments for a loan of $138,000 at 6.5% over 30 years = $872.25 per month
That’s a potential saving of $367.36 every month. Wow! An extra $367 in your pocket every month. Imagine what you could do with that! No wonder those debt consolidation ads are everywhere you look.

Okay – we didn’t cut your repayments in half, but you can be sure that if I’d used bigger numbers and higher interest rates, I could have worked out a way to show you a GREAT sales pitch for consolidating your debts.

How We See It

The reality of the situation is a little different…

You see, if you continued to pay your $15,000 car loan at $320.55 per month for 5 years, then at the end of 5 years, you would own that car.

Paying $320.55 per month x 60 months (5 years) = You would have paid $19,233 for that car over 5 years.

But if you consolidate that $15,000 into your home mortgage, it will take you up to 30 years to pay off the same car. Let’s see what happens if I work out the cost now…

$15,000 at 6.5% over 30 years = $94.81 per month x 360 months (30 years) = $34,131.60 for the same car!
Would you pay $34,131.60 for a car you know should only have cost $15,000? I know I wouldn’t!

I’m guessing that in 30 years time you won’t even have the same car any more, so you’ll probably be paying off a different car (or two) by then AS WELL.

The same principle applies to your credit card. Will you even remember what you bought for $5,000 in 30 years time? Not likely?

Before you consolidate your debts onto your home mortgage, ask yourself if you couldn’t perhaps budget your current income just a little differently to avoid having to get into a situation that just keeps you in debt even longer than you already will be!

Tips To Faster Payday Loans

While a payday loan is already a really quick process to apply for, it is also important that you realize you can speed it up if you spend a bit of time looking at all of the options to ensure you are doing as much as you can to speed up the process so that you can return to your normal life without a lot of stress of hassles. Keep in mind, a Fast Payday Loan not only gets you back on track quickly, but also allows you to rapidly get the money that you need.

Your first step should be taking a few minutes to gather together a quick list of your bills that need to be covered immediately. This will help you to determine the amount that you need to ask for when applying for the payday loan. Asking for an amount that is too small is not going to be much help to you, while asking for an amount that is too large will make it much harder to repay the loan when it is due. A few minutes looking over your plans will make it much easier to determine for certain how much you need to borrow and be sure you are getting the right solution for you.

It is also important to determine when your next payday is. This will allow you to quickly and easily work to schedule the payday loan after you have been paid. Most times, the loans are due within 2 weeks, however many times you can arrange for a couple of extra days in order to coincide with your payday and make it much easier to repay the loan.

Gather together your work information; this should include the name and contact of your supervisor, as well as a couple of recent paycheck stubs. This will typically be required by the lenders in order to approve your Payday Loan Application. By having this information already readily available, you will make it much faster to apply without a huge amount of stress. However, spend a few minutes to make sure that you are getting the best overview possible so that you are able to quickly and easily complete the information that is requested on the application.

Another good idea is to locate the name and address of a local payday loan lender and find out what hours they are open. Most often, you will need to make arrangements to be there on time, and this could mean needing to take a few minutes off from work in order to take care of matters. There is always the option of looking for Fast Payday Loans, though when using this method there is no need to worry about hours since you can apply from home at any time that is convenient for you. As you get ready to apply for a payday loan, you are going to find that the process is incredibly easy and simple.

Keeping your head above water

If you’ve had to take out payday loans to cover emergency expenses, you’re not alone by any means. Most of us have been in that situation before when you have to do whatever it takes to pay for car repairs, emergency travel, or even to keep bread on the table. And while we may have put ourselves in the position of having poor credit, being stuck in the cycle of constantly handing over your paycheck, then borrowing against it again isn’t exactly helping the situation.

You Need To Get Out

Here’s the thing. You don’t have to stay in that cycle forever. There are ways that you can get out of it. The simplest option is to just borrow a little bit less every time you take out payday loans. I know it can be tough making your bills on what you’re able to take home, but if you don’t want to keep handing money over every week, this is what you have to do. Consider this: If you’re maxed out on your payday loans, and another emergency hits, what are you going to do? Not a pretty picture, is it?

You Can Get Out

If you absolutely can’t pay down your loan even a little bit every time you get paid, then you are in seriously over your head, and you need some help. Fortunately, most states regulate the short term loan industry, and there are programs out there than can help you. Ask your payday lender. They may not be happy about it, but in most states, they have to tell you what your options are. Often, you can choose to pay back the loan over a period of several weeks or months. They might try to tell you that it will stop you from getting more payday loans in the future, but don’t let them kid you. For the interest they charge, they will lend you money again if you need it.

There’s Nothing Like Freedom

The best thing you can do once your payday loans are paid off is start paying yourself some of the money you have been paying them all this time. Start a savings account. Think about it. If you have put all that interest money you’ve been paying in a savings account over the past couple of years, you probably wouldn’t have needed to take out payday loans to begin with. Do yourself a favor. Once you get free, stay free.