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If you are deeply in debt already most likely no bank will give you a "consolidation loan",and if you get one it will be at a rate of just around the same you are paying on many of your cards already..so what you end up doing is just stretching payments to facilitate your cash flow.
Depends on what your collateral is like.
And you seem to not understand that better cash flow means that you actually have more money to reduce your principal, while still having money left over.
With a decent debt consolidation loan you could slash your credit part payments to a fraction of what they were, and steadily chip away at the balance over time. Obviously, there are some caveats to all this. First, choose a program that makes sense financially.
Of course, that also means you have to not use your credit cards anymore. Stick in the desk drawer. Even better, stick them in the oven and heat to 350 degrees.
Last edited by MinivanDriver; 02-13-2018 at 10:46 AM..
Another thing I don't understand are those people who are paying monthly credit card balances. They are literally paying loan shark interest rates, so much so that they are only making tiny dents in their monthly balance.
It would be so incredibly easy to walk into a bank or a credit union and get a debt consolidation loan at a rate one-fifth that amount. Why the heck don't people do that?
Because they're too lazy to do it, that's why.
I expect that a majority of folks are in that predicament are there because they lack an understanding of financial matters and the discipline to make wise financial decisions. If they followed your advice, it would only be a matter of time before they had both credit card debt and personal loan debt.
I expect that a majority of folks are in that predicament are there because they lack an understanding of financial matters and the discipline to make wise financial decisions. If they followed your advice, it would only be a matter of time before they had both credit card debt and personal loan debt.
True. But if they did indeed see it as a way to escape CC debt and not spend further, it would make a world of difference. People are just slaves to their appetites.
Just today, I received a postcard in the mail from the bank advertising a 4.99% debt consolideration loan rate. Mind you, I have zero credit card debt. But given that the national average right now is 15%, that's a huge drop in cash outlays on a monthly basis. Take half your savings and bank it. Take the other half and pay down principal.
I do think, as we've said, that most of these people simply do not think on a grander scale. They want a $4 cup of coffee, so they buy it, not realizing how much money these little things add up to over the course of the year and also not understanding how those little savings, if invested can create a substantial amount of money over the course of many years.
It reminds me of the Benjamin Franklin quote, "Small holes sink great ships"
I do think, as we've said, that most of these people simply do not think on a grander scale. They want a $4 cup of coffee, so they buy it, not realizing how much money these little things add up to over the course of the year and also not understanding how those little savings, if invested can create a substantial amount of money over the course of many years.
It reminds me of the Benjamin Franklin quote, "Small holes sink great ships"
I've found that people can be intimidated by thinking about money. They think you have to be a rocket scientist when, truthfully, with a little research online and a few well-placed phone calls, it's pretty easy.
We just treat it like a game rather than drudgery.
Just today, I received a postcard in the mail from the bank advertising a 4.99% debt consolideration loan rate. Mind you, I have zero credit card debt. But given that the national average right now is 15%, that's a huge drop in cash outlays on a monthly basis.
Was it based on hard collateral, like house equity or vehicles? That's one of the nastiest and most seductive traps in the game. In the housing boom, people kept paying off unsecured debt (== "nyah, nyah!") with debt secured on their ballooning equity. Day comes they can't make a payment, they aren't yelled at by a credit card company... they lose the house.
That was an extreme time for it, but most credit advisors say you should never, ever roll unsecured debt (credit cards, signature loans) into secured debt where you can lose the collateral. On a more common and smaller scale, struggling families can lose the car when they miss a loan payment - which means complete disaster, oftentimes. Consolidation and "recovery" loan providers tend to be aggressive, if not outright predatory.
Was it based on hard collateral, like house equity or vehicles? That's one of the nastiest and most seductive traps in the game. In the housing boom, people kept paying off unsecured debt (== "nyah, nyah!") with debt secured on their ballooning equity. Day comes they can't make a payment, they aren't yelled at by a credit card company... they lose the house.
That was an extreme time for it, but most credit advisors say you should never, ever roll unsecured debt (credit cards, signature loans) into secured debt where you can lose the collateral. On a more common and smaller scale, struggling families can lose the car when they miss a loan payment - which means complete disaster, oftentimes. Consolidation and "recovery" loan providers tend to be aggressive, if not outright predatory.
Actually not. That's for uncollateralized loans $50,000 and under.
Actually not. That's for uncollateralized loans $50,000 and under.
Wow. Now I have to wonder how many people with accumulated debt they'd like to combine would qualify... and how high the interest rate goes before they do.
Wow. Now I have to wonder how many people with accumulated debt they'd like to combine would qualify... and how high the interest rate goes before they do.
Not sure. It's in my recycling bill. But I definitely remember that no collateral was required. And it was a large super-regional bank with a pretty good track record, not some fly-by-night.
Not sure. It's in my recycling bill. But I definitely remember that no collateral was required. And it was a large super-regional bank with a pretty good track record, not some fly-by-night.
Well, it isn't always. The bank would love to have $25k out in a solid loan, even at 5%. And I'd strongly bet that the interest rate goes up sharply as the FICO drops, and it's not too far out before they just decline.
Like pretty much any loan, really. But the lower end of consol loans is swimming with sharks.
After all, 1% financing on cars is advertised to all and only actually given to a small fraction of buyers.
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