Debt Elimination Using A New Loan.
This debt elimination plan operates by creating a margin from a
lump sum of cash. Individuals with access to a large lump sum of
cash (like a new second mortgage) creat the margin by immediately
paying off high interest debt.
This plan assumes you can obtain a
second mortgage high enough to pay off all high interest debt at
one time (credit cards, auto loans, etc). It doesn't matter what
if the new 2nd mortgage is 5, 10 or 20 years or what the interest
rate is because you are accellerateing it at a fast rate (4 years).
The following charts display debt payoffs
and time before and then after using debt elimination plan using
new 2nd mortgage to payoff high interest debt and create a margin.
| |
Before
|
| Creditor |
Interest Rate |
Years |
Months |
Payment |
| Credit Card #1 |
21% |
1 |
3 |
$100 |
| Credit
Card #2 |
21% |
1 |
6 |
$100 |
| Credit Card #3 |
17.5% |
2 |
9 |
$200 |
| Credit Card #4 |
15.9% |
1 |
5 |
$150 |
| Credit Card #5 |
21% |
0 |
11 |
$100 |
| 2nd Mortgage |
15% |
10 |
0 |
$200 |
| Car Loan |
14% |
4 |
0 |
$244 |
| Car Loan |
12.9% |
2 |
0 |
$288 |
| Student Loan |
10% |
8 |
2 |
$62 |
| New 2nd Mortgage |
12.5% |
n/a |
n/a |
n/a |
| 1st Mortgage |
8% |
28 |
4 |
$991 |
| Taxes And Ins. |
n/a |
28 |
4 |
$120 |
| New Monthly Payments |
|
|
|
$2,555 |
| |
After
|
|
| Creditor |
Years |
Months |
Payment |
| Credit Card #1 |
0 |
1 |
Paid Off |
| Credit
Card #2 |
0 |
1 |
Paid Off |
| Credit Card #3 |
0 |
1 |
Paid Off |
| Credit Card #4 |
0 |
1 |
Paid Off |
| Credit Card #5 |
0 |
1 |
Paid Off |
| 2nd Mortgage |
0 |
1 |
Paid Off |
| Car Loan |
0 |
1 |
Paid Off |
| Car Loan |
0 |
1 |
Paid Off |
| Student Loan |
0 |
5 |
$921 |
Paid Off |
|
| New 2nd Mortgage |
4 |
0 |
$523 |
$1,444 |
Paid Off |
| 1st Mortgage |
9 |
6 |
$991 |
$991 |
$2,435 |
| Taxes And Ins. |
9 |
6 |
$120 |
$120 |
$120 |
| New Monthly Payments |
|
|
$2,555 |
$2,555 |
$2,555 |
$1,382 in high interest debts paid
off minus $523 for the new 2nd mortgage payment equals an $859 margin.
The margin ($859) created by paying
off the first eight debts is directed to the student loan ($62 +
$859 = $921). The sudent loan is now paid off in 5 months.
Once the student loan is paid off,
the new margin ($921) is then directed toward the new second mortgage
($523 + $921 = $1444). The new second mortgage is now paid off in
4 years.
After the new second mortgage is paid
off, the new margin ($1444) is then directed toward the home mortgage
($1444 + $991 = $2435). The mortgage is now paid off in under 10
years!
In this example, the projected interest
payments ithout using a debt elimination plan equals $223,566. The
new projected interest paid for all loans using the plan is $86,203.
Using the debt elimination plan saves $137,363 in interest payments!
Diverting funds from the margin:
What happens if you choose to divert
a portion of the newly created margin to the creation of an emergency
fund, unforseen expenses or a new expense like a car purchase?
| Alternative |
Option 1 |
Option 2 |
Option 3 |
Option 4 |
| Diverted
Funds |
$0 |
$100 |
$200 |
$300 |
| Monthly Payment to
Old Debt |
$2,555 |
$2,455 |
$2,355 |
$2,255 |
| Years To Payoff |
9years
6 months |
10 years
1 month |
10 years
11 months |
11 years
10 months |
Adding funds to the margin:
If you were to add funds to your monthly
payments outside of the created marging you will accellerate payoff
of your debts even faster.
| Alternative |
Option 1 |
Option 2 |
Option 3 |
Option 4 |
| Additional
Funds |
$0 |
$100 |
$200 |
$300 |
| Monthly Payment to
Old Debt |
$2,555 |
$2,655 |
$2,755 |
$2,855 |
| Years To Payoff |
9years
6 months |
8 years
11 month |
8 years
5 months |
7 years
11 months |
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