The worst, the bad, the good and the best

The worst: I have this big personal loan that I have to pay. I got it 20 months ago as a way to lower my main credit card bill because I had run it up trying to help my wife start up a clothing store in a street market in the city. I funded her business twice and eventually all I got from that was this big debt. I took a loan at 24% to pay this balance on my main credit card. Since then I failed to keep my main credit card in zero balance. Now I have this loan AND the credit card balance. I hate myself for having done this so many times now that it's so embarrasing to admit to making the same stupid mistake so many times.

The bad: I'm on payment 20 out of 48. Yet another debt to add to all the money I owe. Amount owned at the moment: $6458. Current monthly payment is $311. Will I be able to make this month's payment?..stay tuned cause I certainly don't know if I will get payed for some extra work that i've been doing or for some extra work that I quoted to do on a monthly basis.

The good: Ironically the good part is that I got a letter from that bank stating that they were going to rate my interest rate due to the new regulations including the monetary policy rate. The new rate will be 29% So my new monthly payments would be $325, a $15 increase. Not that much but it's an increase.

So how is this good? Well the letter included an opportunity for me to extend my loan term up to 60 months. So today, actually just a few minutes ago (i'm still aching from walking to the bank branch), I went there and ask for my loan term to be extended to 60 months. The customer service agent said that normally they would extend my loan to 60 months from the date it was originally created. So if the request goes thru normally I would start next month be now on payment 21 out of 60 (or 1 out of 40). New monthly payment would be $257. $54 less per month but obvioulsy I would end up paying more interests in the long run.

However right now I'm just trying to get all my payments within my budget and I would be hard pressed to get a lower rate loan that this one even at 29%. So I took this offer.

The best: I asked the agent if they could actually refinance my loan to 60 months starting from today, not from 20 months ago. He wrote that in my refinance request. If it does go thru this way, I would have just started with a new loan of 60 months to pay for the $6458 at 29%. Monthly payments would be $207. About $104 less per month.

Again I would obviously pay more in interests but in a year or two when I (hopefully) have payed other debts and have more money available I can ask them to shorten my loan term and I'm sure they would be happy to do so. Otherwise I could still get a shorter term in another bank or in the end save up the extra money in an account in their bank and when I reach the balance due, pay it all at once. That will be a very happy day for me.

On the income front, my wife went to job agency today and got letters to visit a bank and a drug company to see if they can hire her. She went to a retail department store about two weeks ago and she has called them every other day and they tell her they will schedule her for tests soon, but still nothing solid.

In the mean time, I have one credit card payment that is already late. I've payed part of it. I have this loan that it's payment was due yesterday, so I hope that even with the late payment they still approve at least the "good" part.

The real hits will come in about a week when I have to pay my main credit card and the minimum payment (lempiras + dollars) is about $650. By then I probably won't have that amount of money so the payment will be past due. I hope by then that this loan refinance will have gone thru (it's the same bank) positively. Either way I will then call or go in and ask them to cancel my credit card and set up a payment schedule for me.

To think that the operations manager of this bank is in the board of directors of my company gives me all kinds of thoughts. Would he help me with a better loan to cover what I owe to his bank? or would he stand by the banks procedures and not help me. Would he keep quiet about my situation or would he eventually talk about it with my boss (who is not only work related but also a friend of him)?

I know that he is a straight man and respect procedures. I know he also helps when he can. I worry that if I ask him for help and explain my situation he might just say that it's out of his hands since my problem is with the credit/loan department and not the operations department. I then would worry that with his inability to help me but knowledge of my problem and how it would affect his bank, that he would talk to my boss about it. I have heard them talk about people running up credit card debt so many times that I would probably pass out in his office if he started asking me questions about that. I have no clue what would they would want to do with/to me.

Pray for the "best" out of this loan. Pray for my wife getting a job SOON. Thank you!

Well, at least this blog is free. ...sounds like this could be my signature from now on.

The slavery of minimum payments

Today I got a Credit Card bill on my mail. Balance is $5485.

 

I took this credit card because it offered to transfer my balance from my "main" credit card and gave me 0% interest for 6 months. Well it's the 8th month now and they are now charging me 4.92% MONTHLY! That's 59.04% annually.

 

I should've used those 6 months to pay some of the capital that I owed. I did do that, I paid about $1588 for the first 6 months. But in the last month I was expecting a payment from some extra work that I had done and it didn't happen. So what did I do to pay the monthly bills? (including other credit cards) I took out cash advances on this credit card, which basically took it back to the original level I had when I got it, but now I'm paying interest on all that debt. And to really make me feel like crap I have to tell you that the card I was trying to pay off is now all the way up there again!

 

Looking at the statement closely it's interesting to see how they will keep me in the debt hole if I can't pay more than the minimum payment. Warning, there is a little bit of math ahead.

 

The interest this month is a total of $276. The minimum payment is $289. So $289 - $276 =  $13 . This means that if I paid the minimum payment only (thus keeping the collectors calls away) I would only lower my balance from $5485 to $5472. If I were to lower my balance by $13 each month, it would take me 420 months to pay that debt off! That's  35 years! And imagine if I were to actually charge more on it.

 

So, there are two ways I could go on with this card. Actually there are more (like not pay it), but focusing on trying to keep my creditors happy there are 2 ways. In both cases I will assume that I will not charge the card any more.

 

1) Pay off the mininum balance each month. And it will probably take those 35 years to pay it. Maybe it only takes half, that would be "only" 17 years and 6 months. The good side of that is that every month the payment that I would have to do would be less and less (a few cents probably), and most of it would be going to interest.

 

2) Set a number above the minimum payment of now and pay that amount each month, regardless of what the minimum payment turns out to be. I will try my best to do this. I'm setting my monthly payment to $300. I will pay them $300 each month. Every month a little more of those $300 will go to paying off the balance. It will be like a regular loan. The bad side of this is that I will have that $300 payment to do every month. The good side is that probably I would pay off this debt much faster than with option #1. Let's see

 

A little loan calculator I have here says that If I have a loan of $5485 that I have to pay off at a interest rate of 59.04% annually.... wait .. this calculator doesn't go that high! I guess the creator can't imagine someone paying more than 50% interest rate on any type of loan. Maybe the mob has better rates! Anyhow, I'll have to use the maximum value of 50%. Now I have to play with the loan term to get a payment of $300 or close so. I get a monthly paymentof $296 when I set the term to 3 years. Because i'm actually being charged a little more than what the calculator can reach I will probably have a longer term, like 4 years. But it sure beats 35 years !!

 

Do any of you have a loan calculator that can go up to 59.04% anually ? if you do try telling me the term for a loan of $5485 with a monthly payment of $300.

 

There are some other options I could use to handle this debt. I could pay the bare minimum while I try to finish of paying other debts and then start paying $300 monthly. I could pay $300 almost every month and less when times get tough(er). Unless I can offload this debt to some other lower rate loan I'll have to pay at least $289 soon and some number like that every month.