farm budgeting

[GMN]

I have 2 bills that I feel the interest is too high on, unsecured debt. I had asked my Banker if we could take out a loan there to pay them off, at a cheaper interest. He said we could But he wuld need collateral, I'm wondering is it always worth it just to save interest, or should a person just suck it up and pay the higher interest, instead of going thru a bank?

GMN

 

[Ryder]

Number 1. How much would you save on the interest?

Number 2. Do you have collateral you can put up? If so, then why not put it up unless you anticipate not paying the debt or think you may need the collateral for another debt in the future.

 

[GMN]

Number 1. How much would you save on the interest?

Number 2. Do you have collateral you can put up? If so, then why not put it up unless you anticipate not paying the debt or think you may need the collateral for another debt in the future.

it would save about $75 a month, and it doesn't bother me to put up the collateral, but it is a concern that if we needed to borrow for something down the road that this could hamper that. I have to say I'm leaning towards not doing it now, just for that reason.

 

[Angus Cowman]

could you add a little extra to the principal each month and therefore offset some of the interest on the duration of the note

I know that on a 30 yr loan if you pay 1 extra payment per yr towards principal it will knock yrs off of the duration of the loan

 

[bigbull338]

ive done what your talking about on a small scale both ways.an on both i payed as much as i could stand to pay.just to get it payed off as soon as possable.right now i dont owe no 1 nothing.an thats a good feeling.but im strange in the fact that i dont mind oweing money.

 

[AngusLimoX]

Number 1. How much would you save on the interest?

Number 2. Do you have collateral you can put up? If so, then why not put it up unless you anticipate not paying the debt or think you may need the collateral for another debt in the future.

it would save about $75 a month, and it doesn't bother me to put up the collateral, but it is a concern that if we needed to borrow for something down the road that this could hamper that. I have to say I'm leaning towards not doing it now, just for that reason.

I can't see them not adding admin or service fee's and that may knock any advantage out.
If it is a short term debt you are trying to string out, then watch that your lack of cash flow doesn't put you on a slippery slope with revolving debt.

I think your insticts are correct.

 

[1982vett]

Without getting into more details such as how much, how long and cash flow (don't even want to go their)....All of which could change most of the suggestions you get. Try this one.

Concentrate all efforts on one. Pay the minimum on the other two and concentrate any extras you can to the one. Hopefully it will go away fairly quick. When it is gone add what you were paying on the first to the second one. Then do the same to the third. Usually you would be advised to concentrate efforts on the higher interest. I'd like to say to start with the smaller loan cause you will see progress in getting it paid off quicker...but not knowing the interest rates and specifics you would need to make that judgement.

You have to take into account most loans come with upfront costs of their own which will add to you liabilities before you see any benefit from a new loan. Look for a loan calculator and play with different scenarios. Doing so should help you make some decisions.

 

[john250]

Money today is worth more than money tomorrow. Put up the collateral and borrow at the better terms. A good payment history will put you in good standing if an emergency comes along. JMO

 

[gimpyrancher]

1982vett,

I agree with you except the highest interest rate loan should be the first to pay off. With every penny you can spare. The problem with taking out a loan to pay off what you borrowed is that now your unsecured loans are paid off and the credit is now available again. Rarely do people wait to use it again, while still paying off the "cheaper" loan amount.

 

[GMN]

Well we have a few other loans, with very low interest, these 2 bug me becasue the interest is kind of high. The bank loan would be for 3 years, but they would want almost double the amount in collateral, and the payments on a 10% loan would only be $25 less than what I'm paying now on the one bill to get it paid off in the same time of 3 years, at a higher interest-now that is what puzzles me, how can that be? U would think the higher interest one would take much longer to pay off, and would take more money to pay off in the same 3 year period, but I ran the payment calculator in several different spots, and it came up exactly the same way each time. To me, being we use the bank, have our morgtage thru them, and a small note, I wouldn't want to take out another loan for this, just in case we would need them for some unforseen breakdown in the future. Our problem is we don't have alot of money in savings, and last year in the slump of $10 milk prices sure did not help, not sure when we will get caught up from all that, so i do think for now, I will just keep paying on it, unless some awesome other deal comes along with a much lower interest, to really make a dent in how fast it gets paid off.

I have read Dave Ramseys views on the snowball debt plan, he says paying off the smallest bill first is the way to go, BUT he says his plan works for everyone-EXCEPT dairy farmers. Believe me over the years, I have been mind boggled by just this, which bill to pay, which bills to pay extra on, and ona and on, its not easy to even run a budget, as I really don't know until a day before what I will be making. Last year I never had enough monny, and that is even worse. if there was jsut one way that worked for everyone would be a breeze, but every business is different, I think a person jsut has to look at their own situation and try to make the best decisions for themselves.


GMN

 

[1982vett]

Well we have a few other loans, with very low interest, these 2 bug me becasue the interest is kind of high. The bank loan would be for 3 years, but they would want almost double the amount in collateral, U would think the higher interest one would take much longer to pay off, and would take more money to pay off in the same 3 year period, but I and the payments on a 10% loan would only be $25 less than what I'm paying now on the one bill to get it paid off in the same time of 3 years, at a higher interest-now that is what puzzles me, how can that be?ran the payment calculator in several different spots, and it came up exactly the same way each time. To me, being we use the bank, have our morgtage thru them, and a small note, I wouldn't want to take out another loan for this, just in case we would need them for some unforseen breakdown in the future. Our problem is we don't have alot of money in savings, and last year in the slump of $10 milk prices sure did not help, not sure when we will get caught up from all that, so i do think for now, I will just keep paying on it, unless some awesome other deal comes along with a much lower interest, to really make a dent in how fast it gets paid off.

I have read Dave Ramseys views on the snowball debt plan, he says paying off the smallest bill first is the way to go, BUT he says his plan works for everyone-EXCEPT dairy farmers. Believe me over the years, I have been mind boggled by just this, which bill to pay, which bills to pay extra on, and ona and on, its not easy to even run a budget, as I really don't know until a day before what I will be making. Last year I never had enough monny, and that is even worse. if there was jsut one way that worked for everyone would be a breeze, but every business is different, I think a person jsut has to look at their own situation and try to make the best decisions for themselves.


GMN

I'd guess the loan is nearing the end where more of your payment is going toward the principal. Might even guess that you have about 3 years left to pay on it. At the beginning of a loan a higher percentage of a payment is going toward interest. At the end of a loan less of the payment is interest and the principal balance starts to shrink faster. I'm thinking that refinancing a longer term loan with about 3 years left to go into a lower interest 3 year loan would basically reset the clock (so to say) where a higher percentage of the loan payment is going to interest again. May not be more money going to interest, but the ratio between the two is changed.

 

[1982vett]

1982vett,

I agree with you except the highest interest rate loan should be the first to pay off. With every penny you can spare. The problem with taking out a loan to pay off what you borrowed is that now your unsecured loans are paid off and the credit is now available again. Rarely do people wait to use it again, while still paying off the "cheaper" loan amount.

I'd say the exception might be if the next highest loan were substantially smaller and wouldn't take very long to pay off. I'm talking months not years. I think the psycological effect of seeing a loan paid off would be worth a little something.

Without getting into more details such as how much, how long and cash flow (don't even want to go their)....All of which could change most of the suggestions you get. Try this one.

Concentrate all efforts on one. Pay the minimum on the other two and concentrate any extras you can to the one. Hopefully it will go away fairly quick. When it is gone add what you were paying on the first to the second one. Then do the same to the third. Usually you would be advised to concentrate efforts on the higher interest. I'd like to say to start with the smaller loan cause you will see progress in getting it paid off quicker...but not knowing the interest rates and specifics you would need to make that judgement.

You have to take into account most loans come with upfront costs of their own which will add to you liabilities before you see any benefit from a new loan. Look for a loan calculator and play with different scenarios. Doing so should help you make some decisions.

 

[larryshoat]

Gail, Dave ramsey's plan works great for people that make enough money, but don't know how to handle it. You're still staggering from the $10 milk. I think in farming one of the hardest things to take is that we have been financialy going backwards, but it happens from time to time. I think if I had equity and could prove capacity to repay and since rates are low I might consider refinancing all the debt into something long term. That would give you some breathing room. In the times that I've sold stuff for less than I had in it, it didn't seem to hurt so bad while I was doing it, since I had some cash flow. What really hurts is the cumulative effect of selling 10 steers to meet obligations that 7 steers should have met.

Larry

 

[backhoeboogie]

You've probably got friends or family with nickels tied up in low interest savings. This could be a win/win situation in that they could loan you the money, they could draw more interest than they are earning now, and you could pay less. You seem like a very good person who is credible and trust worthy Gail.

Just something to think about.

 

[Ryder]

You've probably got friends or family with nickels tied up in low interest savings. This could be a win/win situation in that they could loan you the money, they could draw more interest than they are earning now, and you could pay less. You seem like a very good person who is credible and trust worthy Gail.

Just something to think about.

With all due respect to bhb, I would not go to family or friends. There can be exceptions to anything, but with family/friends it can go from just business to personalities real fast. This can create a lot worse problems than the monetary debt.

Stand on your own two feet, take care of your own business, and keep your independence.

 

[GMN]

You've probably got friends or family with nickels tied up in low interest savings. This could be a win/win situation in that they could loan you the money, they could draw more interest than they are earning now, and you could pay less. You seem like a very good person who is credible and trust worthy Gail.

Just something to think about.

With all due respect to bhb, I would not go to family or friends. There can be exceptions to anything, but with family/friends it can go from just business to personalities real fast. This can create a lot worse problems than the monetary debt.

Stand on your own two feet, take care of your own business, and keep your independence.

Lets put it this way, I don't have any family that I would consider borrowing money from. If I ever borrowed from a friend, it would have to be legal in writing, but i would only consider that under extreme circumstances and this is not that.


GMN

 

[GMN]

Thanks for the replies, i'm sure this will all work out one way or another-just have to think onit some more, but not today.

GMN

 

[backhoeboogie]

Thanks for the replies, i'm sure this will all work out one way or another-just have to think onit some more, but not today.

GMN

Ryder is probably right. I have helped out some nephews and a younger bro with no issues. They were appreciative all through everything.

 

[TexasBred]

You've probably got friends or family with nickels tied up in low interest savings. This could be a win/win situation in that they could loan you the money, they could draw more interest than they are earning now, and you could pay less. You seem like a very good person who is credible and trust worthy Gail.

Just something to think about.

With all due respect to bhb, I would not go to family or friends. There can be exceptions to anything, but with family/friends it can go from just business to personalities real fast. This can create a lot worse problems than the monetary debt.

Stand on your own two feet, take care of your own business, and keep your independence.

NEVER borrow nor lend to family or friends..The makings of a storm !!!!
Lets put it this way, I don't have any family that I would consider borrowing money from. If I ever borrowed from a friend, it would have to be legal in writing, but i would only consider that under extreme circumstances and this is not that.


GMN

 

[garcia1.icon]

Yes Ryder, I do agree with you. As you said Stand on your own two feet, I really respect that sentence, Because taking money from friends or family will never mean. It will again take to another problem. Because I suffered a lot with the same scenario.