|
by editor@familybudgeteer.com
John Smith was going over his credit card statements on a lazy
afternoon. When all was said and added up, he was $10,000 in credit
card debt and that didn't include his car payment! The amount was
staggering to him. So John had to do some serious thinking about
consolidating his bills.
John called the bank the very next day to ask about taking out a
loan. The current rate for a personal load at his credit union was
12.9 percent on a 60-month loan. The rate for a consolidation loan
with collateral was 9.975% for a 60-month loan. Should John Smith
take out either of these loans?
Well, let's take a good look at his circumstances. He was paying out
over $600 a month in loans and credit cards, including his car. All
of his credit cards had interest rates ranging from 16.9% to 21.89%.
His car had a percentage rate of 13.9%. Now he had a chance to bring
them all down to either 12.9 percent or 9.975%.
By doing the simple math, the answer was an astounding YES! By taking
out the collateralized consolidation loan, he could combine all of
his credit card bills and his car payment and have a payment of $372
per month!
The only reason he would not want to take out either of these loans
is if he planned to continue using the credit cards after they were
paid off. That would put him in a worse position than when he started
out this quest to consolidate!
So to end our story, Mr. Smith marched himself down to his credit
union took out the collateralized consolidation loan and promptly
closed his credit card accounts and destroyed the cards. Five years
later, Mr. Smith has much less debt and a paid off card with only one
credit card (with a low credit limit) for emergency uses only. He
pays for everything with cash and is very happy without "Mr. Plastic"
weighing him down with debt.
=====================================
EMAIL
|
|