Advice Wanted: Software for Debt Relief
I am a Quicken 4.0 user who is wrestling to pay off student loans, an auto
loan, and and credit card debt on two cards (at different interest rates).
Is there a software program--embedded in Quicken, MYM, or Money-- which
will help me figure out the best strategy for paying off these loans. I
have some cash to pay down this debt, but since my loans have different
interest rate and terms, I am confused about which--and how much--to pay
off first. What about Shareware programs? Is there any good shareware
which can help me sort this out?
There is a good shareware program called Debt Analyzer for Windows:
The prime locations for new releases are as follows:
CompuServe: Library 4 of the UKSHARE forum
Internet: World Wide Web: http://www.smartcode.com/iss
FTP Site: ftp://ftp.smartcode.com
BBS: Rocky Mountain Software (801) 963-8721 Library 5 (F 5)
Unfortunately there is no hook into Quicken to get information. You enter your
loans, balances and rates. Debt Analyzer can then calculate out a payment
schedule maximizing on different things like "highest balance first", "highest
interest rate first", etc. You can print out the debt repayment report then
automate the payments in Quicken. If you stick to the schedule and don't
incurr more debt you can save lots of $$$ and/or time til debt free.
Of course my tack is to merely follow the low interest credit card offers and
mark my financial calendar when it's time to move my long term debt. Usually
the current card will extend the offer rather than see you jump ship. Of course
I have either enough credit or a small enough debt to be able to consolidate my
debt under one card. Then I pay as much as I can on that card.
I'm not a spokesman for this shareware and I've only nominally used it but the
stategy seems sound and it was the only real debt reduction shareware that I
saw.
Here's some more info from the help file:
There are two main methods supported for helping you rid yourself of debt.
These are called the Debt Elimination Schedule and Loan Consolidation. Each of
these terms and the methods they employ are described below. Please note that
there are two important rules that should be followed to make your plan work
for you. They are 1. Stick to the plan and 2. Do not acquire more debt!
Violations of either one of these rules will most likely make your plan invalid
and will require a new plan to be made.
Debt Elimination Schedule
The Debt Elimination Schedule is designed to take all your current debt
information and project a possible solution for eliminating your debt. The
solutions generally show significant savings in interest (interest that does
not go to the creditor) by following the schedule instead of merely making the
same current payments.
How does it work? Each of your debts is given a priority. Each month, your
payments are made to each debt. Once one debt is completely paid off, then the
payment that was earmarked for the paid off debt is then applied towards the
highest priority debt. This then accelerates the payment on the highest
priority debt. Loan acceleration (early payoff of a loan) is what produces
your interest savings. To sum it up--as debts are paid off, the payments for
those debts are applied to the highest priority debts that have not been paid
off. Several options are available which can help accelerate and optimize your
debt elimination schedule. These include using minimum payments, applying
extra payments and selecting a priority method.
Loan Consolidation Schedules
The Loan Consolidation Schedule is designed to take all your current debt
information and combine it into a single new loan.
How does it work? The new consolidated loan is presumed to have a lower
overall interest rate than the combined existing debts. It is the lower
interest rate that makes loan consolidation so appealing--it results in lower
overall payments and less interest paid on the loan. Credit cards typically
have high interest rates associated with them while Bank or Credit Union loans
usually have much lower rates. It is therefore relatively easy to take all
your credit cards balances, add them up, get a new loan from a bank, and payoff
your credit cards. The bank loan will save you money through interest savings.
The Debt Analyzer allows you to create loan consolidation schedules and will
determine the amount of money you can save by doing so.
Several options are available to tailor the loan consolidation to your specific
needs. These options are made available through the loan consolidation method
input field. Depending on the method selected, you may have to enter a new
monthly payment or the number of months in the new loan.
Information about each debt is entered through the Debt Entry Window and
includes the name of the debt, minimum payment, current payment, balance,
interest rate and a user specified priority.
The priority method is only available if the reduction plan is set to the debt
elimination schedule. This is the priority in which you want to payoff your
debts. You may choose one of 9 predefined priorities or you may enter your own
priority by choosing the User Specified option. The predefined methods are as
follows:
Highest Rate First
The debts with the highest interest rates are paid off first.
Smallest Debt First
The debts with the smallest balance are paid off first.
Largest Debt First
The debts with the largest balance are paid off first.
Smallest Minimum Payment First
The debts with the smallest minimum payment are paid off first.
Largest Minimum Payment First
The debts with the largest minimum payment are paid off first.
Smallest Current Payment First
The debts with the smallest current payment are paid off first.
Largest Current Payment First
The debts with the largest current payment are paid off first.
Shortest Term Debt First
Under the current conditions, the program determines how long it will take to
payoff each debt given the payment, balance and interest rate. Those debts
which normally take the shortest time to be paid off are given the highest
priority to be paid off first.
Longest Term Debt First
Under the current conditions, the program determines how long it will take to
payoff each debt given the payment, balance and interest rate. Those debts
which normally take the longest time to be paid off are given the highest
priority to be paid off first.
Strategies
In many cases, the priority payoff option you choose will simply be a matter of
preference. However, certain options offer either real or psychological
advantages. The Highest Rate First should always yield the best results in
terms of the amount of interest saved. Simply put, the debts with higher rates
are going to cost you more--so the sooner they are paid off, the better off you
will be. Many people advocate that you should pay off the smallest debts first
(select Smallest Debt First or Shortest Term Debt First). Your debts will
begin to disappear quicker giving you the feeling that you are accomplishing
your goal--Getting out of Debt! This satisfaction may be well worth the few
extra dollars you may pay in interest by not following the Highest Rate First
method.