TIP 25
Cut the Cards!
“If you don’t want to buy it with your own money, you don’t need it.”
~Unknown
By now you’ve figured out that one of the major themes woven throughout this book is getting out of debt—I write about it quite a bit even in the sections not dealing directly with money. Debt is one of the biggest problems facing modern families—a true American crisis—and yet so many people don’t seem to feel any urgency to do anything about it.
Dare to be different and do something others might consider drastic and a little crazy—cut up your credit cards!
Stop Making Excuses
Seriously, stop making excuses for keeping your credit cards and close the accounts right now—today—then get some scissors out and cut those cards into confetti. If …show more content…
Similar to payday loans, these are short-term high-interest loans using the borrower’s vehicle as collateral. Borrowers who get title loans allow the lender to place a lien against their car’s title and must surrender the hard copy of said title to the lender. If the loan is repaid in time, the lien is removed from the car title and the title is returned. If the borrower is unable to pay (defaults), the lender may repossess the vehicle and sell it to repay the borrower’s debt. • 90-days same as cash and “no payments, no interest purchases such as at Rooms to Go. These deals sound fantastic, don’t they. Who can pass up the temptation of buying a brand new suite of furniture and saving up for it during a 90-day to18-month no payment, no interest grace period? Well, you should. If you want new furniture—or new anything for that matter—why not save up some cash for the next 18 months and then go shopping? Consider the fact that over 80% of of these same-as-cash never get paid off in time and convert into a high interest loan—typically 24% APR with a Rule of 78 prepayment penalty.
The Rule of 78 is a way of calculating interest so that earlier payments have a higher interest rate than later payments. Earlier payments are weighted with more interest than later ones. Paying off a loan early results in the borrower paying more interest overall.
Don’t Forget to Close the …show more content…
You’ll typically end up paying about the same amount per month, but it comes with a major downside—your debt is no longer diversified. Instead of having multiple creditors you now have one, and if you get behind again you could find yourself in deeper trouble.
Steer clear of companies that promise to clean up your debt. First of all, the only things that can be legally cleared off your credit report are inaccuracies or transactions that are seven years old or older. Anything else is required by law to be reflected on your credit report. Second, some of these companies persuade you to go into Chapter 13 Bankruptcy which is an absolute last resort and all-around horrible idea.
Lastly, don’t fall into the temptation of taking out a home equity loan. Think about how foolish it is to put your home—your shelter—as collateral for consumer debt. A bigger issue is that shifting your debt from a credit card to a home equity loan doesn’t deal with the root issues of how you got into debt in the first place. The majority of people who take out home equity loans for consumer debt don’t make any changes to their lifestyle or habits, so they accrue even more
Cut the Cards!
“If you don’t want to buy it with your own money, you don’t need it.”
~Unknown
By now you’ve figured out that one of the major themes woven throughout this book is getting out of debt—I write about it quite a bit even in the sections not dealing directly with money. Debt is one of the biggest problems facing modern families—a true American crisis—and yet so many people don’t seem to feel any urgency to do anything about it.
Dare to be different and do something others might consider drastic and a little crazy—cut up your credit cards!
Stop Making Excuses
Seriously, stop making excuses for keeping your credit cards and close the accounts right now—today—then get some scissors out and cut those cards into confetti. If …show more content…
Similar to payday loans, these are short-term high-interest loans using the borrower’s vehicle as collateral. Borrowers who get title loans allow the lender to place a lien against their car’s title and must surrender the hard copy of said title to the lender. If the loan is repaid in time, the lien is removed from the car title and the title is returned. If the borrower is unable to pay (defaults), the lender may repossess the vehicle and sell it to repay the borrower’s debt. • 90-days same as cash and “no payments, no interest purchases such as at Rooms to Go. These deals sound fantastic, don’t they. Who can pass up the temptation of buying a brand new suite of furniture and saving up for it during a 90-day to18-month no payment, no interest grace period? Well, you should. If you want new furniture—or new anything for that matter—why not save up some cash for the next 18 months and then go shopping? Consider the fact that over 80% of of these same-as-cash never get paid off in time and convert into a high interest loan—typically 24% APR with a Rule of 78 prepayment penalty.
The Rule of 78 is a way of calculating interest so that earlier payments have a higher interest rate than later payments. Earlier payments are weighted with more interest than later ones. Paying off a loan early results in the borrower paying more interest overall.
Don’t Forget to Close the …show more content…
You’ll typically end up paying about the same amount per month, but it comes with a major downside—your debt is no longer diversified. Instead of having multiple creditors you now have one, and if you get behind again you could find yourself in deeper trouble.
Steer clear of companies that promise to clean up your debt. First of all, the only things that can be legally cleared off your credit report are inaccuracies or transactions that are seven years old or older. Anything else is required by law to be reflected on your credit report. Second, some of these companies persuade you to go into Chapter 13 Bankruptcy which is an absolute last resort and all-around horrible idea.
Lastly, don’t fall into the temptation of taking out a home equity loan. Think about how foolish it is to put your home—your shelter—as collateral for consumer debt. A bigger issue is that shifting your debt from a credit card to a home equity loan doesn’t deal with the root issues of how you got into debt in the first place. The majority of people who take out home equity loans for consumer debt don’t make any changes to their lifestyle or habits, so they accrue even more