Have a lot of small loans to pay off.

Discussion in 'Budget & Bargains' started by jac2000, Jan 26, 2017.

  1. jac2000

    jac2000 New Member

    Hi,

    I have a lot of personal loans applied last year and before. Managing everything is getting complicated and hard to calculate and budget. I want to reduce the debts and dependence on credits this year.

    This lead me to think about getting a debt consolidation loan. This will allow me to pay off all the different loans with varied rates and have just one loan. I read about it and found that I may have to use my house as a collateral. http://www.mortgagesmortgages.ca/mortgage-options/debt-consolidation/ But, the combined money I borrowed don't add up to the value of my house. So, would it be a good idea?

    Has anyone taken debt consolidation loan? Has it helped you save money?
     
  2. AuntJamelle

    AuntJamelle Well-Known Member

    Hmmm...I have read that in some cases debt consolidation loans are not all they are cracked up to be. You have to decide what is right for you, of course! But my two cents worth would be to put in a plug for the Dave Ramsey method. It has really worked for us!

    If nothing else, the snowball method of paying off debt seems to be tried and true. We don't use an envelope cash system like we are "supposed" to. I just have an Excel spreadsheet that I've built our entire budget out on for the next year or two - money coming in and going out - every little thing I can think of plugged in. Then I can tell how much we are going to have left over at the end of each month to pay extra on debt.

    You list all your debts and start paying as much extra as you can on the smallest debt - regardless of interest rate - and make the minimums on everything else. Then once it is paid off you tackle the next one, having now freed yourself from making the minimum payment on that first smallest debt you use that $ plus everything else extra you can come up with to tackle the next smallest debt and so on.

    Things start to "snowball" and you can really pay things down quickly, at least we've found that to be the case. My Excel spreadsheet method (I just made it, very simple formulas for adding and subtracting :) ) lets me see when we'll be able to pay off the truck, the camper and so on.

    I'm happy to chat more about this approach, but perhaps others have more thoughts on the debt consolidation idea? I guess the thing that I come back to is that these debt consolidation companies are not doing this as a public service, they make money off of it for sure. If you can, it might be better to stay in control yourself. No judging either way here, just my musings!!!
     
    jampss likes this.
  3. sweetpumkinpye

    sweetpumkinpye Well-Known Member

    We are trying really hard to pay everything of ASAP. I put an extra $2000 on our mortgage on Thursday, we have 21years remaining but will hopefully have it paid off this year. We have then decided that the money that we pay on the mortgage will then go into my Superannuation for a while to try and build up my retirement fund more.
    Whenever we get a payrise the extra money always goes to paying off debt. If we lived without it last week we can live without it this week.

    Financially we are doing OK, we are not in the horrible position that we have so much debt that we need to consolidate loans.
     
  4. missjane

    missjane Well-Known Member

    The problem with consolidation loans is that your debt is not the problem. Your spending habits are the problem, so when you continue spending the way you have been and make no changes in your spending habits, there goes your house because what are you going to do when you accrue more debt after mortgaging off your house to a loan company and have no way to pay the new debt or the consolidation loan?!

    Follow the advice of AuntJamelle and tackle the debt.
     
    Last edited: Apr 20, 2017
  5. sweetpumkinpye

    sweetpumkinpye Well-Known Member

    Good advice Jane
     
  6. Ahorsesoul

    Ahorsesoul Santa's Elves

    I agree, got with GrammaDeb's advice.
     
  7. Miss JoDee

    Miss JoDee Member

    This is a good tool to help you keep track of your spending. It is a better tool use if you use it as planned spending. It will take about 3 months to get it completely tweaked.
     
  8. PamelaG

    PamelaG Active Member

    I'd be very careful of anything that required you to use your house as collateral. I have to second Dave Ramsey's teachings - the snowball method is a great one and gives you a sense of accomplishment as you whittle away your debts. His Financial Peace University course was given at our church and I know many people really saw changes in their financial lives.

    The Dave Ramsey principle that we use is the Zero-Based Budget. Every dollar that comes in has a name - Savings, Mortgage, Utilities, Groceries, Gas, Christmas Fund, Rental House Expenses Fund. We know where every dollar is going so that we don't end up with, what is the expression, More Month at the end of the Money! AuntJamelle's Excel spreadsheet is a great way to set up something like this.
     
  9. Miss JoDee

    Miss JoDee Member

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