Target Credit Card Debt
Illawarra Mercury
Monday July 15, 2002
Q I have a personal loan at 13.5 per cent with a balance of $28,000 over the next four years and a credit card debt of $8000 at 15 per cent. My repayments on the loan are $730 per month and minimum payments on the credit card are $250.
It's going to take me a long time to get rid of these debts and I need to find a solution to this problem as it is draining my finances and general living.
I have read about and researched every bank but because I do not have equity in property or assets of great value, I cannot obtain a loan at a lower rate.
I have noticed some banks offering personal loans at around nine per cent and would like to borrow $35,000 over five or seven years to lower the monthly repayments.
I am on a salary of $60,000 per annum including superannuation. Can you kindly advise me what my best option would be and also, if possible, how to negotiate with the bank and convince them to help me.
A You are better off to pay $400 a month off the credit card debt, which will see it paid off in less than two years. When you have done this, raise the loan payments by $400 a month to $1130. This will see all your debts paid off in around three years. The rate is not of great consequence if the term is short.
Q I am 60 and working as a part-timer earning $40,000 pa. My wife (not working) and I own our home worth about $475,000, with car, cash, shares, and so on valued at another $30,000. Our only superannuation is minimal.
We want to quickly and as safely as possible revamp our investments to provide greater retirement capital. Is buying an investment unit with interest only finance for five years one of the good options?
Or would you advise any borrowings to go towards a spread of shares instead?
A I prefer quality industrial shares or trusts. You can choose a level that suits and there is no worry about damage and vacancies.
In view of your low income, the tax breaks from borrowing will not be huge.
Q My husband and I are both 26 years old and earn around $60,000 pa each. Last year we bought an investment property (house) which is worth around $180,000, on which we still owe around $125,000.
We have a five-year fixed interest rate loan at 7.2 per cent and have elected to make repayments of $2100 per month. This doesn't give us a lot of extra money but it will pay the loan off in six years' time.
We live in a rented unit ($1200) per month and are now investigating other investments options.
Would you suggest continuing these large repayments and waiting until our first loan is paid off before we buy another property, or should we reduce the repayments in order to buy another investment property?
Alternatively, would you envisage shares and or managed funds being a better option than a second property?
A I believe your resources are better utilised by borrowing on an interest only basis and using the money freed up to gear into shares. This will give you maximum diversification while saving tax.
© 2002 Illawarra Mercury
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