Finances... Take 2.



Photo courtesy of: http://www.noelbagwell.com/blog/?p=5188



Okay, so in my "series" of financial blogs, I wanted to write a "what we did" post about my own personal finances. Previously, I wrote about debt consolidations. You can link back to that post here.  Anyway, now to invite you into my personal life! Its so, so exciting, and you're gonna totally be blown away (sarcastic eye roll and awkward laugh here).  

In my last financial post, I wrote that my student loan debt was under $10,000. Alas my friends, it is officially under $9,000!  Yippee! It sorta feels like we've been making payments on it forever. But, I guess it really hasn't been that long. Just a few short months, actually.  My interest is about three-point-two-ish percent. It was a whopping 6.7% through my student loan company.  How did I drop my interest?! By my personal version of correct "debt consolidation".  Here's how I did it:

My bank was having a fabulous deal on personal loans through them (in other words... low interest). And, if you borrow against your savings (also known as using your savings as collateral), the interest is even lower.  When someone buys a car, and takes out a car loan through their bank, they use the new car as "collateral" which basically means that if you don't make your payments, the bank takes the car. So, the same goes for my personal loan. Matt and I had enough (and extra) to use as collateral against the new bank loan that would be used to pay for my student loan. So, if we didn't make the payments, well, the bank would just use our savings to pay for the loan. Okay, that's the sum of it, but here's what else you need to know:

• You CANNOT touch the amount in your savings that you are using as collateral. So, say you have $10,000 saved, and you took out a loan for $5,000, you are only allowed to use the difference ($5,000).  So, I don't recommend doing this if you have just enough to cover the loan. You just never know when an emergency could occur.

• When you use some kind of account as collateral (savings, CDs...), your loan payment will be significantly lower. I'm talking my payment is $25.00 a month. However, if you only pay the bare minimum (at least this is the case for us), you will barely be paying the loan interest. We always pay a fixed amount every month. What is good about these low payments, though, is say something unexpected comes up; well, if you don't have the money to pay the amount you have been paying for the past six months, you can get by with paying the minimum. Then, pick-up the very next month. 

• This is sort of like debt consolidation, but not. The key to this type of "consolidation" is that you are not going through an advertised company. You usually don't end up with bad credit. I mean, not paying your bill will obviously hurt your credit, but you have the money to pay for the loan in its entirety, so you shouldn't even have an issue with paying your bill.  Oh, and this isn't really debt consolidation because I wasn't trying to consolidate debt owed to five different companies, and I wasn't trying to lower my interest because I couldn't make my loan payments.  I just wanted to save some money!

• I feel that this is a good way to save extra money that would be going to my student loan company for interest.  And, my loan payments to the student loan company varied by a few dollars each month because of the interest. Having such a low payment at the bank, I can be a fixed amount every month... and it knocks out a bunch of interest, and I know exactly how much I will be paying every month. 

Anyway, there is nothing saying you have to do any of this. I'm just saying this is what we did, and it has really been beneficial to us.  Some other things you might consider to kick your student loan to the curb: look for a job in your profession that will pay back a percentage or all of your student loan (I know teachers who work in certain schools for a certain period of time can sometimes get student loan assistance); if you can, do side work to bring in extra money, and put all of this extra towards your loan if you can. There are several things you can do to pay off your student loan such as budget, budget, budget. If you set aside $50.00 for clothes this paycheck (or whenever), then once that $50.00 is spent, it is long gone, and don't dip into other funds for clothes. Same goes with eating out, family entertainment funds... etc... When its gone, its gone!  Guess you better spend wisely or learn to be creative! Oh, and DON'T use a credit card to replace "missing" funds. Not wise.  Happy money management! 

*Please note: I am not a professional financial advisor. These are only my personal opinions about this subject matter. Is there anything you do or did to help your finances or money management? I'd love to hear about them.