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How you can save thousands leveraging your current debt
February 15, 2017
Looking to save money every month? Perhaps it's time to consolidate all your debt to one easy-to-manage loan. You can save in interest and pay your debt off quicker. Not only will you save each month, but you can start to put something away for later on down the road that can grow into a sizable nest egg.
So just how much exactly can you save? Well that answer varies on many factors such as the amount of your debt and current financial situation - but we will take a look at how much John can save.
This is John's three combined credit cards that total $3,707.00
$879 14.5% $35
$2,453 22.99% $98
$375 18.50% $15
The total monthly payment for the three credit cards above is $148.28.
Now let's take a look at John's other 'personal loans / unsecured debt. This is debt similar to a credit card. Personal / unsecured loans differ from a car loan or mortgage because there is no collateral however, personal loans often have a fixed payment and term such as 24, 36, 48, 60 months etc.
John has one total personal, unsecured loan totaling: $3,847.00
$3,847 15% $133
John's total unsecured debt is $7,554 and he is paying $281.28 every month to cover the 4 payments.
Now let's take a look at what happened if John consolidated all those debts into one new loan.
$7,554 14% $206.42
John manages to qualify for a personal loan that covers all 4 of his debts combined with a single payment of $206.42 a month. That is $74.86 he can put away into savings or invest for the future.
Beyond saving $75 every month, John can now pay off all of his debt within 48 months; the term of his new loan. Previously, it would have taken John 10 years and 4 months to pay off his debt!
What happens if John invested the $75 in savings each month? At a return rate of 7% at the end of 48 months when John is debt free, John would have $4,114.89 accumulated.
Let's take a look at the benefit of consolidating:
- John would pay roughly $75 less each month
- John would be debt free after 4 years versus 10 years 4 months
- John could accumulate over $4,000 by investing the $75 he was saving each month versus zero if he hadn't consolidated
- John increases his credit score by roughly 45 points just by lowering the total usage amount of open credit
If you're looking to consolidate, don't hesitate to call Central Sunbelt and speak to your loan officer. Being a not-for-profit financial institution owned by our members, we are all about putting you in the best financial position to pay less and save more.