As mentioned above...a loan won't help you...all it does is shifts the payment amounts and you will be paying way more in the long run...create a plan to actually pay down your debts. here is an article that I've written about a system to pay down your debts.....Sorry for the length...hope this helps...
From drowning in debt to financially free in 5 steps...
Debts are becoming a more common reality in today’s world. It’s no secret that we live in a materialistic world where people feel compelled to “keep up with the Jones’s next door”. We are constantly bombarded with “0% financing for 12 months”, “No annual fees and 5% interest” credit cards and “no payments until 2009”, so it makes it sooooooo easy to get those things we all want, but can’t afford right now.
But what happens when we get everything we want and realize that we are a little further in debt than our budget will allow? That seemingly endless cycle of paying stuff off and having nothing at the end of payday. When you’ve got more than one debt how are you ever going to get out? Which one should you pay first? I keep paying the minimum payments but it doesn’t seem to be getting any lower. I once asked a client how he felt about his debts and he replied "you're not living unless you're in debt" I completely disagree....imagine how much more you could do if you weren't in debt!
With most debts people think if they are paying the minimum payments it will get it paid off quickly. In reality, the minimum payments are generally in place so the lender doesn’t have to send it to collections and not to help you pay it off quickly. By paying your payment amounts or even the frequency of your payments (monthly to bi-weekly), it will shave months or even years off your debts and save you hundreds if not thousands in interest.
Here’s a bit of a “debt strategy” that seems to really work. It will shave tons of time off your debt repayment and will get you out of debt faster and will also create a great habit for savings and building up assets.
Let’s use this as our example of someone’s debts:
VISA: $2000 – Minimum monthly payment $50
Master card: $5000 – Minimum monthly payment $125
Loan: $15,000 – Monthly Payment $400
Mortgage: $50,000 – Monthly payment $400
Step 1: Check you’re your debts for ways to shave costs.
One area people often overlook on their debts is the insurance they have on them. Instead of having separate insurance on all your debts, take a look at an individual insurance policy covering all of them in one. You’ll likely save a good chunk of money each month on that alone. Furthermore, sometimes the insurance you are paying for is worked into the loan amount, so you are paying interest on the insurance payments as well. There are many different reasons for changing from creditor insurance to personal insurance but that’s a whole other story. See if there are any other options in your debts that you are paying for that you don’t need as well.
Step 2: Analyze your budget and free up a little extra money.
That’s right, the dreaded word “budget”. You don’t need to analyze every penny, just find some ways to maybe free up an extra $50 or $100 a month. Chances are if you are reading this your debt situation is enough of a concern that making a few simple changes like going out for beer one night less a month or brown bagging lunch 2 or 3 of 5 days a week instead of eating out every day, or making your own coffee at home instead of those $4 latte’s every morning, is something to seriously consider. The more you can free up the better, but don’t think you have to completely change your lifestyle to do it.
Step 3: The game plan….
Let’s say you were able to free up $100 a month. What the game plan is, is to get rid of the smallest debt first and work your way up to the biggest one. Instead of a shot gun approach of just fire in a bunch of direction, we are going to focus our aim at one thing at a time, so it’s a little more manageable. Using the example situation above, here’s what it will look like:
A) Take that extra $100 and apply it on top of your VISA payment each month (now you are paying $150 a month to the VISA instead of $50). Continue making minimum payments on the other debts, until the VISA is paid off.
B) When VISA is paid off, you are now used to making those $150 payments anyways, so take the $150 you were paying on the VISA and add that to the minimum payment you were making on the master card ($150+$125 = new payment $275/month). You’re now making more than double the payments, it’s pretty easy to see that this will get paid off much sooner.
C) When the MC is paid off, take that $275 and add it to your loan payment (new loan payment = $675/month). Sounds like paying $675 a month is a lot, but remember, you’ve now been used to paying these payments for several months now…it’s just going to one spot now, right? Keep paying $675 on your loan until it’s gone and continue making your minimum on the mortgage.
D) Now that the loan is paid off, take that $675 a month and apply that to your mortgage payment. Many mortgages have limits to how much you can increase your payments by, so it is important to plan things out. EI: When your mortgage renews and you know you will be making massively high mortgage payments (adding the $675 to $350 is almost tripling your payment, most banks only allow up to double), renew it to an open mortgage so you can make the payments as high as you can. Now that you are making $1025 payments each month, you will have the mortgage paid off in less than 5 years instead of 20, plus you will save roughly $40,000 in interest. IF you can’t think what you would do with an extra $40,000 in your pocket instead of the banks, feel free to give it to me. :D
Step 4: Getting ahead…
Congratulations, you are now completely debt free and likely decades sooner than you ever thought you would be! Now is the best opportunity to get ahead. You now have been used to paying $1025 a month (in this situation) towards your debts for probably about 5-6 years. You’re used to that expense, why not keep paying it….to yourself! Start building in investment portfolio or savings plan of some sort. Remember when you were in debt and you couldn’t even fathom the thought of having $100 free each month to save? Now you have $1000 a month! That’s $12,000 a year! Imagine in 2 years, you could buy that new car, and you don’t even have to finance it this time! You can pull a Jim Carey from the movie The Mask and say “Do you accept CASH!?!” CHA-CHING! And drop 25 grand on the table! It’s really up to you what to do with your money. You’ve worked hard to get out of debt so you deserve to treat yourself, but if you are used to putting that $1000 a month towards something why not really treat yourself with retiring 10 years sooner than you thought was even possible? If you are 30 years old and putting away $1000 a month to a retirement plan, retiring at age 50 is very attainable!
Step 5: Financial Freedom!
Enjoy life! You’ve gone from being $72,000 in debt to being debt free with an extra $1000 a month going towards savings and planning on retiring at age 50, in less than 5 years! Many people spend their entire lives in debt, but you’ve tackled it now in a couple years! You now have the choice to do what you want financially and not worry about it!