The Perks Of Consolidating Debt (BA Q&A)

smallest of greendom. So thought of salt aka goes to your grandma, not me and Mandy. Okay, Okay. So if you have questions that you'd like answered about career, about business, about money, about child life these days, you can go on over to Branhambishing podcast dot and click contact us, slide into the DMS on Ig Brown and Vision podcast, the BA podcast on Twitter, and Briannivision podcast at gmail dot com. Okay, so let's get to the questions. Well,

first question of today comes from Courtney via ig. Courtney says, hello, ladies, I love this podcast. And Tiffany, I've been a part of your literature academy for about two years. Yeah, and I love it. We love that. It's taught me so much. So I have a question. My now fiance told me that back in twenty twenty he ended up getting a personal loan to pay off credit cards, and without reading the fine print, found out later that the lender took

over his car loan for collateral. So now he's paying off his car through them instead of Capital One, and it's paying three hundred dollars more on this car month now than before. Damn. He called the lender to see if he can get a lower payment since he hasn't missed a payment or has been late since he got the loan, but they said he couldn't do that. Of course,

not child, They want all that money. So we're wondering if you guys have any advice on the best way to handle a personal loan and if possible to refinance a personal loan, If so, is it a good idea to do? So? Okay, thank you. So what I'm getting Courtney, is that fiance wanted to pay a credit card debt, which is great. He got a loan to pay it off. Okay, somehow in the fine print the lender said, I'm gonna

take off over your car loan. That way, if you don't pay me, will take your car and you're gonna pay off the car loan and the three hundred dollars a month I'm assuming is part fee, part to pay down that credit card debt. You didn't say how much your credit card debt was, and he's wanted to lower his payment. Okay, so you didn't share what the interest rate was. There's a lot missing here, So let's just

I'm just gonna make some generalizations. In general. If you are wanting to get out of a specific loan with a specific lender because you want better terms, here are some of your options. You can do what you said, which is see if you can renegotiate with them in the terms. That's one, which they've said no. Two, you can try to refinance, you know, with you know that lender or a different lender. So that's two. That's certainly something that you can do. And then three, you can

also look for another lender. What I would do is I would head down to my local credit union. A sister of mine not she is doing that now. Doing this. Now, she's looking to purchase a car, and dealer financing has gotten better than it used to. But still, you know, you're typically gonna pay you know, a higher interest rate, not always because dealer financing is much better these days, and some of these big banks don't even do car financing.

They make you go through the dealer. But so I told her because a friend of mine is a teacher where I live, and there's a credit union that a lot of teachers in Newark like to use because they have better interest rates. So she went to the credit union. They had three stipulations. You had to live in Newark, or work in Newark, or worship in Newark. So she was able to prove that she lived in Newark. She was able to open up a credit union account that

day and apply for the loan for the car. So right now, I think interest rates if you're borrowing money for a car are like in the seven percent range, you know, maybe high sixes. They're offering five percent in that range, so not even I think like four percent, four point something, something tremendous. So she is going to purchase her car at the dealership, but use the financing

at the credit union. So what I would do is to tell your fiance to one reach out to credit unions in his area and see if you know what, I don't know how much he owes he if he'd be able to get potentially get his car loan and his credit cards like paid off via the credit union and he holds the credit union instead. Now here's the thing, I do not know the terms of this new lender. If you're able to pre pay, because some lenders won't

let you. So you're gonna want to call and say or look at the fine print to see can I pay this loan off before the period of time. So sometimes lenders will be like, okay, you have like five six years on this car note, but you can't prepay, meaning whether you pay in five years or five months, you pay in the full amount either way, you know, So you want to make sure that he's able to prepay, meaning paid and paying it off before the allotted period of time and there's not a penalty to do so.

And if that so, then I would start. If his credit score is right, you know, ideally would be able to go to a credit union and see if the credit union can assume these two loans or this total loan, you know, credit cards mixed with car note, and then he can now pay the credit union at a lower interust rate and therefore lowering his monthly payment. Okay, so those are some of your options. Does that make sense? Courtney?

You know, here's the thing. You know that fine print be fine printing, and I know sometimes it can feel overwhelming when it comes to like borrowing money. So some questions just in general, so whether this is Courtney or Courtney's fiance saying when you borrow money, questions that you always want to ask is like one, you know, like how much am I actually borrowing? You know? Two? Obviously,

who do I owe? Sometimes you're borrowing money, you're like so for example, if you're getting credit financing from a car dealership, it's like, well, who do I actually who am I going to end up owing? Right? So that's two. Three? What is my interest rate? And is it fixed or is it variable? So that means meaning like, okay, am I going to pay five percent for the length of the loan or five percent for the first two years and then ten percent after that? So what is my

interest rate? Is it fixed or is it variable? So is it the same or does it go up and down based upon the market or otherwise? Right? What was that? Four? Right? So? Five or four? I don't remember.

there a pre payment penalty? So let's just say you're gonna buy a car and it's twenty thousand dollars because you get a previously owned car, you put down ten you have a ten thousand dollars loan, and then you say, I don't, I don't know. You hit the you hit the numbers for fifty thousand. You're like, let me pay off this car a week later. Are you going to be punished for that? Are you even allowed to do that? You want to make sure you're able to prepay or

pay off early. And then two, what happens if you're in late, like do you lose your five percent interest? You want to ask of this like a question seven, I guess do you lose your interest rate? Did your interest rate go up?

you know. And so to me, my favorite place to borrow the credit union. I believe that you should have three financial institutions in your life. I believe you should have your regular brick and mortar bank. So that's the big bank, so that you be seeing on the corners, right, those big old you know, the banks we all know if I say their name, but they don't pay me, so I ain't saying no nets Okay, So that's one big bank and the reason Why you have a big

bank is for convenience. If you are in California, you can use that same bank that's on the corner. You come to New Jersey, the bank is probably there. You go to Alasta, the bank is probably there. So big bank for convenience. This is where I like to keep my checking right, my everyday money. Second financial institution that I like to have is an online only financial institution.

Why because that's why I like to keep my savings because they typically have high yield savings accounts because they don't have the same overhead costs as these big banks that are on every corner. They're online, and so they get to pass on the savings to you in the form of paying out higher interest. I'll give you an example.

Your big bank on the corner. If you put your money in savings there, you're probably gonna make point zero zero zero zer one percent child by right now at a high dealed savings account at an online only bank, you're looking at four four and a half percent currently as I'm taking this, that's what it's looking like, you know, give or take. So you're four times the amount that you're going to earn on your money at an online

only bank. So that's the second type of institution. Third type of institution that I like is a credit union. This is where I like to borrow from, so brick and mortar convenience, checking online only bank savings account for high yield savings, and then credit union to borrow from.

Because credit unions typically many credit unions are nonprofit or definitely their community based credit unions, and their role for us if they're nonprofit is not to make a profit and to offer as many resources and tools financially to community as they can so you can get a better deal on the money that you're borrowing. Because my sister is instead of spending like seven percent or like six percent on like you know, on her interest for the

car loan, she's gonna pay like four percent. That's tremendous of how much money she's gonna save. And so I like to have those three. And of course, like a broker's account is probably the fourth if I'm thinking about it like for investing, but we're thinking about day to day money, those are the three into so just consider that that. Like, I like to have them in place, even if I'm not using your credit union right now.

I like to just be a member of one. The good thing about many credit unions is that you could join the same day and ask for a loan the same day. But ideally, you know, having those three under your belt are going to help you navigate. Well, we're

gonna take it for guy. Hopefully that was helpful. If you have questions, like I said, sobbing to the DMS on IG Brian Abision podcast, email us at Brianna Vision Podcasts at gmail dot com, go to a Brownambition podcast dot com and click contact and the BA podcast on Twitter. But we'll be back and black and ready to answer more questions. Hey, hey, hey, BA fam, here's a Brown Ambition throwback.

off debt. Interesting questions. So just to recap forty dollars in total, that consists of credit cards, student loans, and personal loans. Interesting miss, and they're wondering how to tackle it. And that's collectively, that's collectively together.

this is how much my life costs. How much is left over after I pay my expenses. Oh, there's two hundred dollars left over, and then you can might decide one hundred dollars is gonna go to saving, because you should be saving and paying down debts simultaneously. So maybe one hundred dollars goes to savings and another hundred goes to my debt paid down plan. So now you have

your debt paid down plan money. And if you're gonna do the snowball method, it would look like this, Hey, lowest balance debt, You're gonna get your minimum plus this one hundred dollars, and now I'm gonna pay it, pay pay, pay, pay and pay pay it. And then when that's paid off, I'm gonna roll over the lowest debt's minimum plus that one hundred dollars to the second lowest debt. So the second low s det is going to get effectively three

payments in one. It's minimum the first lowest debts minimum plus that hundred dollars, and then you're gonna pay pay pay paid off, and then you're gonna roll it off to the third lowest debt. And so that's the way the snowball method works. Or you can use the avalanche method. Which is when you pay off the debt with the

highest interest rate off first. And so the avalance method makes the most sense as far as mathematically, because you're basically paying off the debt that has that's costing you the most amount of money because the interest rate is the highest, And the snowball method makes the most sense emotionally because if you pay off the debt with the lowest balance first, you kind of get a faster return emotional return on your investment because it might take you

ten years to pay off the debt with the highest interest rate, and so you might not feel as.

everything in one place. You could look into consolidating those credit cards with a personal loan, for example, from a credit union, if it means that you could secure a lower interest rate than what you're currently paying on those credit cards. Because we know how difficult it can be to pay down credit card debt when it's got you know, what is the average APR in credit cards, and thing

like seventeen percent that's with like perfect credit today. So yeah, I could look at I know this crazy, you could look at consolidating those credit cards just so you have one fixed monthly payment, which is what you get with a personal loan, and then you can both tackle that

payment together. And of course, when you're applying for a personal loan, they're going to take into account how much you can afford to pay, so your monthly payment shouldn't be more, shouldn't end up being more than what you guys can comfortably afford with your student loans. If you're both still still in school, then maybe they aren't quite due yet, so they're not an immediate concern, but you

definitely want to. I would focus on getting rid of that other types of debt, the credit card, the personal loans before you guys graduate, so that when you graduate you can just throw everything you got at those student loans. If the student loans are an issue, now you know, if they're federal, there's things you can do income based repayment for bears, deferment while you focus on your higher interest debt like credit cards or personal loans to buy

yourself some time. But eventually you got to tackle them right and even if you defer them, interest is going to still be accruing. So you want to aggressively as fast as you can get rid of the other debt and then hop on those student loans. If they're private, you can look into well, if you've got them, you know, pretty high interest rate in your student loans and you think you're interested in looking at refinancing, that's also an option.

If you guys have strong credit scores. There's lots of companies out there that will refinance your student loan debt today, which will help you secure a lower interest rate and maybe reduce your payments and help you pay it off faster. But just keep in mind, if you have federal student loans and you're refinancing them, you're essentially turning them into a private loan, which means those flexible options I mentioned earlier, like income based repayment or forbearance are probably no longer

available to you. So it has to be worth that trade off for you to refinance them and turn them into private loans.

you know. So, I mean there's companies like so Far that I that are great companies for refinancing for private loans, but I always tell people, if you can keep them federal, it typically is worth it, just because if you ever fall on hard times, private loans don't care, but loans, but federal loans, there are things in place that you know that you can use to protect yourself if you fall on hard times, And it's much easier to the fall on a private loan, like a veteran alone is harder to default.