bad debt
- Thread starter Zion
- Start date
After reading The Richest Man in Babylon I would offer the simplistic but reasonable magic pill, that you should devote 20% of your post tax income to debt (bad debt) reduction and 10% to investment ( eg. the after tax cost of you investment property, eg. ), the remaining 70% is what you should live on..no more!
Naturally I am also thinking, well if you purchased the "right" house in the "right" spot and added value by a "good" renovation or extention you could generate equity more than you have in bad debt.
Can you reorganize your debts? create a LOC against your 1 IP and use some of it to clear your high interest bad debt ( and never never think about more bad debt!)? The link between "Consumer Credit" and "Dumb" need's to be implanted deaply in your mind, link that consumer credit and the TV marketing of the consumer society is a big con to keep you poor. ( if you know Always_Learning personally you would say hypocrite...I have to admit a love for electronic gadgetry and am currently dribbling over a 50in Hi-Def Plasma TV ...and I dont watch more than 1 hour of TV a week!)
Naturally I am also thinking, well if you purchased the "right" house in the "right" spot and added value by a "good" renovation or extention you could generate equity more than you have in bad debt.
Can you reorganize your debts? create a LOC against your 1 IP and use some of it to clear your high interest bad debt ( and never never think about more bad debt!)? The link between "Consumer Credit" and "Dumb" need's to be implanted deaply in your mind, link that consumer credit and the TV marketing of the consumer society is a big con to keep you poor. ( if you know Always_Learning personally you would say hypocrite...I have to admit a love for electronic gadgetry and am currently dribbling over a 50in Hi-Def Plasma TV ...and I dont watch more than 1 hour of TV a week!)
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To create an LOC to pay out bad debt is only shifting the bad debt into the IP. Still not deductable. He may enjoy a lower rate but also has no set time frame to get it paid out.
I always counsel my LOC clients to consider their self discipline with what is really a huge credit card!
Can you pay out a bad debt faster than you believe the housing market will increase? The opportunity cost of focussing on clearing that debt is to not buy at todays prices.
Perhaps an answer is to buy now and then clear the debt. There really is severals ways to skin this cat.
Zion, I can't really advise you without knowing the exact situation so the above opinions are just food for thought.
Cheers folks,
I always counsel my LOC clients to consider their self discipline with what is really a huge credit card!
Can you pay out a bad debt faster than you believe the housing market will increase? The opportunity cost of focussing on clearing that debt is to not buy at todays prices.
Perhaps an answer is to buy now and then clear the debt. There really is severals ways to skin this cat.
Zion, I can't really advise you without knowing the exact situation so the above opinions are just food for thought.
Cheers folks,
Hi Zion,
Simon makes a vaild point (he's also very handsome too).
There are a lot of variables here. Some of these include how much you owe in bad debt, the value of your property (and the corresponding loan), your income (how soon you can pay off the bad debt without affecting your lifestyle), the growth on any prospective investment property, and many others.
Is there any chance of posting a few more details? Nothing too personal, but maybe a few numbers (perhaps the amount of the bad debt and the interest rate(s)... this may help to come up with a better answer.
Best wishes,
Jamie
Simon makes a vaild point (he's also very handsome too).
There are a lot of variables here. Some of these include how much you owe in bad debt, the value of your property (and the corresponding loan), your income (how soon you can pay off the bad debt without affecting your lifestyle), the growth on any prospective investment property, and many others.
Is there any chance of posting a few more details? Nothing too personal, but maybe a few numbers (perhaps the amount of the bad debt and the interest rate(s)... this may help to come up with a better answer.
Best wishes,
Jamie
I am currently selling one of my 2x IPs to pay down my PPOR. It was a hard decision to make but I was uncomfortable with the amount of debt in my home loan and the IP has gone up quite a lot (I purchased it before my PPOR). Anyway, I plan to loan against my PPOR straight away to purchase another IP.
The World,
Do a good search in here on trusts. It may be possible to simply create a trust and sell the IP to it with a 105% loan. Then pay down the PPOR. This will save you from selling and then rebuying - at least save you an agents comission.
If all you want to do is fix up the debts so that they are all deductable then this may be an answer.
All the best,
Do a good search in here on trusts. It may be possible to simply create a trust and sell the IP to it with a 105% loan. Then pay down the PPOR. This will save you from selling and then rebuying - at least save you an agents comission.
If all you want to do is fix up the debts so that they are all deductable then this may be an answer.
All the best,
