Financial advise

[Michaelbro]

Hi Everyone.

I need some financial advice. I have about 4 accounts that I pay monthly and let’s say they total R1000 pm and the total amount that I owe on all four accounts is R10 000. The interest and fees per month totals to R500 and the remaining payment terms range from 3 to 15 months.

I have this idea that I can pay then off all at once using one of three methods. (Pay and close the accounts)

• Credit Card
• Personal loan
• Overdraft facility

The fourth option is to just sit it out and pay the monthly instalments. Please give your advice and share and experience you have.

Many thanks

Mike

 

[Archer]

Pay the minimum on the 3 accounts with the lowest interest.
Pay as much as you can afford on the one account with the highest interest.
Once that account is paid off, do the next highest interest rate account. Keep going until they are all paid off.

Thats my advise vs creating more debt to pay off your current debt

 

[Michaelbro]

Pay the minimum on the 3 accounts with the lowest interest.
Pay as much as you can afford on the one account with the highest interest.
Once that account is paid off, do the next highest interest rate account. Keep going until they are all paid off.

Thats my advise vs creating more debt to pay off your current debt

Thanks .
I'm in the situation that whatever I am paying is the max than I can afford but the minimum for the actual instalment. There is no room to play .

 

[The_MAC]

Debt-snowball_method

 

[Cius]

Yep, just pay it off as fast as possible. If you can get some weekend work and earn a few K you can pay off one debt and then up the payments into the others getting the snowball rolling faster. If additional earnings are not an option check around your home for stuff you are not using that you could sell on gumtree or something. The issue with waiting it out is that in the interim other needs will pop up and as your budget is so tight you have to extend some debt meaning you never get out from under it. Its very important to switch from paying interest to earning it by saving each month (once debt is gone) and only buying cash. I tend to save into a few categories a little each month and then that one month when the car breaks or I need new work shoes it does not hurt me as I already have a lot saved up just waiting for that situation to arise. It takes a little discipline but once you get there you will wonder how you got buy without the budget/savings.

 

[Pitbull]

Hi Everyone.

I need some financial advice. I have about 4 accounts that I pay monthly and let’s say they total R1000 pm and the total amount that I owe on all four accounts is R10 000. The interest and fees per month totals to R500 and the remaining payment terms range from 3 to 15 months.

I have this idea that I can pay then off all at once using one of three methods. (Pay and close the accounts)

• Credit Card
• Personal loan
• Overdraft facility

The fourth option is to just sit it out and pay the monthly instalments. Please give your advice and share and experience you have.

Many thanks

Mike

Don't do it Mike.

We all know you want to make more debt in the long run to pay off short term debt. We have all been there. Archer's advice is sound. Either that or just finish paying it off the way they are. Once you finish one in 3 months put the extra available and pay that on the other till all is settled.

 

[HavocXphere]

Move it to an overdraft account / whatever....IF the interest rate there is lower and you can still make the payment.

 

[Pitbull]

Move it to an overdraft account / whatever....IF the interest rate there is lower and you can still make the payment.

I would not. Overdraft will end up costing him more in the long run. The interrest might be lower but it's a continual cycle. The longest repayment he has is only 15 months, shortest is 3. I would just pay it off as it. Mike, what is the reason for wanting to do it? You thinking you will loosen up some more money in the short term?

There must a be a reason or objective that you want to accomplish now for you to ask this question.

 

[HavocXphere]

I would not. Overdraft will end up costing him more in the long run. The interrest might be lower but it's a continual cycle.

Explain to me how it costs more if interest is less?

Short of there being some arbitrary administration fee that makes absolutely no sense.

 

[Pitbull]

Explain to me how it costs more if interest is less?

Short of there being some arbitrary administration fee that makes absolutely no sense.

And overdraft gets deducted from his salary. Account goes intoa negative, salary paid. Account is in credit - negative. So it becomes a cycle of having that overdraft over a very long period of time even at lower interrest he will end up with it longer than just 15 months. This is obviously just an observation and more info is needed from him? Like his objectives

 

[BlackJack1301]

Take your debt and go outside in the sun and put them all in a bowl filled with water. They need to be about 5 cm submerged, then you will achieve the optimum financial burn off ratio.

During this time you will also realize that debt is a part of life and you cannot outrun it. Ever.

 

[Mike Hoxbig]

Pay the minimum on the 3 accounts with the lowest interest.
Pay as much as you can afford on the one account with the highest interest.
Once that account is paid off, do the next highest interest rate account. Keep going until they are all paid off.

Thats my advise vs creating more debt to pay off your current debt

I would do this.

 

[HavocXphere]

Nee PB.

I know everyone is scared the infamous debt spiral and having accounts in the negative, but in this case it is the optimal solution from a mathematical PoV, first due to the interest (presumably) being lower and secondly because you shave a little bit of extra interest off due to the entire salary hitting the overdraft (about interest rate on loan x 0.5 x salary per month). It will also not increase the total time to clear the debt - it'll decrease it slightly due to interest savings.

We can battle it out with Excel calculations...but please lets rather not.

One thing that isn't taken into account in the above is the psychological effect. Take the snowball method mentioned above. Its mathematically inferior to other approaches, but results in an immediate sense of progress...which motivates people to keep going.

 

[Michaelbro]

And overdraft gets deducted from his salary. Account goes intoa negative, salary paid. Account is in credit - negative. So it becomes a cycle of having that overdraft over a very long period of time even at lower interrest he will end up with it longer than just 15 months. This is obviously just an observation and more info is needed from him? Like his objectives

My plan is to lower the overdraft each month by the "R1000" amount. And put as much Into paying it off as fat as possible. It is possible for me to do this in 6- 8 months. In my head I only pay the fees on this account. Currently each of the 4 accounts has Interest, insurance ,service fees .

Debt-snowball_method

Thank you

Yep, just pay it off as fast as possible. If you can get some weekend work and earn a few K you can pay off one debt and then up the payments into the others getting the snowball rolling faster. If additional earnings are not an option check around your home for stuff you are not using that you could sell on gumtree or something. The issue with waiting it out is that in the interim other needs will pop up and as your budget is so tight you have to extend some debt meaning you never get out from under it. Its very important to switch from paying interest to earning it by saving each month (once debt is gone) and only buying cash. I tend to save into a few categories a little each month and then that one month when the car breaks or I need new work shoes it does not hurt me as I already have a lot saved up just waiting for that situation to arise. It takes a little discipline but once you get there you will wonder how you got buy without the budget/savings.

Thanks , I will look around the house for things to sell , maybe lower the total amount. I do save a little each month for in case a situation arises.

Don't do it Mike.

We all know you want to make more debt in the long run to pay off short term debt. We have all been there. Archer's advice is sound. Either that or just finish paying it off the way they are. Once you finish one in 3 months put the extra available and pay that on the other till all is settled.

Thank you

Move it to an overdraft account / whatever....IF the interest rate there is lower and you can still make the payment.

 

[Pitbull]

My plan is to lower the overdraft each month by the "R1000" amount. And put as much Into paying it off as fat as possible. It is possible for me to do this in 6- 8 months. In my head I only pay the fees on this account. Currently each of the 4 accounts has Interest, insurance ,service fees .

If this is your main aim then yes HavocXphere is correct.

The problem with an overdraft, and I speak from experience here, is that you end up with having to use the overdraft just to make up for the loss in salary because of the negative deduction when your salary lands. If you are disciplined enough to do the above then go for it.

I wasn't and it took me a very long time to sort my overdraft. I have learnt my lessons (given I was younger then). Same with my CC's I only have them in credit now. Both has about R 10k in them, what I use I put back in. So instead of paying interrest on it, I get a small % of interrest. and it's is snowballing since I always put back exactly what I used. Both cards started with just 8k in them and as time has gone on I have increased them slightly. This due to over payment by a few rand on the amount I used the last month and interrest.

Like I said, if you have the discipline go for it. If you don't, rather just pay off you debt the way it is now. Your dispossable income will become more after 3 months as per your post above.

Good Luck

 

[Michaelbro]

I would not. Overdraft will end up costing him more in the long run. The interrest might be lower but it's a continual cycle. The longest repayment he has is only 15 months, shortest is 3. I would just pay it off as it. Mike, what is the reason for wanting to do it? You thinking you will loosen up some more money in the short term?

There must a be a reason or objective that you want to accomplish now for you to ask this question.

I want to pay off my accounts , im looking to fee up some money as fast as possible as I want to purchase a house. I want to do this early next year. (paying debt to make more debt :wtf They are all small amounts but the fees add up . Ive been reading the "The Proof is in the Pudding!! My Financial Diary." thread and I also want to start investing .

Explain to me how it costs more if interest is less?

Short of there being some arbitrary administration fee that makes absolutely no sense.

Interest is not the worst cost , its actually service fees on the accounts .

Nee PB.

One thing that isn't taken into account in the above is the psychological effect. Take the snowball method mentioned above. Its mathematically inferior to other approaches, but results in an immediate sense of progress...which motivates people to keep going.

Nailed it!!

 

[Michaelbro]

If this is your main aim then yes HavocXphere is correct.

The problem with an overdraft, and I speak from experience here, is that you end up with having to use the overdraft just to make up for the loss in salary because of the negative deduction when your salary lands. If you are disciplined enough to do the above then go for it.

I wasn't and it took me a very long time to sort my overdraft. I have learnt my lessons (given I was younger then). Same with my CC's I only have them in credit now. Both has about R 10k in them, what I use I put back in. So instead of paying interrest on it, I get a small % of interrest. and it's is snowballing since I always put back exactly what I used. Both cards started with just 8k in them and as time has gone on I have increased them slightly. This due to over payment by a few rand on the amount I used the last month and interrest.

Like I said, if you have the discipline go for it. If you don't, rather just pay off you debt the way it is now. Your dispossable income will become more after 3 months as per your post above.

Good Luck

I have done this before with a personal loan (Personal loans come straight from hell) and I ended up using the accounts again , this time if I go through with it I will close the said accounts . I have a credit card with a small limit that I mange to keep in the positives for the most part . So I am weir of falling into the traps . I also have had an over draft before (Due to fraud) and it was soul destroying .

I took a look at my 4 my accounts and the total fees add up to more than one of my re payments, so im actually not even paying one of the accounts