Fixing my finances - the value of a personal loan to help get out of debt
For a number of years my finances felt like they were on a roller coaster — often near the bottom of the track, sometimes climbing a little higher, but then rapidly going back down when unexpected expenses would crop up. Like the time our 1986 BMW 528e cooling hoses all decided to break, spilling coolant all over the highway and ultimately requiring a $4k engine replacement. UUUUUGGGGGGHHHHH!!!!
I’ve had a pretty good job but was laid off for a while. Building out my own business ended up requiring using credit cards. I ended up with just under $20k in debt owed to the credit cards. One of them ended up at somewhere around 17%. I was paying over $250/month in INTEREST alone. It totally sucked, because, while I was paying down principle each month it was basically like I was giving $250 dollars each month to people who didn’t care about me except as a line item on their annual profit sheet.
How did I escape the credit card monsters? Through debt consolidation? A new home loan? Services? Not in my case. I was fortunate enough to know someone (my mom and stepdad) who were willing to help me out. They were in a position where they had enough cash on hand to extend to me a personal loan. We agreed on a simple 9% annual rate on the loan and the terms were generous — payoff expected in a number of years. This loan allowed me to pay off the high-interest credit cards immediately and begin paying my parents back.
Because it was a personal loan, we felt a large incentive to pay the debt as quickly as possible. We paid extra each month and we were actually able to finish paying off the loan by the end of the year. (Like I said, we were doing pretty ok on our cash income, this was really a means to escape the credit card companies). We were so grateful to my parents for helping us out, and it helped them too a little bit (the interest payments on the loan).
So the lesson I would like to share is this: Don’t be too proud to ask for help from those who can help if you have that option. You may be surprised at how willing your relatives and friends may be to help you fix your finances if you treat the situation in a businesslike and friendly way. Escaping the credit card companies made us so happy, it is a wonderful feeling.
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