I hear a lot of groans about loans. Have you ever groaned about your loans? Have you ever heard anyone else groan about his or her loans? Better yet, have you done anything other than groan about your loans??? Maybe it is time to do more than groan about loans. I know that it is time to stop this phrase about loans and groans! Most feel that is all they can do about their loans. They feel helpless. They shouldn’t feel that way. There are a lot of things that can be done to stop that groaning.
If you have some loans, and who doesn’t, start by making a list of those loans in detail. What was the original amount of the loan? What was the loan for? What was the date of the loan? Who was the money borrowed from? In other words, who was the lender? What was the original interest rate? What are the payments and when are they due? What is the length of the loan? What is the current balance of the loan? If the interest rate has changed, what is the current rate? Are you current with the payments? Keep in mind that many so-called leases are really loans, so you need to list the information on them, too.
All of this information is available and you should be able to find most of it in the original papers you received when to got the loan. You say, you don’t have those papers? Call your lender and request copies from them. From now on, make sure you set up a file for all future loans and keep complete records of those loans. Very important!
You might want to use a notebook to keep all of the paperwork you receive on a loan. This makes a neat way to keep track of your loans and what is happening with them. It is also a way to make sure that you have all the information on a loan.
The rest of the basic information you need can be found on the annual statements that you receive from the lenders. They usually send them after the first of the year, so you will have the information you need for tax purposes. If the loan was for business purposes, the interest is most likely tax deductible. That includes loans for equipment, too.
While we are on the subject of deductibility of interest on loans, the interest on home mortgages is tax deductible, also. That goes for your residence and also for a second home. It is a good idea to have a file for each of these, as well. That’s another place where the notebook can come in handy.
Once you have all the information on your loans, it is time to review and see if something can be done to improve your situation with these loans. What am I referring to? Now that you know what the current interest rates are, you might see that it is possible to re-finance the loan and reduce the interest rate and possibly lower the payment as well. If cash flow is an issue, then, by reviewing this information, you may see that you can lengthen the loan and reduce the required payment. Don’t be too concerned about paying a loan off as fast as possible. Make sure that the payments fit within your budget and cash flow concerns. The loan will get paid off eventually. The key is to make sure you can live with the payments and avoid any additional stress.
I think I should spend a little time to say that a loan is not necessarily a bad thing. A loan can allow you to obtain something that you need long before you could afford it. I would also state that a loan is debt and I know that most reading this consider debt a bad thing. Debt is a “four-letter word,” but not all debt is bad, as long as you are in control of your debt. You must never forget that money is worth what you can borrow it for. If you can borrow money at a rate lower than the current cost of money, that is not a bad idea. It allows you to operate on OPM (other people’s money). Never get yourself into a situation where you are debt-free and also asset-free and cash-poor. You always need to have a cash reserve to cover emergencies that may arise.
Stanley B. Greenfield has been engaged in the fields of Financial Management and Insurance since 1962. He is a Registered Financial Consultant, and was awarded the designation of RHU, Registered Professional Disability and Health Insurance Underwriter, in 1979, as one of its Charter Members.
Mr. Greenfield also serves as a member of the Board of Directors of the Florida Chiropractic Foundation for Education and Research. You may reach him at [email protected], call 800-585-1555 or 904-513-2229 or visit his website, www.stanleygreenfield.com.