Friday, September 4, 2009

A decision

I went to the bank today to chat with my account manager. I've boosted my RRSP & TFSA contributions slightly, switched the type of chequing account I have (fixed fee of $9.95 p/month!) and asked her advice on something I actually had just thought of on my walk over.

This, of course, could be something that a banker would agree to, so before I get too excited about it, I thought I would pass it by all my favourite PF bloggers for an opinion. I'm comfortable with the idea of doing this, however.

Because my debt is now quite manageable (under $4K) I thought I would pay off my other debts - student loan, credit card & Revenue Canada - with my LOC, leaving me with one debt to pay down, instead of three. This also means I have just one interest rate to deal with (5.75%) instead of 3 or 4 different ones, and I can set up an automatic withdrawal twice a month to make a payment towards it. This will, I believe, work better for me now that I'll be down to one job and there will be months that I might need a little more cash flow than others.

Other reasons that I've decided to do this now are because I have some specific things I need in the very near future: namely new winter tires/insurance for the car and I can put chunks of my paycheque towards those instead. As well, there is good news surrounding my job, which I will be for certain in about two weeks (and share, of course!). The government also has an annual bonus for its employees which is a travel allowance of $2042 per year. It takes two years initially to get this, and it's annually after that. February will be my first allowance, and the timing is such that I should be able to apply it to my RRSP, and apply my income tax refund to the LOC.

It's basically a mini-consolidation loan without the high interest rate. I'm going to set a fixed monthly repayment amount of $150 and add more when & if I can. I am okay with this and the fact that it will take me a little bit longer to get completely out of debt.

I hope everyone has a wonderful long weekend!

7 comments:

Canadian Saver said...

I did this when I had about $10,000 left to pay off. I took out a line of credit through ING direct and just had 1 payment per month instead of a bunch of different CCs and loans. I never worked out how much I saved doing this, but it was a heck of a lot easier for sure!!

Go for it!

Frugal Dreamer said...

I say go for it, too! :)

Hope you have a great weekend!

Northern Living Allowance said...

Thanks CS & FD! I chatted with a friend (whom I really respect) about this too - briefly - and she thought it was a great idea, so I went ahead and did it.

It feels great, even though I'm still technically in debt. I'll be saving on interest, making payments I can afford, making my credit scores look good (I hope!)and I can still live off my jars and put any extra into my savings or towards the LOC.

Thanks for the support! :)

TeacHer said...

I agree with the others: DO IT! It sounds much easier than paying a bunch of different loans every month.

Northern Living Allowance said...

Thanks TeacHer! :) I went ahead and did this. I've had no second thoughts about it, so it mut be the right decision!

Janie Out of Debt said...

Interesting post. Thanks for sharing. I had a friend do this and she loves it.

Best wishes,

Janie

The Asian Pear said...

that's a great idea. it also creates less clutter in your life... like forgetting a payment or whatnot.