Reply: 1.1
From: Chris Legg
I have to disagree with the tactics used.
People in the situation described where they are paying half the gross income in loan repayments simply would not be able to find the extra 10% without putting further incredible strain on their lifes.
There are two ways to do this with no extra repayments.
Sorry this is going to be a long post and I would suggest if you want to work through this example print off a copy of page ten of Burleys Document
1 If property equity is available consolidate all the loans into a new P & I for $149600.
Maintaining the existing payments of $2675 per month would enable the loan to be totally paid out in 5.5 years.However to ease the strain a 10 year loan would reduce the monthly payments to $1670 leaving an extra $1000 per month of income.
2 If no equity
Assuming an interest rate of 16% per annum on the credit cards then the monthly interest on the $10,000 credit card debt would only be $133 per month but the minimum repayments shown are $550 therefore each month there is credit available of $420 which can be redrawn to pay down the other debt.So after two months the $600 Hardware debt could be repaid freeing up a further
$30 per month to be paid into the JC Penny account which after a further two months would also be repaid freeing up a further $40 and so on.
At the end of 10 months or so
all the five smaller accounts would have been paid off making available an extra $240 per month for debt reduction. By this time (10 months) the Wells Fargo account would also have been finished.
At this point there is available $70+$50+$50+$40+$30+$300= $540 per month from finalised accounts.
I would then address the credit cards which should then be paid off using the minimum payments of $550 plus the $540 from above
$1090 less the interest of $133
I personally would pay off the smallest first as this would take three months adding a further $100 per month paying off the second in another three months then increasing the other finally paying off all credit cards by month twenty two.
Choices could then be made about refinancing the remaining car loan, second mortgage and home loan.These of course would also have been reducing by possibly as much as $15000
at the same time
I think apart from the no extra cost the debtors would get reinforcement of their tactic every every two or three months as the smaller loans would be paid off giving them an incentive to continue.
Should anyone wish to discuss their own situation with me please feel free to email me direct.
[email protected]
I think after that I will go for a walk on the beach
Chris