The 3 R’s: Refinance – Renegotiate – Reallocate
Refinance: simply means you get a new loan on an existing asset, likely because interest rates have lowered.
Before refinancing make sure to consider the 4C’s to get the best rate:
- Credit Score
- Cash Flow Reporting
- Collateral
- Connections
Renegotiate: you keep the original loan, but apply for a new rate.
- Credit Cards
- Mortgages
Reallocate: taking underperforming funds and paying off higher interest rate loans to improve cash flow and save money.
When to consider reallocating funds:
- Investment accounts that haven’t been performing or that create stress and worry for you
- Savings accounts or money markets that are not earning as much as you are paying in interest
- Business line of credit, home equity line of credit, credit cards or student loans that have a higher interest rates
The Cash Flow Index will get you a guaranteed return. Take some time to review your debts using this equation below.
Cash Flow Index Equation: Chasing the highest interest rate as a primary method to pay off loans can be a fool’s errand. On the other hand, using a shotgun approach of paying extra to any loan when the money happens to be there can be even more dangerous. The Cash Flow Index Equation takes into consideration several factors to determine the fastest way to free up cash flow.
