Debt Consolidation

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#1943265 19-Jan-2018 09:30

Paul1977:

I haven't seen it mentioned anywhere (unless I missed it), what sort of interest rates he is currently paying.

The OP said that they were looking to leave the car loan as is, as they felt it was manageable; so that only leaves 10K needing the consolidation loan. What sort of rates are currently making the payments crippling while the (relatively) high interest rates of a debt consolidation loan would be 'easily serviceable' (paraphrasing OP)?

E.g. 10K over 2 years the weekly repaying at 15% is only $11 a week less than the same loan at 25%.

EDIT: Changed percentage in example to better reflect best case consolidation load interest rate given his low credit score.

Thats correct. High interest does cost more, but in your example $11 ain't gonna help much. Interest is a pain, but the issue is cashflow, and thats the repayments.

And from what I gather here a consolidation loan probably wont happen due to credit rating. Even if it did, it just turns a maybe 2 year problem into a 4 year less of a problem, it makes it a bit easier but it just drags it out.

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#1943267 19-Jan-2018 09:34

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

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#1943269 19-Jan-2018 09:35

tdgeek:

Paul1977:

I haven't seen it mentioned anywhere (unless I missed it), what sort of interest rates he is currently paying.

The OP said that they were looking to leave the car loan as is, as they felt it was manageable; so that only leaves 10K needing the consolidation loan. What sort of rates are currently making the payments crippling while the (relatively) high interest rates of a debt consolidation loan would be 'easily serviceable' (paraphrasing OP)?

E.g. 10K over 2 years the weekly repaying at 15% is only $11 a week less than the same loan at 25%.

EDIT: Changed percentage in example to better reflect best case consolidation load interest rate given his low credit score.

Thats correct. High interest does cost more, but in your example $11 ain't gonna help much. Interest is a pain, but the issue is cashflow, and thats the repayments.

And from what I gather here a consolidation loan probably wont happen due to credit rating. Even if it did, it just turns a maybe 2 year problem into a 4 year less of a problem, it makes it a bit easier but it just drags it out.

That would normally be my thinking as well, but:

networkn:

The ASB Calculator says he could pay back the debt within 2 years at $190 a fortnight, and he believes he could easily pay it back in 18 months.

If the above is true, his current interest rates must be astronomical for it to make much of a difference. Either that or his current loans are actually much shorter term, although the OP has mentioned several times that the interest is the problem, the term of the current loans has never been mentioned IIRC.

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#1943275 19-Jan-2018 09:45

SheriffNZ: Someone mentioned the no asset procedure. I think that's one option and a valid one. Another one is making a proposal to each of his creditors (the same proposal to all of them) explaining his issue and requesting that they each reduce their interest rates down by an equal % each in order to all him to pay everyone. the creditors would probably look favourably on this as it reduces the admin cost of chasing him all the time. It also limits the possibility of him doing something like the No Asset Procedure where they wouldn't get anything (I haven't looked into how a secured car fits in that system).

The proposal could be made on behalf of your nephew and you can say you'll help administer it but take on no liability. Alternatively he could do it himself but he's likely to need help drafting professional letters and communicating with his creditors.

Any creditor who doesn't at least consider something like this is probably someone he shouldn't have borrowed from in the first place.

I am not spoonfeeding this kid his solution. At this point it feels I have done 5x the work he has in solving this issue which isn't acceptable. I have a young family who is far more deserving of my time than him, esp if he isn't prepared to understand that his actions which I advised him against multiple times, have consequences. I spoke to him last night and he kept asking questions answered on the website and included in the video explaining the services! He got an earful from me and told he could accept his mistakes and prepare for the consequences which may include sacrifices, or he could continue in denial and face worse and more serious consequences and sacrifices under much less friendly circumstances.

I have an assurance from him that he will contact CAP, hopefully, if he does that, he won't need me to handle much more.

There is the added complication of a racing charge filed by the police he is going through which may or may not be dropped, but could result in 4K in fines and require him to have a lawyer possibly another couple of grand, and the fact that as a result of him not having a mechanic check his car pre purchase it now needs about another $1500 worth of repairs he found out this week!

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#1943292 19-Jan-2018 09:55

networkn:

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

I hadn't seen this when I last replied.

Not sure what qualifies as "smallish", but I suspect he must have taken out some very short term loans for the repayments to be that high on a single loan.

I'm certainly no financial expert, but I agree with you that it sounds like he needs to learn money management. A debt consolidation loan would only be a short term fix until he does the same thing again by how you've described the situation. But as you mentioned, he doesn't seem interested in anything but the easiest way out.

As awful as it sounds, especially with friends and family, sometimes people need to suffer the consequences of their mistakes before they learn. It is a very hard lesson for someone young starting out in life though, but you say you've bailed him out of similar situations in the past?

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#1943294 19-Jan-2018 09:57

networkn: ...as a result of him not having a mechanic check his car pre purchase it now needs about another $1500 worth of repairs he found out this week!

Did he buy his car from a registered dealer, if so how long has he had it? The dealer might be liable for the repairs.

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#1943296 19-Jan-2018 10:01

networkn:

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

But can he get one? Going by the comments here, his rating may preclude that. But certainly, small loans at those rates would massively help cashflow. From what I read about CAP, its support and help, but not financially. So, while thats great, his payment problems still continue, unless they can ask for short repayment holidays? Maybe one repayment holiday from a $200 repayment loan can whip off the other quickly?

And I would wager that they will see he is over his head, so sell car, buy a $2000 runabout, and that makes it 90% under control, but he wont want that

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#1943297 19-Jan-2018 10:03

Paul1977:

networkn:

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

I hadn't seen this when I last replied.

Not sure what qualifies as "smallish", but I suspect he must have taken out some very short term loans for the repayments to be that high on a single loan.

I'm certainly no financial expert, but I agree with you that it sounds like he needs to learn money management. A debt consolidation loan would only be a short term fix until he does the same thing again by how you've described the situation. But as you mentioned, he doesn't seem interested in anything but the easiest way out.

As awful as it sounds, especially with friends and family, sometimes people need to suffer the consequences of their mistakes before they learn. It is a very hard lesson for someone young starting out in life though, but you say you've bailed him out of similar situations in the past?

Yeah, the loans that are causing the real issue now, are the ones he took out to cover payments on other loans when he got into trouble.

Part of it is a lack of education. Most parental units will try and convey this information at a younger age, but this didn't happen and now he isn't interested in hearing it from them.

I agree, the consequences are his, and it will be fine long term I think. He will learn from this, even if he makes similar mistakes again. These kids can be slow learners sadly.

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#1943324 19-Jan-2018 10:11

tdgeek:

networkn:

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

But can he get one? Going by the comments here, his rating may preclude that. But certainly, small loans at those rates would massively help cashflow. From what I read about CAP, its support and help, but not financially. So, while thats great, his payment problems still continue, unless they can ask for short repayment holidays? Maybe one repayment holiday from a $200 repayment loan can whip off the other quickly?

And I would wager that they will see he is over his head, so sell car, buy a $2000 runabout, and that makes it 90% under control, but he wont want that

No chance of a consolidation loan at this point, I am just discussing it generally not as it relates to him.

CAP can actually take his debt and use powers assigned to them under law to "force" his high interest high repayment borrowers to accept less under hardship terms. Essentially they will make a plan, which involves him paying them, them paying the creditors, mandatory savings account and some spending money.

Selling the the car won't help. He will get less for it than he owes, he won't be able to get a loan for a another cheaper car. He doesn't have cash for a run around.

It's also got some issues which would further complicate.

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#1943342 19-Jan-2018 10:38

networkn:

tdgeek:

networkn:

It's not the interest that's the problem per se, though apparently there are some loans with penalty interest in the dozens of percent calculated daily if he misses a payment. The problem is that a few of the smallish loans have $200 a week or $200 a fortnight payments and we has more of those than he can pay back on current income. A consolidation loan lets him get rid of those really quick which frees up cash to sort his others.

But can he get one? Going by the comments here, his rating may preclude that. But certainly, small loans at those rates would massively help cashflow. From what I read about CAP, its support and help, but not financially. So, while thats great, his payment problems still continue, unless they can ask for short repayment holidays? Maybe one repayment holiday from a $200 repayment loan can whip off the other quickly?

And I would wager that they will see he is over his head, so sell car, buy a $2000 runabout, and that makes it 90% under control, but he wont want that

No chance of a consolidation loan at this point, I am just discussing it generally not as it relates to him.

CAP can actually take his debt and use powers assigned to them under law to "force" his high interest high repayment borrowers to accept less under hardship terms. Essentially they will make a plan, which involves him paying them, them paying the creditors, mandatory savings account and some spending money.

Selling the the car won't help. He will get less for it than he owes, he won't be able to get a loan for a another cheaper car. He doesn't have cash for a run around.

It's also got some issues which would further complicate.

Clearly his parents are not financial but can they get a loan for him, just for the smaller high repayment loans?

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#1943343 19-Jan-2018 10:42

tdgeek:

Clearly his parents are not financial but can they get a loan for him, just for the smaller high repayment loans?

Not an option, unfortunately.

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#1943348 19-Jan-2018 10:49

networkn:

tdgeek:

Clearly his parents are not financial but can they get a loan for him, just for the smaller high repayment loans?

Not an option, unfortunately.

Thought so. Looks like CAP, especially if they have a bit of twist their arms power on creditors. Cross fingers that they dont start rubbing their hands with what seems to be an over 10k car. "ah ha, we can fix this easily"

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#1943356 19-Jan-2018 10:57

tdgeek:

networkn:

tdgeek:

Clearly his parents are not financial but can they get a loan for him, just for the smaller high repayment loans?

Not an option, unfortunately.

Thought so. Looks like CAP, especially if they have a bit of twist their arms power on creditors. Cross fingers that they dont start rubbing their hands with what seems to be an over 10k car. "ah ha, we can fix this easily"

As I said, it won't help to sell the car as it will be worth less a year into a 5 year loan for 10K, than the loan would be worth.

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#1943387 19-Jan-2018 11:05

networkn:

tdgeek:

networkn:

tdgeek:

Clearly his parents are not financial but can they get a loan for him, just for the smaller high repayment loans?

Not an option, unfortunately.

Thought so. Looks like CAP, especially if they have a bit of twist their arms power on creditors. Cross fingers that they dont start rubbing their hands with what seems to be an over 10k car. "ah ha, we can fix this easily"

As I said, it won't help to sell the car as it will be worth less a year into a 5 year loan for 10K, than the loan would be worth.

Ok. Im thinking repayments . I assume a 10k 5 year loan is about $275 a month. A private sale should get an ok price and avoid 275 a month for another 4 years, replace that with a cheap runabout till he's on his feet, CAP may want that

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#1943442 19-Jan-2018 11:49

networkn:

As I said, it won't help to sell the car as it will be worth less a year into a 5 year loan for 10K, than the loan would be worth.

Yeah, but the car is only going to decrease in value, and unless he is able to keep up the payments the loan could increase.

CAP will likely take stock of all his assets and if there is a couple of K that can be realised between the value of the car and a cheap runabout, then they may require him to sell it as part of the process

There is no way his is going to be able to section off the car and car loan when they go through everything...

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