Two Points on Debts

Apropos of nothing really; I just felt like writing about personal fiancés.

Paying Off a Huge Debt

About ten years ago I retired in debt. How much debt? I borrowed cash from a friend to pay my rent. I owed Canada Revenue Agency for one thing, having pled relief from interest and penalties for a few years, the time was up.

Came the day that Canada Revenue Agency telephoned me. Catherine, with a calm voice waded right in with “How are you?” Fine. “Are you getting back on your feet?” Yes. After about a minute of circling Catherine did not move in for the kill. Instead she managed to get me to talk about myself (my favourite subject) and how I was raised (not to be in debt to anyone), my lifestyle, and so on. Catherine did not mention my balance, which then began to drive me crazy, so I just up and asked her to get it out of the way.

“Eight thousand seven hundred and sixty-five dollars and seventeen cents:. Well of course she had the amount in front of her. I felt that,

I had been paying back my friend’s cash loan at $300 per month, and had paid off that loan two months before. I had $600 in the bank, enough for an extraction but not enough for a root canal.

Catherine didn’t know that, of course. I’m not stupid! And Catherine isn’t stupid either. Catherine did not ask me to pay it back; Catherine asked me how I would feel IF it were all paid back. Well, I’d feel great, of course, and for a few seconds I felt as if it were all paid off, all $8,765.15 of it. Plus interest while I was paying it off. Those few seconds did the trick.

What a saleslady. She had placed the floppy-eared puppy in my hands and I held it against my chest, stared into its eyes ...

“Well, if, just suppose, you decided to start paying it off ...” and note that it would be MY decision to start paying it off, not the CRA’s decision, “ ... how much do you think you could pay off each month, say?”. I’m not stupid; I could see what was coming, and honestly the CRA had cut me a break.

I knew I could pay back a loan at $300 per month so quick-as-a-whip I said “$150 per month.”. And quick-as-a-whip-Catherine said quietly “As much as that?”. What a saleslady.

Me? I felt both exhilarated and guilty. “I think so, but I am worried”. What about? “Well, suppose I needed to get some dental work done”. Not a problem, you just give us a call and tell us that you are going to miss a month or two”.

Did you notice how it is always me that is in control, making the decisions?

With these objections out of the way, I explained that I couldn’t make a payment this late in the month, but could start at the end of the next month.

Did you notice how Catherine was in such control that she made me think that I was in control?

At the end of the next month I mailed off a cheque for $150, same at the end of the month after that, and as well I was socking away $450 in savings in a bank account that paid me no interest. I am not stupid. Why am I getting 0% for my bank savings and paying 8% (or whatever it was then) to the CRA.

Picked up the phone and asked if it would be OK if I increased my payments to $300 per month. I am not stupid, but I am naïve. Of course it would be OK. So the next month I shot off $300, and the month after that too, and the CRA sent me a hard-copy statement showing me that my debt has fallen from “that much” to only “this much”. Impressed me. I whipped up a spreadsheet that predicted when I could pay off the debt completely, including the interest. My spreadsheet. My schedule.

A month later came a refund check from a paralegal in Ottawa, or a GST refund cheque; whatever. I picked up the phone and asked how this worked. If I sign the back of this cheque and mail it off, can you use it to pay down my debt?. Note that I am now helping the CRA to do their work. Yes they could.

Ten minutes later I was dropping the cheque in its envelope with a stamp into the letter-box outside Shoppers Drug Mart. Slept right through the night, that night.

And so it went, windfall cheques going right back outside the door within ten minutes of me opening my mail. The came the next statement from the CRA and my spreadsheet data, charted, so a steeper downward slop than before.

By now I had been paying down the debt for a year; bored. It was time for a change, so I decided that at the end of each month, when the pension was in, I would mail a cheque for whatever balance was in my cheque account. I mean by that that if I had $678 in my cheque account the day before the pension arrived, I would write the cheque for $678 and use the pension amount for the next month.

This became a game for me to see how much I could retain in the bank account each month. Last month was $678; let’s see if we can make that $679 or more next month.

Well! About eight years ago my CRA debt was down to $273.45, significantly less than my regular monthly payment. Once again I phoned my good friends at the CRA and confirmed the balance. They agreed that it was $273.45. So let me see if I understand this - if I mail you a cheque for $273.45 will that eradicate the debt? Yes, as long as it gets to us a few days before the end of the month. And will there be any dribbling of interest on the few days between now and when you get the cheque, after all, I don’t want to have to write another cheque for about twenty cents next month. Nope! $273.45 and we are done.

Ten minutes later I was outside Shoppers Drug Mart, and felt so good that I went inside and bought myself a bar of chocolate.

Of course, at the end of the next month I did not mail a cheque, and spent a few weeks waiting for the jack-booted thugs to break down my door for not paying the CRA.

Didn’t happen.

In fact, two weeks later they sent me a lovely statement that was riddled with “0.00” all over the place.

Since then I racked up credit card debt on my move to Bonavista and paid it all off in six months by writing the current balance owed “$3,125” with a thick red marker pen on an A4 sheet of paper taped to the inside of my back door. I could not leave the house without being reminded of the current balance owed, and that curbed my purchase of luxury items when I arrived at the supermarket fifteen minutes later.

And since then I have taken out loans of $8,000 and $5,000 for electrical and other repairs, and paid them off within twelve months.

Well, that’s my take on unmanageable debt!

Taking Out a Huge Loan

My first loan for $8,000 I put on my best casual trousers, my best shirt, but no tie, and walked to the bank nervous as anything. What if I didn’t get the loan?

My second loan for $5,000 I put on my best casual trousers, my best short, but no tie, and walked to the bank feeling sorry for them.

What changed?

In the past I have always thought that the bank was doing me a favour by lending me money. Today I think that I am doing them a favour by paying them interest on a loan.

The pressure is on the manager to work out how to get the loan in place. No loan means no interest for them.

In theory, if my credit rating is good enough for a loan and this bank can't do it, then I will pay some other financial institution, so my bank really needs to make the sale. And I just sit there and let them sweat (“clickety-click”) while I play back a Bach Cantata in my head.

Where do I sign?

By the way, I also think that my credit score is almost pointless. It is not my credit score that counts; it is whether or not I get the loan. Think about that.

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