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[Question]
DO YOU BELEIVE IN PAYING A DEBT WITH A DEBT
I have been going through some websites of consultant agencies. Some of this agencies do not even try to investigate your case they will push that you take their LOAN option, and pay them back latter in the year. Does this work though starting a debt to pay a debt, I think the new debt will come with more interests and cost more than the original debt.
Debt is dangerous. Paying for a holiday with your credit card or fly-now-pay-later does not work. You are only putting a noose around your neck and you become a slave to debt.It can destroy you if not managed correctly, but sometimes we do need to get some form of finance to get by.
You should only incur debt if there is a financial benefit. Getting credit from a supplier so that you have time to sell the product and make a margin is fine. You may also take a loan to expand your business, provided that you have done your homework and the benefit is more than the interest that you will pay.
The worst thing that you can do is to take a loan to consolidate debt. You are only increasing the problem. Best is to play open cards with creditors and to come to some arrangement and then stick to it. I have yet to come across a bank who will turn you away when you want to negotiate repayment.
Never renege on your promises as then you will lose credibility and then nobody will help you.
Also bear in mind, those "debt consolidation" options often put you under debt review, which could leave you in a much worse state that you're in and count against you one day when you're debt is finally paid off and you want to buy a house.
Simple rule of thumb:
1. Pay off all credit cards, and close them
2. Pay off revolving credit loans and close them
3. pay off overdraft and close it.
3. Only now do you start saving and investing money, since the interest on the debt you had it much higher than the interest you gain from saving and investing.
i dont agree with you on the credit card or over draft...
credit card is a better option than paying cash or using a debit card...why because they both incur fees to draw cash and fee to swipe debit card...i only use my credit card to pay for stuff unless i get a cash discount...or if i got paid cash from a customer...the trick is to reduce the credit limit to a manageable amount...for me R1000 for others it could be less or mor.
overdraft are very handy in bussiness...but in a personal capacity i dont know so much.
good tip about not trying to save money when you have debt...the difference in the interest just makes it a foolish option.
when it comes to debt...rather take a step back...count to 100 then consider your options...i have been down this route on a few occassions...but people know i am good for my word...which is the most valuable asset i have.
i dont agree with you on the credit card or over draft...
credit card is a better option than paying cash or using a debit card...why because they both incur fees to draw cash and fee to swipe debit card...i only use my credit card to pay for stuff unless i get a cash discount...or if i got paid cash from a customer...the trick is to reduce the credit limit to a manageable amount...for me R1000 for others it could be less or mor.
I actually meant that, if he has (for example) R10,000 debt on his credit card, and R10,000 debt on his overdraft, and say R50,000 debt on his revolving credit loan then he should settle those accounts before doing anything else. The compounded interest he pays on those type of accounts will make more debt if it's not paid off ASAP.
Using a credit card and overdraft for anything, even business is always a good idea (no need to carry cash, transaction fees are less, etc, etc) BUT only if you can manage cashflow and don't allow those account to run a large debt.
I'll say one thing about debt, I can see why the poor get poorer and the rich get richer. If you are unable to pay Wesbank on time they charge you 10% extra, if your debit order bounces they charge you R125 even though the debit oder may have been for R20. You pay massive fees for overdrafts etc. I screwed myself with 30 day acounts too, never again. If I don't have the cash to fund a job then the customer can pay 50% in advance, if he doesn't want to then he is welcome to go somewhere else. I will also never let a custemer take anything unless it has been paid in full - I've been bitten by that too. I will never ever buy anything on credit again (except a house), including credit cards and overdrafts. When the $h1t hits the fan and you lose your income then you will see how the banks eat the little cash you have left and then bleed your stone until it turns to dust.
I learned a new term in the last couple of days, namely: Annuity Income ...my new fixation...
i dont agree with you on the credit card or over draft...
credit card is a better option than paying cash or using a debit card...why because they both incur fees to draw cash and fee to swipe debit card...i only use my credit card to pay for stuff unless i get a cash discount...or if i got paid cash from a customer...the trick is to reduce the credit limit to a manageable amount...for me R1000 for others it could be less or mor.
overdraft are very handy in bussiness...but in a personal capacity i dont know so much.
One step better is to use a credit card, but always have a positive balance. This way you get the credit card benefits, but if something goes wrong there is nothing to pay off.
Yes the overdraft is very handy, until the brown stuff hits the fan, and then it becomes a nightmare.
Debt to loan institutions (of any type, formal or informal) is like walking a high tightrope.
The banks kill you with fees when you are in the dwang, they are quite happy to shove you deeper and deeper into the dwang hence my unwillingness to use their services. If it was up to me I would put all my money (the little I've got) under my mattress, at least I don't get to pay somebody fees for stashing it or withdrawing it or saving or just looking at it.
i am with you on this adrian...by the time you are finished paying deposit fees withdrawl fees and all the fees in between....you are better of just keeping the money stashed away...the other bonus is you know when you have lots to spend and when to ease off the spending when the pile goes down....the less sars knows about your financial affairs the better off you are...the difference between you and i getting nailed for fraud and some goverment official...they dont have to pay it back...you get a fine...penalties and interest.
I have several things to say about the issue of debt in general and the paying of a debt with debt in particular. Here goes: 1.The first ideas for this explanation were conceived by John Hagee. It’s his idea and reasoning. I endorse such reasoning. 2. If I run your business in the capacity of manager and I loose R100 000 per month for 12 months, will you classify me as a good manager or a bad manager? 3. Okay, let’s take it further, if I loose R100 000 per day, will yyou classify me as a good manager or a bad manager? 4.Right, let’s say that you went into business 2012 years ago when Jesus was born and you lost R1000 0000 per month, every single month from the year 0 to now 2012 you still would not have lost one trillion Rands!!!! 5. The USA had to borrow 1.7 trillion dollars in 2010 just to run itself!!! 6. “ If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now...but ~$700 billion- same amount the banks got during bailout.” 7. A trillion dollars = $1,000,000,000,000.That's 12 zeroes to the left of the decimal point. A trillion is a million million dollars.
So to answer the question directly: Is it good to pay debt with debt? No, it isn’t but some people don’t have the choice, they have to sometimes borrow money to pay existing debts i.e pay their cars and houses This concept of reckless borrowing is what led to the global economical meltdown.
Let me then resolve as follows:
1. The management of the USA which is the Government are currently in a situation where they are in 14 Trillion Dollars debt! Had they been good custodians from the outset, this debt deficit would not have occurred. The point I'm earnestly trying to drive home is simply this, if I ran your business and lost 3o million per month for many years, would you still want me in your employ??
2. Being in debt can never be a good thing, that said, there are people who take out personal loans and credits cards for the sole purpose of paying off other loans, credit cards and debt that they have. It's avicious circle....
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