Our most recent contact has indicated that he is looking for suggestions on how best to consolidate his credit card and gambling debt and also how to gamble responsibly and not grow debt even further than he has. He is applying for $30,000 which could be either a personal loan or it could be consolidated with the mortgage on his home to take advantage of the equity that he has in his home. He wants to know which is the better approach. He also wants suggestions regarding how to control his gambling so that he does not owe a lot in the future from gambling.
We are not gambling addiction experts and we really have no professional suggestions regarding gambling. We have heard many people have just simply stayed away from casinos to avoid the temptation. If they must go to the casino, they will take a limited amount of money with them to gamble with and when it is gone, they leave. They also leave their debit cards and credit cards at home when they go to the casino to avoid any temptation. Other than those small suggestions we suggest a call to gamblers anonymous for further help and suggestions.
Regarding how he should finance his $30,000 debt, there are two main alternatives which he has mentioned. The chart at the end of this post illustrated the interest costs and monthly payments covering the $30,000 consolidated with his mortgage at 5% over 25 years compared to a 5 year loan and a higher personal loan interest rate.
Bottom line is that consolidating this $30,000 loan with his mortgage will result in much lower monthly payments over a long period of time with corresponding much higher interest costs even though the interest rate is much lower than a personal loan. The personal loan will cost about half as much in terms of total interest costs, due to a much shorter term, however the monthly payment will be 4 times that of the mortgage payment.
It basically comes down to cash flow. If the client can afford the higher payments, then they are much better off in the long run to take the personal loan and pay the loan off quickly to minimize the total interest cost of the loan.