What would you do? Debt vs PM Holdings

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pink freud
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What would you do? Debt vs PM Holdings

I have "a friend" with  about 13k cc balance and also has around 350 oz of silver and 5 oz gold.

Would you cash in to eliminate the debt? or would you keep paying the minimum and hold the PM's?

Edited by admin on 11/08/2014 - 05:06
kenklave
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Paying the minimum on 13k?

Paying the minimum on 13k? You won't pay that off for twenty years. I would see about getting Transferring the balance to a new 0% card. Transfer fee will be about 3%, but many offers are 18 mos. Or longer. I would do whatever I could to keep my stack, but if you are paying double digit interest, I'd try and knock that out quick. That or get more creative with your financing.

Captain Benny
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Neither option

By no means sell the physical when inflation is around the corner.  Its possible in an economic collapse that a reset of debt could occur and there would be no need to pay it back -- EVER.  It is also possible that the inflation will eventually make that 13k debt look like pennies when compared with the 350oz of silver.  Remember 350oz of silver priced at $120/oz would result in $42,000.  $120 is not unreasonable and in fact I believe it to be quite low, considering that its 1/12 of what gold is currently valued at.

When gold and/or silver go up in price relative to the dollar, they'll tend to move in unison.  The ratio between them will bounce around, so lets say the ratio stays about 1:43, if gold goes to $2000, then your buddy can easily pay off the debt at a later time with $3000 worth of silver to spare.

I have no doubt the ratio will close below 1:16, which hypothetically if gold stayed valued at ~$1500 then silver would be valued at $93/oz.  This means 350oz is about $20,000 more valuable than the debt at that point.

Do not however pay the minimum balance on the CC.  Pay it off sooner rather than later because the interest payments on CCs will eat up far most cost than inflation based on historical evidence.  Get rid of the debt, but do not "rush" to get rid of it... and definately do not sell your only monetary protection against strong inflation and/or hyperinflation!

Eric Original
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What would you do?

Similar situation here.  Up until recently I was able to get/keep most of the PM purchases on low rate cards, but some are running out now.  Did sell some silver in April in the mid 40's to reduce some debt, but don't want to sell now at these prices.  Mostly just paying the minimum right now.   Some Roth IRA money will come available 1/1/12 so I'll eliminate the higher rate cards at that time.

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$13k at what rate?  It just

$13k at what rate? 

It just boils down to doing the math.

Don't count on your debt being erased, that will just get you into trouble. You never want to owe anyone anything for whatever reason if at all possible for the same reason you don't want to get owned.

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pink freud
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thanks for the replies debt

thanks for the replies

debt breakdown...

2k@19%,  6k@8% ,  1k@9%,   2k@4%,  1k@2%,   1k@3%   around $70-80 in interest per mo.

I also plan on buying the ATB 'america the beautiful' 5oz rounds as they are released (both versions).  5 per year @ $285 for the mint version the next 10 years  AND  spot + $4/oz for the bulllion version = 560 oz (in 10 years)

I guess I want my silver cake  and to eat it too!

Captain Benny
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ok...

Get rid of that 19% ASAP, the others you can deal with over time.

pourty
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Pay them off, but not with PM's

Personally, I would do everything in my power short of selling PM's to pay off those debts, starting with the higher interest rate debts.  I would not sell my PM's, but I'd definitely stop accumulating until I got debt free.  Buying PM's while holding high interest credit is like gambling, and gambling generally benefits the house far more than the player...

The thing is to be prepared.  Be prepared for the eventuality that hyperinflation might NOT happen, PM's might NOT skyrocket, and you'll still be paying the banks an enormous amount of interest.

I'm stacking just like most here, and I do believe the fiat game will be up at some point.  But I also understand people have been predicting the end of fiat for decades and it hasn't yet panned out.  What if they're wrong and it's 20 years instead of 3-5?

Pay off your debts and buy PM's with cash.  Why bother looking for the best prices on PM's only to pay high rates of interest on the fiat debt you accumulated to buy them?

Eric Original
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I'm with Benny

That 19% one has to go.  Don't sweat the rest.

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Jorg_Ger
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It depends if you bought the

It depends if you bought the physical silver and gold as an investment or as an insurance against currency devaluation. If the latter is the case, by all means keep the physical. Things can get out of control very quickly these times.

If silver and gold is an investment for you, things are a little more tricky. In the end it boils down to a bet if PM's outperform the debt or not. I wouldn't want to place such a bet right now, but you might think different.

On the investment side, there is two rules you should stick with to keep healthy finances:

1. Don't try to make money with credit money.

2. Interests on credit money are always higher than on savings (provided the risk is the same).

From that it follows that you should use the 13k cash to pay the debt. Any new money you should use to pay the debt until it's gone. Once that is done, there comes the time to go for more PM's (or whatever else you want to buy).

Captain Benny
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Jorg_Ger wrote: It depends if

Jorg_Ger wrote:

It depends if you bought the physical silver and gold as an investment or as an insurance against currency devaluation. 

Original intent or purpose has no relevance to making the best short or long term decisions in the present.  No further explanation needed.

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Eric remember when I had that

Eric remember when I had that 18 months 0% offer?

I'm kinda glad I didn't load that up with bullion. But we did take that offer and transferred balances. We have a structured plan over 18 months to get our debt to zero. If the world implodes before then, we'll cross that bridge when we come to it.

I consider any "loan" at less than inflation a win, so don't be in any hurry to pay down your 0% cards / 3% student loans / 2.9% HELOC or anything (unless the rate is resetting higher soon).

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Unless you want the

Unless you want the Uncirculated ATB's for the numismatic value from the mint, I would re-think aquiring them that way. You are blowing roughly $100 on the premium, which could get you another 2.5 oz of bullion. But if you're collecting them to keep as numismatics then by all means get them while you can. With a mintage of only 27,000 not many people will have the whole collection.

Eric Original
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Pablo, Yeah I remember

As I recall, it was one option to consider since it didn't look like you'd be able to access the 401(k).  

Anyway, a plan to get to DEBT FREE status sounds awesome too!  My long term goal is a certain amount of debt free physical.  It's tough to get happy on both.  I can get the phyzz I want, OR I can get debt free, but it's going to be a while before I get both.  I have enough phyzz right now that if I sold it all, I could get debt free, so I'm sort of "net net" debt free.  But then I'd feel really light on the phyzz.  Oh well, one must make choices...

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pink freud
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Thanks for all the answers guys and gals!

Well, 'my friend' sold 120 oz of SAE's @ 37.73/oz  and 4-2005 Somalian Elephants for $90/ea.

That will take care of the high interest rates and will be down to around $7500 in cc debt.

SilverFocker
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pink freud wrote:  Well, 'my

pink freud wrote:

Well, 'my friend' sold 120 oz of SAE's @ 37.73/oz  and 4-2005 Somalian Elephants for $90/ea.

That will take care of the high interest rates and will be down to around $7500 in cc debt.

Sad.....:(          ASE's @ a lil over a buck spot.

silversalmon
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Eric Original wrote: As I

Eric Original wrote:

As I recall, it was one option to consider since it didn't look like you'd be able to access the 401(k).  

Anyway, a plan to get to DEBT FREE status sounds awesome too!  My long term goal is a certain amount of debt free physical.  It's tough to get happy on both.  I can get the phyzz I want, OR I can get debt free, but it's going to be a while before I get both.  I have enough phyzz right now that if I sold it all, I could get debt free, so I'm sort of "net net" debt free.  But then I'd feel really light on the phyzz.  Oh well, one must make choices...

Exactly the same boat eric, but you know my plan! If everything works out, 18 months from Jan. 2012, I'm debt free, unless of course  we all die in 2012 ;-)

Eric Original
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2012

Yeah, that Mayan calendar thing will screw all our plans!  

just kidding, lol

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