Personal Loan dilemma

[Quoc414]

Hi guys! new here,
Was wondering if ya'll can help me figure out something.
rigth now i have a 15K personal loan at 10% interest that i've only been paying the minimum.
I also have a credit card with 5k limit. What I was thinking if I can use like 2K or 3K from the card and transfer it to the loan, and pay agressively towards the card. I've always been good with paying off my card. Just wondering what you guys think of my plan?

[kork13]

First off, Welcome!

Unfortunately, it's most likely not worth it in the scenario you're describing. What interest rate would you get on the transfer? What is the upfront transfer fee (typically 2-3% or more)? Most likely, whatever benefit you would gain from transferring some of the loan balance would be eaten up by the transfer fee. If you could do it with a greater proportion of the loan (and thus have more months with the lower interest rate), that would potentially make it more worthwhile. But as you describe it, $2k-$3k wouldn't significantly reduce your total interest/fee payments.

If you can't find a credit card to do a transfer for the full balance (or at least around 60-70%) and for less than 3-4% interest (0% offers are starting to come back, so you could look into finding one of those), I would recommend simply aggressively paying down the loan. Make double payments, or triple payments if you can afford it. If you can make aggressive payments toward the debt on a card, you can do the same without the card.

[disneysteve]

Welcome. I'm not sure you are asking the right question. One thing I often say is that you can't borrow your way out of debt. Where did this debt come from? Why are you only paying the minimum payment? Have you slashed all discretionary spending to free up cash for debt repayment? How about getting a 2nd job or selling stuff?

I'd suggest listing your income, monthly expenses and debts with outstanding balances, interest rates and minimum payments.

[jpg7n16]

Originally Posted by Quoc414

Hi guys! new here,
Was wondering if ya'll can help me figure out something.
rigth now i have a 15K personal loan at 10% interest that i've only been paying the minimum.
I also have a credit card with 5k limit. What I was thinking if I can use like 2K or 3K from the card and transfer it to the loan, and pay agressively towards the card. I've always been good with paying off my card. Just wondering what you guys think of my plan?

It's probably a terrible idea. Most CC's charge much higher than 10% for any type of transaction (purchase or cash advance). It's the interest rate that matters most, not the remaining balance.

And if you can afford to pay "aggressively" on a credit card, why not just pay aggressively on the loan??

[Quoc414]

You got a point jpg, I guess the whole reason i want to pay the card agressively is because I can pay it online, where the Credit Union where I have my loan at is by mail.

Steve,
After rent and all that good stuff, I have about 1000 left each month. I still have about 2000 left to pay for the card from my vacation. I figured this would be a fast way to pay off the loan. I can see why it's a bad idea because I need some liquidity on my Card in case of emergency right? What if I do my budget right, will this work??

[disneysteve]

Originally Posted by Quoc414

After rent and all that good stuff, I have about 1000 left each month. I still have about 2000 left to pay for the card from my vacation. I figured this would be a fast way to pay off the loan. I can see why it's a bad idea because I need some liquidity on my Card in case of emergency right? What if I do my budget right, will this work??

If you have $1,000 of free cash flow each month, why did you have to finance your vacation? Luxuries should not be financed. If you don't have the cash, you don't do it. Vacation, and other wants and luxuries, should be paid for out of savings.

NO! You do not need liquidity on your credit card in case of emergency. You need an EMERGENCY FUND in case of emergency. Do you have any savings? You have $1,000 free each month. Where is that going currently if not to savings?

Again, I'd recommend that you do the following:
List your monthly income, your monthly expenses and each of your debts with balance, interest rate and minimum payment.

I suspect that you don't currently know where your money is going each month.

[Quoc414]

alright i'll do my best here goes::
-Income: 2200

-rent: 700
-loan 1: minimum: $390 balance: $15,000
-Student loan: minimum: $98 balance: $9,000
-Credit Card balance: $2000
-Cable: $55

[jpg7n16]

Well we're here to help you out so do you pay for....

Food?
Gas?
Insurance? (car, health, dental, life, etc.)
401k?
Utilities?
Toiletries?
Clothing? (average month)
Entertainment?
Gifts/giving?

[Quoc414]

car Insurance is 150 a month
misc. expenses is about 200 a month

401k is already taken from the 2200 income

[disneysteve]

Quoc414, you haven't really answered the question yet. What you've given us so far is this:

Income: $2,200
Expenses: $1,593

That does not include the payment on the credit card but assuming a 4% minimum, that would add another $80 bringing us to $1,673. That does not include a whole slew of expenses, as jpg pointed out, like food, gas, clothing, etc.

Earlier, you said you have $1,000 left each month. Based on just what you've listed so far, you really have no more than $500/month free and most likely a lot less than that once all expenses are accounted for.

I'd say your main problem is that you don't know where your money is going. I'd recommend that for the next 30 days, you record every penny you spend on absolutely anything. Keep a notebook, record it with a smartphone, whatever. Save all receipts, too. At the end of the month, sit down with your spending log and review it item by item. See where you are actually spending your money and how much you are actually spending. Then come back and share that info here. Let unbiased eyes look over things and make suggestions as to how to trim spending and direct more money to debt repayment.

[Quoc414]

Thanks Steve
Also, do you think Mint.com is a great way for me to start?
I don't feel quite comfortable putting all my financial info on there, that's the thing.

[disneysteve]

I don't really know anything about mint.com though I've heard many people mention using it. Personally, I think you can track things just fine on your own with paper and pencil. It really isn't rocket science.

[ea1776]

Originally Posted by Quoc414

Also, do you think Mint.com is a great way for me to start?

mint.com didn't work great for me when I tried it. It had trouble being compatible with my credit union checking account. Also, I didn't like that you had to give out all your online account usernames/passwords. I use a spreadsheet on google docs (so I can update it from anywhere, phone, work, home, etc... without needing the .xls file). It has worked very nicely.

I list all my debts, minimum payments, interest rates.
I have another column with debts that I've payed off, with a slash mark through them (for motivation's sake).
I have another column that lists my assets (retirement accounts, emergency fund, personal belonging estimate of worth, car's worth).
I keep a running tab on my net worth, debt, assets and update a column monthly, so I can see how they change overtime, then I plot a graph, which gets updated automatically so I can look at the trendline (and I like to see debts going down down down and net worth & assets going up up up!!!).

Good luck, and I highly recommend just getting amped up about getting out of debt and living frugally. Once I did, I never looked back and it feels great.

[cypher1]

Originally Posted by Quoc414

Thanks Steve
Also, do you think Mint.com is a great way for me to start?
I don't feel quite comfortable putting all my financial info on there, that's the thing.

I was just going to ask, do you do any of banking, credit cards, or student loans online? Besides doing cash transactions, saving receipts, that can be cumbersome trying to sort and organize at first. Backtracking expenses online is so convenient for seeing where most of your money goes (minus the big bills already noted). Moving out from parents basement to my house I realized I can't count on everything within a filecabinet. I'd suggest using Excel spreadsheets to start simple for tracking expenses. There are formulas to calculate everything automatically, which I converted my checking account/savings to do instead of writing down. When you get more comfortable, it can't hurt to add more columns to list all monthly/annual expenses, document the websites for bills/utilities, login ID, customer support number if you need to call (i hate digging through paper work, skimming for a contact #) As a home owner, I even added a column for seasonal expenses/repairs, IE fall sprinkler purge services, spring lawn spray for weeds, detailing an estimated cost/ and phone number. That may be overkill for most, but I like to plan ahead for any "surprises". Not saying you have to, but I also end up checking my cc/checking accounts daily out of old habits.

[Quoc414]

Originally Posted by ea1776

mint.com didn't work great for me when I tried it. It had trouble being compatible with my credit union checking account. Also, I didn't like that you had to give out all your online account usernames/passwords. I use a spreadsheet on google docs (so I can update it from anywhere, phone, work, home, etc... without needing the .xls file). It has worked very nicely.

I list all my debts, minimum payments, interest rates.
I have another column with debts that I've payed off, with a slash mark through them (for motivation's sake).
I have another column that lists my assets (retirement accounts, emergency fund, personal belonging estimate of worth, car's worth).
I keep a running tab on my net worth, debt, assets and update a column monthly, so I can see how they change overtime, then I plot a graph, which gets updated automatically so I can look at the trendline (and I like to see debts going down down down and net worth & assets going up up up!!!).

Good luck, and I highly recommend just getting amped up about getting out of debt and living frugally. Once I did, I never looked back and it feels great.

Is there a formula that you use to automatically calculate everything?
im not good with spreadsheet

[disneysteve]

Originally Posted by cypher1

Backtracking expenses online is so convenient for seeing where most of your money goes

I tend to disagree with this. Backtracking with your bank statement or credit card statement can give a big picture view but a lot can get lost. For example, if it says you spent $50 at WalMart, it doesn't tell you if you spent it on groceries, new sheets or Coke and video games. You need the receipt for that. For someone who really needs to get a handle on where their money is going, just looking at the online overview probably isn't sufficient.

[cypher1]

Originally Posted by disneysteve

I tend to disagree with this. Backtracking with your bank statement or credit card statement can give a big picture view but a lot can get lost. For example, if it says you spent $50 at WalMart, it doesn't tell you if you spent it on groceries, new sheets or Coke and video games. You need the receipt for that. For someone who really needs to get a handle on where their money is going, just looking at the online overview probably isn't sufficient.

I'm not saying for anyone trying to manage their money/track expenses, should no longer needs to save their receipts, or should charge everything to a card. But for just STARTING OUT, when you can look up x amount going to grocery store + Y went to the bar +Z went gas, you can get a rough summarization of monthly costs vs net income. At that point, you can start breaking down those reciepts, IE groceries or fast food, toiletries, hobbies, clothing, etc. Kind of like zooming in from forest to trees, macro to micro economics for subjects, maybe not the best analogies for this topic

[disneysteve]

Originally Posted by cypher1

for just STARTING OUT, when you can look up x amount going to grocery store + Y went to the bar +Z went gas, you can get a rough summarization of monthly costs vs net income. At that point, you can start breaking down those reciepts, IE groceries or fast food, toiletries, hobbies, clothing, etc.

I agree. Start with the big picture and then get down to the nitty gritty details.

[jpg7n16]

Originally Posted by Quoc414

Is there a formula that you use to automatically calculate everything?
im not good with spreadsheet

Microsoft has free budget templates on their website that are setup to do all the calculations for you.


Budgets - Templates - Microsoft Office


Usually the formulas are easy: =A+B <-adds cell A and B, =sum(A:A) <-sum of column A -- Things like that.

It may take some getting used to at first, but once you see what the cells say, they're very basic math. "I'd like to add this cell, plus this one, plus this one".... =Click + click + click --- and you're done. (Click is you clicking on the cells you want to add together)

Even if that's too hard, the spreadsheets already have all the formulas in them, so you shouldn't have to worry about anything.

[cypher1]

Originally Posted by Quoc414

Is there a formula that you use to automatically calculate everything?
im not good with spreadsheet

Others may have more convenient or advanced calculations/sheets, but this is what I used for basic +- auto calculations within Excel for my checking account. I can't remember if this was in the MS Excel template, or if I googled You can customize to however you like, or find it's not worth the hassle.

=IF(AND(ISBLANK(E3),ISBLANK(F3)),"",G2-E3+F3)

So in order to use this formula, you want to setup in this order (or how I did it):

So titled columns:
A: Date
B: Item#
C: for "X" cleared check
D: Description
E: Payment/Debit
F: Deposit/Credit
G: Balance

So listing above titles columns in Line 1 (Again, this can all be modified to your preference))
Line 2 having an "existing balance" $xxx in column F: Deposit/Credit
Line 3 including the next bill (E3) or deposit (F3), and paste that formula in Balance (G3).

=IF(AND(ISBLANK(E3),ISBLANK(F3)),"",G2-E3+F3)
Explanation:
So if there is a value in E3 or F3, then G2 (previous balance above) minus E3 (current expense) plus F3 (current deposit)= current balance G3.

Going foward, line 4 , G4 (Balance), you can't just copy the existing formula since its for that previous line G3. If you highlight Line 3 Column G3 (that formula should display under fx), the cell is selected, but there is a tiny black box on bottom right hand corner. Move your cursor onto that tiny box, and while holding left click, drag that selection down a few cells to auto populate the formula. So instead of =IF(AND(ISBLANK(E3),ISBLANK(F3)),"",G2-E3+F3) next one in G4 is =IF(AND(ISBLANK(E4),ISBLANK(F4)),"",G3-E4+F4) and G5 is =IF(AND(ISBLANK(E5),ISBLANK(F5)),"",G4-E5+F5)
You can see where manually changing those variables in every line can be a nuisance. And adding your transactions will be easier than writing down.

This is just one simple example of thousands of how Excel can be used for finances. This type of format I use for mainly checking/savings, and keep another page within the same spreadsheet for tracking bill/info as mentioned earlier.
Regardless of software, always remember to BACKUP DATA whenever you have a chance, and keep copy (s) on differnt systems/drives, without mentioning passwords or other sensitive material if found. I cannot stress that enough to anyone.