Center for Financial Education
174 guests and
0 on-line users
The best way to predict the future is to clearly understand what is happening in the present.
Common Causes and Errors
Most Popular Pages
Search Last option: use our search engine to find the information you are interested in ..
Module name: :: type: :: file / func: :: module missing
By leaving your personal data on the site, you agree that your information will be used in accordance with
(c) 2004 - 2017, Sergey Spirin, all materials on the site, except those signed by other names
Website Design - Visual Square
Instead of joining
I don’t like obvious recommendations like “do not make new debts” or “give up unnecessary purchases for a while”. Who are these tips written for? How to pay on loans if there is no money even for clothes and good nutrition?
In addition, each Russian debtor is “unhappy in its own way.” The bank takes an apartment from someone for mortgage debts. For others, the phone is torn by collector calls. Someone in the wake of the "credit boom" scored a bunch of small loans for unnecessary "show-offs." The ruble has depreciated twice, the income level has fallen, and making payments every month is becoming increasingly difficult.
There is no universal algorithm of actions for getting rid of debts. But there are a couple of useful chips that will streamline this process (except for the option with the bankruptcy of an individual). By the way, I categorically do not recommend resorting to the help of black and white magic! 🙂
Let's take the average situation as an example: there are several debts, there are no delays in them. But every month it’s more and more difficult to service them (incomes have fallen, a child was born, one of the loans in foreign currency).
We evaluate the current situation.
We create a table in Excel or just draw it by hand in a notebook. The number of lines depends on the amount of debt. The Petrov family (husband and wife) has four of them: a mortgage, a consumer loan on TV, a credit card balance and a debt to a friend Vasya.
Information for columns:
- Total balance
- Minimum payment per month (body, interest and total amount)
In our example, we got:
Here's a picture from Petrova.
Conclusions from the table:
- Vasya's debt does not require interest payments. For the Petrova family, this money is "free." The Petrovs talked with Vasya and agreed that he would not rush them with the return of the debt. Who can help in a difficult situation, if not a friend. But the Petrovs promised that exactly in a year they would return Vasya the whole amount in one payment
- A credit card payment costs the family a penny. Moreover, the minimum payment for credit card debts is automatically debited from the husband's salary card. But it is with a credit card that the largest interest overpayment is 3% per month or 36% per annum. Close this debt is first
- Consumer credit is also expensive: 2% per month or 24% per annum. And it is also advisable to get rid of it as soon as possible. But the consumer was registered according to the annuity scheme. This means that the gain in percentage of prepayment will be minimal.
- The most difficult situation is with Petrovs with a mortgage. Interest on it is small: 1% or 12% per annum
But, firstly, the mortgage was taken in dollars. And since its inception, the ruble has fallen by half. And the salaries, like most Russians, are received by the Petrovs in national currency.
Secondly, the mortgage is repaid in a differentiated manner. And any overpayment immediately reduces both the amount of interest and the “body” of the loan (the term remains the same). In other words, it is extremely profitable for Petrov to repay the mortgage ahead of schedule. Moreover, the forecast for the dollar for the coming years is very contradictory.
There is another option to solve the problem: convert the mortgage into rubles. The Petrovs even found those who would help close the old one and take a new loan for the same apartment. But the proposed conditions for refinancing were even worse than the current ones. The Petrovs decided to leave everything as it is.
1. First minimum payments, then investments
It is quite possible to invest money and pay loans at the same time, the main thing is not to forget about the minimum payments. For a loan delay, the bank can increase interest, introduce fines and additional fees, not to mention a blow to your credit rating. Only consider investing if you have enough for the minimum monthly loan payments.
Draw up a plan for getting rid of debts
In our example, the minimum monthly payment to pay off all debts is about 22,350 rubles. We decided that the dollar is 60 rubles. And Vasya needs to save 1,000 rubles every month (in order to give him 12,000 rubles a year later).
The income for two in the Petrov family is 70,000 rubles. They decided that they could well “heal” for a while and pay off most of the debt for the year. According to their calculations for a modest life, 30,000 rubles will be enough for them. They will direct the remaining 40,000 rubles to pay off debts during the year (this is almost 18,000 rubles more than the mandatory minimum payment).
Debt repayment plan:
- Credit card: fully closed in the first month
- Vasya’s debt: the accumulative account “Accumulator” is connected to the husband’s salary card (Alfa-Bank). Every month, the “Piggy Bank for Salary” service automatically transfers the same amount to the account (in our example - 1000 rubles). Alfa-Bank charges 7% on any account balance. A year later, the Petrovs will close the “Accumulator” (12,000 rubles plus interest) and return the debt to Vasya
- Consumer loan: repaid on schedule - 3000 rubles per month
- Mortgage: the amount remaining after the previous three points is fully used to repay the housing loan. Apart from the first month (closing a credit card), 40,000 should remain on the mortgage - (1000 + 3000) = 36,000 rubles (about $ 600). This is twice the current minimum payment
- Of the four debts, two are completely closed
- Pay off half of the consumer loan on TV
- Closes about $ 6,000 of the mortgage debt balance (60%). And the size of the monthly payment is significantly reduced (at least twice)
In my opinion, the Petrovs made a very real and feasible plan.
3. Pay attention to mutual and exchange funds (ETFs) with minimal fees
If the basis of your debts is loans with low interest rates, investments in high-yield assets are justified. In fact, many financial experts are against early repayment of cheap loans. In their view, it is wise to invest in assets that generate more income than interest on loans. To get stock market returns, buy a share in a unit or exchange fund with low fees.
How to repay debts in order?
The answer to the question depends on the specific situation. The general rule is this: the more problems debt creates, the faster it needs to be repaid.
Say, debts on microloans, as a rule, “knock out” quite tough. And interest on overdue debts in MFIs is simply predatory. Therefore, if you have both a microloan and debts in the apartment, you can temporarily forget about the second point and take up the first tightly.
Another option. The family has several small loans and debts plus a mortgage. Due to a serious delay in the mortgage, the bank went to court. We are talking about the forced sale of apartments. It is clear that it is the repayment of the mortgage for this family - in the first, second and third place.
But for a standard situation without extremes (several debts without arrears), the sequence of repayment looks like this:
- “Expensive” debts (with a high interest rate or in foreign currency). This also includes debts that create psychological discomfort. For example, the boss issued a loan at work and immediately loaded it with instructions like Cinderella's stepmother. Or for debts on alimony spoiled relations with the former family
- “Reasonable” debts (loans with a minimum interest rate or installment plan)
- “Safe” debts (to relatives and friends, per apartment)
How did you get rid of your debts?
Subscribe to updates and share links to recent posts with friends on social networks!
4. Look for opportunities to invest without commission
Most likely, there will be very little money left after payments on loans for investments. There is nothing to worry about. The main thing to remember about the fees and commissions that you pay for each operation. By paying $ 8 per pair of shares, you lose a huge percentage of your investment. Fortunately, many brokerage companies allow you to make some types of investments without paying a commission.
5. Automate the process as much as possible.
The balance between investing money and paying off debts requires a certain discipline. When considering the possibility of investing, determine in advance the correct distribution of income. Then install automatic monthly deductions to the brokerage account and to repay loans. If you received a bonus or promotion, adjust your payments accordingly.
Automation helps to remove indecision and doubt from the decision-making process, facilitates the consistent movement towards the goal and simplifies financial planning.