RULE 38: Consider Consolidating Debts

Ex-First Lady (Nigeria) Patience Jonathan; Ex-Speaker (Nigeria) Dimeji Bankole & Businesswoman, Hajia Bola Shagaya 
Obviously the
best advice is, don’t get into debt in the first place. If it’s a bit late for
that nugget of wisdom then you need to pay as little interest as you can while
you are paying off your debts (which clearly you will be doing as quickly as
possible).

Consolidating debts is one way of doing this that might be right for
you. What I am talking about here is stopping using three or four credit cards
plus an overdraft plus a bank loan plus other borrowings. It is possible to
consolidate all of them into one loan, tear up the cards (as if – you need
industrial strength scissors, and here speaks a man who has cut up many a
credit card) and payoff the overdraft. And yes I do understand the ease and
usefulness of a credit card but don’t forget that good old stand-by – cash.




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“I have a friend who wrote to all his creditors and
offered them an immediate payment of 50 per cent if they would write the debt
off – this included all his credit card people. Surprisingly every single one
of them said yes and he took out a bank loan and paid them all off without
having to declare himself bankrupt”.

A word of warning;
however, if you do consolidate your debts make sure you aren’t turning
short-term debts into long-term debts. The idea is strictly to payoff debt
quickly.
If you do decide
to consolidate your debts, here are some useful tips:
• I have a
friend who wrote to all his creditors and offered them an immediate payment of
50 per cent if they would write the debt off – this included all his credit
card people. Surprisingly every single one of them said yes and he took out a
bank loan and paid them all off without having to declare himself bankrupt. He
thus consolidated his debts and reduced them by half. Brilliant.
• Never ever
respond to any adverts from companies offering to consolidate your debts for
you – those ads are for people with more money than sense.
• Shop around
for any pay-off loans – don’t accept your bank’s just because it is your bank,
they may not be the cheapest by a long way
• Don’t secure
anything against your home, ever, under any circumstances. If you do, you could
lose your home if you don’t keep up repayments. Is anything worth this risk? I
don’t think so.
• Check the
small print regarding early settlements and make sure you aren’t going to be penalized
if you settle early
• Only ever take
out one loan to consolidate and only do this
Once – learn
your lesson and move on.
• Payoff as
quickly as you can afford – the longer the term, the more you’ll have to pay in
interest.
• If you must
borrow, borrow against an asset you can resell (machine tool, delivery van) and
try not to borrow more than the resale value.
• Buying on credit is a bit different. When Jack Cohen started Tesco he negotiated the
rent for his shop to be paid 3 months in arrear, he paid for his stock 3 months
in arrear, and started taking money over the counter on day 1. By day 90 he’d
taken a lot more than he owed
.
From The Book; The Rules of Wealth by
Richard Templar
(Read Rule
39
of Rule of Wealth tomorrow on Asabeafrika)

Read-to-Wealth Series


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