Personal Loans - the dumbest thing I ever did

[Other Pineapple Smurf]

Many of us get tempted to take out a personal loan and I was weak when I did. I'm sharing the following to show how just how stupid I was to do so. That moment of weakness has taught me a valuable lesson:

This is not a post about what led me to take out the loan, or what the money was used for, but rather to show a bit of reality seldom shared. I've also neglected this loan in the sense that it quietly goes off my bank account each month and I've never really bothered to keep up to date with the actual balance. And yes, I will be paying this f'n mistake off this year.

Got only myself to blame.


Account Type : PERSONAL LOAN
Original Capital Balance : 21,000.00
Annual Interest Rate : 23.50
Instalment Amount : 768.30
Frequency of Instalment : MONTHLY
Contract Date : 22/11/2010
Expiry Date : 30/11/2015
Original Loan Term : 60
No of Remaining Instalments : 34

Outstanding Capital Balance : 15,487.53
Actual Contract Balance : 21,048.63

Summary of Transactions

Payments Received : -19,925.82
Interest Accrued : -9,461.82


* You will see that after 26 months I've basically only payed off the interest of this loan if I continue to only make the required contributions.

 

[Alton Turner Blackwood]

You and me both. Mine is a 70k loan though

I made a conscientious decision to pay at least double every month since last month. Took out this bloody loan about 18 months ago

edit: don't you mean after "26 months" and not 34?

 

[syntax]

I took out a loan for my wedding recently. Same story, got crappy rates and they were murdering me on the interest.
I was fortunate enough to make a plan and pay the thing off with a bonus i received but the bastards still made a tidy sum off of me.

 

[Other Pineapple Smurf]

You and me both. Mine is a 70k loan though

I made a conscientious decision to pay at least double every month since last month. Took out this bloody loan about 18 months ago

edit: don't you mean after "26 months" and not 34?

Your right

 

[bavmorda]

This is why i got an access bond. Want new car from the bond, renew my kitchen from the bond, new TV ... etc. Interest rate 8.2 and you don't pay any fees and stuff like this.

 

[themba990]

* You will see that after 26 months I've basically only payed off the interest of this loan if I continue to only make the required contributions.

These numbers look a bit off

Opening Balance R21 048.63
Less
Outstanding Balance R15 487.53
= R5561.1
Plus
Interest Accrued: R9461.82
= R15 022.92

But

Payments Received is R19 925.82

So where is the R19 925.82 - R15 022.92 = R4 902.9 ?

 

[Beachless]

Why dont you get an overdraft or a credit card and pay off the personal loan then pay of the new debt over a shorter period with a lower interest rate?

Even a virginmoney CC is less than the personal loan you got at 13.5 - 17.5%

 

[The_MAC]

R21000 over 5 years (thats the first mistake).
23.5% Interest Rate (thats the second one).

People pay off cars in that amount of time, and that's usually a 200k+ Loan with an interest rate of 9% or less, so the math should already tell you that this is a bad idea.

 

[Nether]

Would it help to payoff a personal load faster?

Because the bank issues a total amount you need to pay at the end of the loan.

Eg R40 000 over 3 years, you will pay approx R70 000 at the end.

Will it reduce this total amount if you pay it down faster?

 

[rorz0r]

Wow that's pretty bad. Wesbank used to send me flippin personal loan stuff in the mail all the time but I phoned one day and spoke to someone straight away who cancelled that so that's pretty good. Interest rates are crazy though. Plus 1 for just getting a virginmoney cc online and paying off that personal loan. They are probably charging you a R57 fee every month as well.

 

[frobbertze]

Depends on where you get the personal loan. My loan at FNB only had the Capital listed and added interest monthly, while a friend of mine got his loan at ABSA and all interest was added before hand. But they usually have to offer a settlement amount if paying the whole amount early

 

[supersunbird]

Would it help to payoff a personal load faster?

Because the bank issues a total amount you need to pay at the end of the loan.

Eg R40 000 over 3 years, you will pay approx R70 000 at the end.

Will it reduce this total amount if you pay it down faster?

Yes

 

[AlmightyBender]

Wow is that interest rate even legal? I'd really try to refinance that bad boy. Good on you for taking ownership and sharing your story, good man!

 

[ebendl]

Why dont you get an overdraft or a credit card and pay off the personal loan then pay of the new debt over a shorter period with a lower interest rate?

Even a virginmoney CC is less than the personal loan you got at 13.5 - 17.5%

Yes, create more debt to repay the existing debt. Always a good idea.

The better idea here would be to just try and pay off double / triple and drop your living standard during that time.

 

[rorz0r]

Yes, create more debt to repay the existing debt. Always a good idea.

The better idea here would be to just try and pay off double / triple and drop your living standard during that time.

Erm... Getting a lower interest rate and less fees and paying the same amount towards the debt will lead to paying off the debt earlier, in this case quite a lot earlier. Of course you can try to cut back on other areas but most likely if you got to taking personal loans you were already past that point.

 

[Beachless]

Yes, create more debt to repay the existing debt. Always a good idea.

The better idea here would be to just try and pay off double / triple and drop your living standard during that time.

What new debt?

 

[encrypted]

I took R15k out for my wedding, paid R998 a month, 12 months later I settled it.... R12500 to settle.

Personal loans are evil.

 

[Other Pineapple Smurf]

Why dont you get an overdraft or a credit card and pay off the personal loan then pay of the new debt over a shorter period with a lower interest rate?

Even a virginmoney CC is less than the personal loan you got at 13.5 - 17.5%

This thread is not about knocking other or jumping into their characters. Its showing a bit of truth about personal loans.

 

[Other Pineapple Smurf]

R21000 over 5 years (thats the first mistake).
23.5% Interest Rate (thats the second one).

People pay off cars in that amount of time, and that's usually a 200k+ Loan with an interest rate of 9% or less, so the math should already tell you that this is a bad idea.

Listen 8 post wonder, a R200K car loan would cost you R6K+ per month over the same time period at half the interest. Also a car loan is secured, a personal loan is unsecured - hence the reason for the higher interest due to higher risk.

Think before you attempt to make an intelligent post.

 

[Other Pineapple Smurf]

These numbers look a bit off
....
So where is the R19 925.82 - R15 022.92 = R4 902.9 ?

That my dear BB'ier is the wonderful world of admin fees and mandatory insurance. Another hidden "feature" of personal loans. Reason why the poor get poorer as Personal Loans is the only debt they have access to.