WEBVTT - The Perks Of Consolidating Debt (BA Q&A)

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<v Speaker 1>It's time for the b a q a A b

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<v Speaker 1>a q a A the b a q A with

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<v Speaker 1>tiff and a the b a q a A. Hey, Hey,

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<v Speaker 1>it's me Tiffany and no Mandy unfortunately, but that's okay

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<v Speaker 1>because I'm in the stew with you. This is Brian Ambishing,

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<v Speaker 1>Question and answer. You have questions, I have some answers.

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<v Speaker 1>Although I am not your attorney, your doctor, your lawyer. Okay,

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<v Speaker 1>you are going to reach out to the people that

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<v Speaker 1>you pay for serious advice and you're gonna take what

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<v Speaker 1>I take what I tell you with the smallest, smallest,

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<v Speaker 1>smallest of greendom. So thought of salt aka goes to

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<v Speaker 1>your grandma, not me and Mandy. Okay, Okay. So if

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<v Speaker 1>you have questions that you'd like answered about career, about business,

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<v Speaker 1>about money, about child life these days, you can go

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<v Speaker 1>on over to Branhambishing podcast dot and click contact us,

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<v Speaker 1>slide into the DMS on Ig Brown and Vision podcast,

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<v Speaker 1>the BA podcast on Twitter, and Briannivision podcast at gmail

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<v Speaker 1>dot com. Okay, so let's get to the questions. Well,

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<v Speaker 1>first question of today comes from Courtney via ig. Courtney says, hello, ladies,

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<v Speaker 1>I love this podcast. And Tiffany, I've been a part

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<v Speaker 1>of your literature academy for about two years. Yeah, and

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<v Speaker 1>I love it. We love that. It's taught me so much.

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<v Speaker 1>So I have a question. My now fiance told me

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<v Speaker 1>that back in twenty twenty he ended up getting a

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<v Speaker 1>personal loan to pay off credit cards, and without reading

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<v Speaker 1>the fine print, found out later that the lender took

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<v Speaker 1>over his car loan for collateral. So now he's paying

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<v Speaker 1>off his car through them instead of Capital One, and

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<v Speaker 1>it's paying three hundred dollars more on this car month

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<v Speaker 1>now than before. Damn. He called the lender to see

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<v Speaker 1>if he can get a lower payment since he hasn't

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<v Speaker 1>missed a payment or has been late since he got

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<v Speaker 1>the loan, but they said he couldn't do that. Of course,

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<v Speaker 1>not child, They want all that money. So we're wondering

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<v Speaker 1>if you guys have any advice on the best way

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<v Speaker 1>to handle a personal loan and if possible to refinance

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<v Speaker 1>a personal loan, If so, is it a good idea

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<v Speaker 1>to do? So? Okay, thank you. So what I'm getting Courtney,

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<v Speaker 1>is that fiance wanted to pay a credit card debt,

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<v Speaker 1>which is great. He got a loan to pay it off. Okay,

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<v Speaker 1>somehow in the fine print the lender said, I'm gonna

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<v Speaker 1>take off over your car loan. That way, if you

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<v Speaker 1>don't pay me, will take your car and you're gonna

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<v Speaker 1>pay off the car loan and the three hundred dollars

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<v Speaker 1>a month I'm assuming is part fee, part to pay

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<v Speaker 1>down that credit card debt. You didn't say how much

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<v Speaker 1>your credit card debt was, and he's wanted to lower

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<v Speaker 1>his payment. Okay, so you didn't share what the interest

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<v Speaker 1>rate was. There's a lot missing here, So let's just

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<v Speaker 1>I'm just gonna make some generalizations. In general. If you

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<v Speaker 1>are wanting to get out of a specific loan with

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<v Speaker 1>a specific lender because you want better terms, here are

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<v Speaker 1>some of your options. You can do what you said,

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<v Speaker 1>which is see if you can renegotiate with them in

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<v Speaker 1>the terms. That's one, which they've said no. Two, you

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<v Speaker 1>can try to refinance, you know, with you know that

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<v Speaker 1>lender or a different lender. So that's two. That's certainly

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<v Speaker 1>something that you can do. And then three, you can

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<v Speaker 1>also look for another lender. What I would do is

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<v Speaker 1>I would head down to my local credit union. A

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<v Speaker 1>sister of mine not she is doing that now. Doing this. Now,

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<v Speaker 1>she's looking to purchase a car, and dealer financing has

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<v Speaker 1>gotten better than it used to. But still, you know,

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<v Speaker 1>you're typically gonna pay you know, a higher interest rate,

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<v Speaker 1>not always because dealer financing is much better these days,

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<v Speaker 1>and some of these big banks don't even do car financing.

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<v Speaker 1>They make you go through the dealer. But so I

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<v Speaker 1>told her because a friend of mine is a teacher

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<v Speaker 1>where I live, and there's a credit union that a

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<v Speaker 1>lot of teachers in Newark like to use because they

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<v Speaker 1>have better interest rates. So she went to the credit union.

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<v Speaker 1>They had three stipulations. You had to live in Newark,

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<v Speaker 1>or work in Newark, or worship in Newark. So she

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<v Speaker 1>was able to prove that she lived in Newark. She

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<v Speaker 1>was able to open up a credit union account that

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<v Speaker 1>day and apply for the loan for the car. So

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<v Speaker 1>right now, I think interest rates if you're borrowing money

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<v Speaker 1>for a car are like in the seven percent range,

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<v Speaker 1>you know, maybe high sixes. They're offering five percent in

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<v Speaker 1>that range, so not even I think like four percent,

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<v Speaker 1>four point something, something tremendous. So she is going to

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<v Speaker 1>purchase her car at the dealership, but use the financing

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<v Speaker 1>at the credit union. So what I would do is

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<v Speaker 1>to tell your fiance to one reach out to credit

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<v Speaker 1>unions in his area and see if you know what,

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<v Speaker 1>I don't know how much he owes he if he'd

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<v Speaker 1>be able to get potentially get his car loan and

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<v Speaker 1>his credit cards like paid off via the credit union

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<v Speaker 1>and he holds the credit union instead. Now here's the thing,

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<v Speaker 1>I do not know the terms of this new lender.

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<v Speaker 1>If you're able to pre pay, because some lenders won't

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<v Speaker 1>let you. So you're gonna want to call and say

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<v Speaker 1>or look at the fine print to see can I

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<v Speaker 1>pay this loan off before the period of time. So

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<v Speaker 1>sometimes lenders will be like, okay, you have like five

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<v Speaker 1>six years on this car note, but you can't prepay,

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<v Speaker 1>meaning whether you pay in five years or five months,

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<v Speaker 1>you pay in the full amount either way, you know,

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<v Speaker 1>So you want to make sure that he's able to prepay,

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<v Speaker 1>meaning paid and paying it off before the allotted period

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<v Speaker 1>of time and there's not a penalty to do so.

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<v Speaker 1>And if that so, then I would start. If his

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<v Speaker 1>credit score is right, you know, ideally would be able

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<v Speaker 1>to go to a credit union and see if the

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<v Speaker 1>credit union can assume these two loans or this total loan,

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<v Speaker 1>you know, credit cards mixed with car note, and then

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<v Speaker 1>he can now pay the credit union at a lower

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<v Speaker 1>interust rate and therefore lowering his monthly payment. Okay, so

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<v Speaker 1>those are some of your options. Does that make sense? Courtney?

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<v Speaker 1>You know, here's the thing. You know that fine print

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<v Speaker 1>be fine printing, and I know sometimes it can feel

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<v Speaker 1>overwhelming when it comes to like borrowing money. So some

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<v Speaker 1>questions just in general, so whether this is Courtney or

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<v Speaker 1>Courtney's fiance saying when you borrow money, questions that you

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<v Speaker 1>always want to ask is like one, you know, like

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<v Speaker 1>how much am I actually borrowing? You know? Two? Obviously,

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<v Speaker 1>who do I owe? Sometimes you're borrowing money, you're like

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<v Speaker 1>so for example, if you're getting credit financing from a

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<v Speaker 1>car dealership, it's like, well, who do I actually who

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<v Speaker 1>am I going to end up owing? Right? So that's two. Three?

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<v Speaker 1>What is my interest rate? And is it fixed or

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<v Speaker 1>is it variable? So that means meaning like, okay, am

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<v Speaker 1>I going to pay five percent for the length of

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<v Speaker 1>the loan or five percent for the first two years

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<v Speaker 1>and then ten percent after that? So what is my

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<v Speaker 1>interest rate? Is it fixed or is it variable? So

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<v Speaker 1>is it the same or does it go up and

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<v Speaker 1>down based upon the market or otherwise? Right? What was that? Four? Right? So?

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<v Speaker 1>Five or four? I don't remember.

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<v Speaker 2>I'm on.

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<v Speaker 1>How long is the term three months, three years, five years?

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<v Speaker 1>Or how long do I have before I pay it back?

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<v Speaker 1>You know? Six? Five? I can't remember what I'm on.

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<v Speaker 1>Is there a prepayment penalty? Yes? Some people. The reason

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<v Speaker 1>why they don't want you to pay off sooner is

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<v Speaker 1>they want they don't want to miss out on the

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<v Speaker 1>interest they're gonna earn on you continuing to pay, you know,

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<v Speaker 1>so like that's a huge one, Like, you know, is

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<v Speaker 1>there a pre payment penalty? So let's just say you're

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<v Speaker 1>gonna buy a car and it's twenty thousand dollars because

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<v Speaker 1>you get a previously owned car, you put down ten

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<v Speaker 1>you have a ten thousand dollars loan, and then you say,

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<v Speaker 1>I don't, I don't know. You hit the you hit

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<v Speaker 1>the numbers for fifty thousand. You're like, let me pay

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<v Speaker 1>off this car a week later. Are you going to

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<v Speaker 1>be punished for that? Are you even allowed to do that?

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<v Speaker 1>You want to make sure you're able to prepay or

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<v Speaker 1>pay off early. And then two, what happens if you're

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<v Speaker 1>in late, like do you lose your five percent interest?

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<v Speaker 1>You want to ask of this like a question seven,

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<v Speaker 1>I guess do you lose your interest rate? Did your

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<v Speaker 1>interest rate go up?

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<v Speaker 3>You know?

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<v Speaker 1>What happens? You know? How quickly do they report you

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<v Speaker 1>to the credit bureaus? So if I'm late, what happens

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<v Speaker 1>you know? And do they have some sort of help

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<v Speaker 1>if you're struggling financially? So those are some of the

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<v Speaker 1>questions that you always want to ask before you borrow

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<v Speaker 1>any money. Yeah, because that five pen free five Britain.

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<v Speaker 1>But you know, if you ask those questions, it doesn't

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<v Speaker 1>mean that you're never going to make your mistakes and mishaps,

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<v Speaker 1>but it will allow you to be a more educated borrower,

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<v Speaker 1>you know. And so to me, my favorite place to

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<v Speaker 1>borrow the credit union. I believe that you should have

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<v Speaker 1>three financial institutions in your life. I believe you should

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<v Speaker 1>have your regular brick and mortar bank. So that's the

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<v Speaker 1>big bank, so that you be seeing on the corners, right,

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<v Speaker 1>those big old you know, the banks we all know

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<v Speaker 1>if I say their name, but they don't pay me,

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<v Speaker 1>so I ain't saying no nets Okay, So that's one

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<v Speaker 1>big bank and the reason Why you have a big

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<v Speaker 1>bank is for convenience. If you are in California, you

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<v Speaker 1>can use that same bank that's on the corner. You

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<v Speaker 1>come to New Jersey, the bank is probably there. You

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<v Speaker 1>go to Alasta, the bank is probably there. So big

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<v Speaker 1>bank for convenience. This is where I like to keep

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<v Speaker 1>my checking right, my everyday money. Second financial institution that

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<v Speaker 1>I like to have is an online only financial institution.

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<v Speaker 1>Why because that's why I like to keep my savings

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<v Speaker 1>because they typically have high yield savings accounts because they

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<v Speaker 1>don't have the same overhead costs as these big banks

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<v Speaker 1>that are on every corner. They're online, and so they

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<v Speaker 1>get to pass on the savings to you in the

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<v Speaker 1>form of paying out higher interest. I'll give you an example.

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<v Speaker 1>Your big bank on the corner. If you put your

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<v Speaker 1>money in savings there, you're probably gonna make point zero

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<v Speaker 1>zero zero zer one percent child by right now at

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<v Speaker 1>a high dealed savings account at an online only bank,

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<v Speaker 1>you're looking at four four and a half percent currently

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<v Speaker 1>as I'm taking this, that's what it's looking like, you know,

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<v Speaker 1>give or take. So you're four times the amount that

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<v Speaker 1>you're going to earn on your money at an online

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<v Speaker 1>only bank. So that's the second type of institution. Third

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<v Speaker 1>type of institution that I like is a credit union.

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<v Speaker 1>This is where I like to borrow from, so brick

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<v Speaker 1>and mortar convenience, checking online only bank savings account for

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<v Speaker 1>high yield savings, and then credit union to borrow from.

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<v Speaker 1>Because credit unions typically many credit unions are nonprofit or

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<v Speaker 1>definitely their community based credit unions, and their role for

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<v Speaker 1>us if they're nonprofit is not to make a profit

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<v Speaker 1>and to offer as many resources and tools financially to

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<v Speaker 1>community as they can so you can get a better

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<v Speaker 1>deal on the money that you're borrowing. Because my sister

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<v Speaker 1>is instead of spending like seven percent or like six

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<v Speaker 1>percent on like you know, on her interest for the

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<v Speaker 1>car loan, she's gonna pay like four percent. That's tremendous

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<v Speaker 1>of how much money she's gonna save. And so I

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<v Speaker 1>like to have those three. And of course, like a

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<v Speaker 1>broker's account is probably the fourth if I'm thinking about

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<v Speaker 1>it like for investing, but we're thinking about day to

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<v Speaker 1>day money, those are the three into so just consider

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<v Speaker 1>that that. Like, I like to have them in place,

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<v Speaker 1>even if I'm not using your credit union right now.

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<v Speaker 1>I like to just be a member of one. The

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<v Speaker 1>good thing about many credit unions is that you could

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<v Speaker 1>join the same day and ask for a loan the

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<v Speaker 1>same day. But ideally, you know, having those three under

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<v Speaker 1>your belt are going to help you navigate. Well, we're

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<v Speaker 1>gonna take it for guy. Hopefully that was helpful. If

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<v Speaker 1>you have questions, like I said, sobbing to the DMS

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<v Speaker 1>on IG Brian Abision podcast, email us at Brianna Vision

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<v Speaker 1>Podcasts at gmail dot com, go to a Brownambition podcast

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<v Speaker 1>dot com and click contact and the BA podcast on Twitter.

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<v Speaker 1>But we'll be back and black and ready to answer

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<v Speaker 1>more questions. Hey, hey, hey, BA fam, here's a Brown

0:11:48.440 --> 0:11:50.280
<v Speaker 1>Ambition throwback.

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<v Speaker 2>Here's my question. What would be the best way to

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<v Speaker 2>tackle debt? If my husband and I have forty thousand

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<v Speaker 2>dollars worth of debt from credit cards, student loans, and

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<v Speaker 2>personal loans? Should we consolidate our debt or try using

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<v Speaker 2>a method like the snowball method for more information. We're

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<v Speaker 2>both students, we have full time jobs and a mortgage,

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<v Speaker 2>but we're struggling to save money while trying to pay

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<v Speaker 2>off debt. Interesting questions. So just to recap forty dollars

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<v Speaker 2>in total, that consists of credit cards, student loans, and

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<v Speaker 2>personal loans. Interesting miss, and they're wondering how to tackle it.

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<v Speaker 2>And that's collectively, that's collectively together.

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<v Speaker 1>Yep, I'm not gonna lie. That's not that bad.

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<v Speaker 3>I'm not saying that.

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<v Speaker 2>We could say that, like what I was thinking, like,

0:12:34.679 --> 0:12:37.640
<v Speaker 2>y'all can do this. You got this, Yes, you got this.

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<v Speaker 2>Wet's take each of those three types. We don't know

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<v Speaker 2>how much is credit cards, how much is student loans,

0:12:41.920 --> 0:12:43.319
<v Speaker 2>or we don't know what the interest rates are, so

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<v Speaker 2>it's a little bit difficult to give specific advice. But

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<v Speaker 2>where where would you say start.

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<v Speaker 3>To Well, I would I personally like the snowball methods.

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<v Speaker 3>I'm a little biased. And the snowball method is just

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<v Speaker 3>kind of when you line up your debt from low

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<v Speaker 3>with highest as far as balances are concerned, and then

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<v Speaker 3>you start to tackle the debt with the lowest balance first.

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<v Speaker 3>So basically the other two debts get their minimum and

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<v Speaker 3>the debt with the lowest balance gets its minimum plus

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<v Speaker 3>whatever extra money you could pull from your from your budget.

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<v Speaker 3>So you should have a budget and say, hey, budget,

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<v Speaker 3>this is how much my life costs. How much is

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<v Speaker 3>left over after I pay my expenses. Oh, there's two

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<v Speaker 3>hundred dollars left over, and then you can might decide

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<v Speaker 3>one hundred dollars is gonna go to saving, because you

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<v Speaker 3>should be saving and paying down debts simultaneously. So maybe

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<v Speaker 3>one hundred dollars goes to savings and another hundred goes

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<v Speaker 3>to my debt paid down plan. So now you have

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<v Speaker 3>your debt paid down plan money. And if you're gonna

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<v Speaker 3>do the snowball method, it would look like this, Hey,

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<v Speaker 3>lowest balance debt, You're gonna get your minimum plus this

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<v Speaker 3>one hundred dollars, and now I'm gonna pay it, pay pay, pay,

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<v Speaker 3>pay and pay pay it. And then when that's paid off,

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<v Speaker 3>I'm gonna roll over the lowest debt's minimum plus that

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<v Speaker 3>one hundred dollars to the second lowest debt. So the

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<v Speaker 3>second low s det is going to get effectively three

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<v Speaker 3>payments in one. It's minimum the first lowest debts minimum

0:14:03.240 --> 0:14:05.920
<v Speaker 3>plus that hundred dollars, and then you're gonna pay pay

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<v Speaker 3>pay paid off, and then you're gonna roll it off

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<v Speaker 3>to the third lowest debt. And so that's the way

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<v Speaker 3>the snowball method works. Or you can use the avalanche method.

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<v Speaker 3>Which is when you pay off the debt with the

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<v Speaker 3>highest interest rate off first. And so the avalance method

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<v Speaker 3>makes the most sense as far as mathematically, because you're

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<v Speaker 3>basically paying off the debt that has that's costing you

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<v Speaker 3>the most amount of money because the interest rate is

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<v Speaker 3>the highest, And the snowball method makes the most sense

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<v Speaker 3>emotionally because if you pay off the debt with the

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<v Speaker 3>lowest balance first, you kind of get a faster return

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<v Speaker 3>emotional return on your investment because it might take you

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<v Speaker 3>ten years to pay off the debt with the highest

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<v Speaker 3>interest rate, and so you might not feel as.

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<v Speaker 1>Good about it.

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<v Speaker 3>So I like the snowball method, although obviously that this

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<v Speaker 3>method is amazing if you can stick with it. So yeah,

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<v Speaker 3>I think that I think that that's what I would do.

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<v Speaker 3>I would line it up like that, Honestly, I would.

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<v Speaker 2>Look at the I feel like I have a feeling

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<v Speaker 2>out of all three of those types of debt that

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<v Speaker 2>you have, the credit cards probably have the highest interest rates.

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<v Speaker 2>So I'm a fan, I mean, And that's kind of

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<v Speaker 2>looking at things with the avalanche method in mind versus

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<v Speaker 2>a snowball. But if you wanted a quick you know,

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<v Speaker 2>especially if you're kind of struggling. And let's say he's

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<v Speaker 2>got some credit cards, You've got some credit cards, and

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<v Speaker 2>you want a simple way to just keep track of

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<v Speaker 2>everything in one place. You could look into consolidating those

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<v Speaker 2>credit cards with a personal loan, for example, from a

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<v Speaker 2>credit union, if it means that you could secure a

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<v Speaker 2>lower interest rate than what you're currently paying on those

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<v Speaker 2>credit cards. Because we know how difficult it can be

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<v Speaker 2>to pay down credit card debt when it's got you know,

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<v Speaker 2>what is the average APR in credit cards, and thing

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<v Speaker 2>like seventeen percent that's with like perfect credit today. So yeah,

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<v Speaker 2>I could look at I know this crazy, you could

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<v Speaker 2>look at consolidating those credit cards just so you have

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<v Speaker 2>one fixed monthly payment, which is what you get with

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<v Speaker 2>a personal loan, and then you can both tackle that

0:15:54.000 --> 0:15:57.200
<v Speaker 2>payment together. And of course, when you're applying for a

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<v Speaker 2>personal loan, they're going to take into account how much

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<v Speaker 2>you can afford to pay, so your monthly payment shouldn't

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<v Speaker 2>be more, shouldn't end up being more than what you

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<v Speaker 2>guys can comfortably afford with your student loans. If you're

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<v Speaker 2>both still still in school, then maybe they aren't quite

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<v Speaker 2>due yet, so they're not an immediate concern, but you

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<v Speaker 2>definitely want to. I would focus on getting rid of

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<v Speaker 2>that other types of debt, the credit card, the personal

0:16:18.160 --> 0:16:21.000
<v Speaker 2>loans before you guys graduate, so that when you graduate

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<v Speaker 2>you can just throw everything you got at those student loans.

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<v Speaker 2>If the student loans are an issue, now you know,

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<v Speaker 2>if they're federal, there's things you can do income based

0:16:29.520 --> 0:16:32.560
<v Speaker 2>repayment for bears, deferment while you focus on your higher

0:16:32.640 --> 0:16:35.360
<v Speaker 2>interest debt like credit cards or personal loans to buy

0:16:35.400 --> 0:16:38.360
<v Speaker 2>yourself some time. But eventually you got to tackle them

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<v Speaker 2>right and even if you defer them, interest is going

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<v Speaker 2>to still be accruing. So you want to aggressively as

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<v Speaker 2>fast as you can get rid of the other debt

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<v Speaker 2>and then hop on those student loans. If they're private,

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<v Speaker 2>you can look into well, if you've got them, you know,

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<v Speaker 2>pretty high interest rate in your student loans and you

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<v Speaker 2>think you're interested in looking at refinancing, that's also an option.

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<v Speaker 2>If you guys have strong credit scores. There's lots of

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<v Speaker 2>companies out there that will refinance your student loan debt today,

0:17:05.520 --> 0:17:08.080
<v Speaker 2>which will help you secure a lower interest rate and

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<v Speaker 2>maybe reduce your payments and help you pay it off faster.

0:17:11.160 --> 0:17:13.919
<v Speaker 2>But just keep in mind, if you have federal student

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<v Speaker 2>loans and you're refinancing them, you're essentially turning them into

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<v Speaker 2>a private loan, which means those flexible options I mentioned earlier,

0:17:21.880 --> 0:17:25.600
<v Speaker 2>like income based repayment or forbearance are probably no longer

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<v Speaker 2>available to you. So it has to be worth that

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<v Speaker 2>trade off for you to refinance them and turn them

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<v Speaker 2>into private loans.

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<v Speaker 3>Yeah, and to me, it rarely is worth it, so

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<v Speaker 3>you know. So, I mean there's companies like so Far

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<v Speaker 3>that I that are great companies for refinancing for private loans,

0:17:42.640 --> 0:17:44.720
<v Speaker 3>but I always tell people, if you can keep them federal,

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<v Speaker 3>it typically is worth it, just because if you ever

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<v Speaker 3>fall on hard times, private loans don't care, but loans,

0:17:52.480 --> 0:17:55.879
<v Speaker 3>but federal loans, there are things in place that you

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<v Speaker 3>know that you can use to protect yourself if you

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<v Speaker 3>fall on hard times, And it's much easier to the

0:17:59.760 --> 0:18:03.000
<v Speaker 3>fall on a private loan, like a veteran alone is

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<v Speaker 3>harder to default.

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<v Speaker 1>And so yeah, So I mean, except for like maybe

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<v Speaker 1>rare instances,