Debt Elimination Plan Using No Loans!
This is the debt elimination plan to use if you can't obtain a large
lump sum of cash. People that rent or have to high a loan to value
to qualify for a second mortgage can still eliminate debt with this
plan. It works if some of your debt is credit cards and you pay
over the monthly minimum payment on some.
The difference between what you pay
monthly on your credit cards and the minimum payment is used to
create the margin that makes this plan work. The amount of cash
created for the margin is then used to pay off the highest interest
debt. All other credit cards are get paid with the minimum monthly.
When the high interest rate is paid off. The next highest card gets
worked on.
In the example below the margin created
is the difference between actual monthly card payments and the minimum
payments. After adding up the difference the margin created is $111.
This is the amount used to start paying off debt at an accelerated
rate starting with the highest interest credit card.
| Creditor |
Interest Rate |
Years |
Months |
Actual Payment |
Minimum Payment |
Margin |
| 1st Mortgage |
8.5% |
26 |
10 |
$748.26 |
$748.26 |
0 |
| Credit Card #1 |
21% |
4 |
2 |
$50 |
$30 |
$20 |
| Credit Card #2 |
21.25% |
4 |
3 |
$50 |
$45 |
$5 |
| Credit Card #3 |
15.9% |
3 |
8 |
$125 |
$69 |
$56 |
| Credit Card #4 |
17.5% |
3 |
10 |
$175 |
$156 |
$19 |
| Credit Card #5 |
21.5% |
4 |
3 |
$50 |
$39 |
$11 |
| Auto Loan #1 |
11.5% |
4 |
10 |
$115 |
$115 |
0 |
| Auto Loan #2 |
12% |
4 |
10 |
$200 |
$200 |
0 |
| Student Loan |
10% |
12 |
4 |
$73 |
$73 |
0 |
| Taxes And Ins. |
0% |
26 |
10 |
$120 |
$120 |
0 |
|
|
|
|
$1706.26 |
$1565.26 |
$111 |
| Below
is the debt listed in order of greatest interest rate. The $111
margin created would be applied to credit card #5. |
| Creditor |
Interest
Rate |
| CCard
#5 |
21.5% |
| CCard #2 |
21.25% |
| CCard #1 |
21% |
| CCard #4 |
17.5% |
| CCard #3 |
15.9% |
| AutoLoan#2 |
12% |
| AutoLoan#1 |
11.5% |
| Student Loan |
10% |
| 1st Mortgage |
8.5% |
| Tax Ins |
NA |
|
| When
credit card #5 is paid off, the new margin becomes $150 ($111
+ $39). This new margin amount is now applied to credit card
#2. |
| Creditor |
Interest
Rate |
| CCard
#5 |
paid |
| CCard
#2 |
21.25% |
| CCard #1 |
21% |
| CCard #4 |
17.5% |
| CCard #3 |
15.9% |
| AutoLoan#2 |
12% |
| AutoLoan#1 |
11.5% |
| Student Loan |
10% |
| 1st Mortgage |
8.5% |
| Tax Ins |
NA |
|
| When
credit card #2 is paid off, the new margin becomes $195 ($150
+ $45). This new amount is now applied to credit card #1. |
| Creditor |
Interest
Rate |
| CCard
#5 |
paid |
| CCard #2 |
paid |
| CCard
#1 |
21% |
| CCard #4 |
17.5% |
| CCard #3 |
15.9% |
| AutoLoan#2 |
12% |
| AutoLoan#1 |
11.5% |
| Student Loan |
10% |
| 1st Mortgage |
8.5% |
| Tax
Ins |
NA |
|
This process continues in a domino
effect until all debt is paid off. In this example, $101,844 in
interest will be saved. Time to pay off total debt is reduced from
28 years and 10 months to 11 years and 1 month!
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