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Need help with my debt problems
Ender
Registered User regular
Registered User regular
Dear friends and comrades, I am in need of some serious help.
My fiancee are in some pretty serious debt. We carry quite a bit of credit card debt from when I was unemployed, we have a mortgage, and a home equity loan to deal with. On top of that, my student loans that I deferred will be reinstated in a few months.
We pay over the minimum on our cards, but they are still killing us (softly lol). I need some assistance for what options I have in regards to paring down this debt. We tried contacting some of the credit card companies, but they are unwilling to negotiate. In fact, one of the cards, who jacked up my fiancee's interest rate after a singular late payment (one late payment in 5 years of having the card), and refused to budge on it. We borrowed money from her father and made a huge lump payment on the card. Their response? Close the account and say "sorry, account needs to be open to adjust the interest rate". Which means the balance on the account is currently trapped at a shitty interest rate.
We tried to get a loan from our bank, but knew they would turn us down with the problems we've been having.
Any ideas? We certainly don't want to have to go down the bankruptcy/consolidation route, but since our credit is getting trashed anyways, I'm starting to contemplate it. I'm concerned that once the other credit card companies see someone closed an account on us, they may do the same.
Any suggestions would be greatly welcome.
My fiancee are in some pretty serious debt. We carry quite a bit of credit card debt from when I was unemployed, we have a mortgage, and a home equity loan to deal with. On top of that, my student loans that I deferred will be reinstated in a few months.
We pay over the minimum on our cards, but they are still killing us (softly lol). I need some assistance for what options I have in regards to paring down this debt. We tried contacting some of the credit card companies, but they are unwilling to negotiate. In fact, one of the cards, who jacked up my fiancee's interest rate after a singular late payment (one late payment in 5 years of having the card), and refused to budge on it. We borrowed money from her father and made a huge lump payment on the card. Their response? Close the account and say "sorry, account needs to be open to adjust the interest rate". Which means the balance on the account is currently trapped at a shitty interest rate.
We tried to get a loan from our bank, but knew they would turn us down with the problems we've been having.
Any ideas? We certainly don't want to have to go down the bankruptcy/consolidation route, but since our credit is getting trashed anyways, I'm starting to contemplate it. I'm concerned that once the other credit card companies see someone closed an account on us, they may do the same.
Any suggestions would be greatly welcome.
Ender on
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Consolidation isn't a bad thing. All it is is a loan to pay off your other loans at (usually) a much better interest rate. It's actually an awesome route to go if you can afford to give up your revolving lines of credit.
Doing this method is actually more effective in the long run, because you eliminate the higher interest debt faster, which saves you money. Think of it this way:
You have 4 credit cards. For these purposes I'm going to assume that each card has equal debt and interest rates. Paying, say, minimum + $50 on each card will pay them all off at the same time, but will take forever. If you instead pay minimum + $200 on one card, then just minimum on the other 3, you pay off the first card nearly 4x as fast. You can then go to the second card, and pay minimum + $200, PLUS what was the minimum of the first card that you no longer have. You'll pay off that card even faster, then the third card, then the last.
That is the best way to pay off multiple lines of credit.
Also, as soon as you get some of those credit cards paid off, cancel them.
You can do it. Just buckle down, save, save, save, and destroy those credit cards as soon as they are payed off.
The very first step is not arguing about different available interest rates - it's sitting down with your spouse and getting all of this crap onto paper, finding what the amount owed is, developing a budget, and then tackling the problem. After you can see the beast clearly you can look at consolidating loans and destroying it completely.
You need to be damn sure you know what you're doing, and need to have a concrete plan that you know you'll stick to.
I wouldn't really think any bank out there is going to give someone with your debt load another credit card, though.
I can has cheezburger, yes?
Get all your bills, credit card statements, bank statements, etc and throw it all in excel. Organize it by category.
Order from highest to lowest. Go thought the list and see what you can reduce or eliminate.
For example, if you see you're spending $100 on food and $75 on dining out, see if you can eat at home more and get rid of the dining out expense. I've did 'budget worksheets' with people and would say that majority of the people I do them with are surprised they are spending that much on X. Whatever X is... eating out, comic books, beer, movies, etc.
It's easy to let a $5 coffee or a $1 soda here or there slip though the cracks, but when you have it neatly organized into hard numbers; it's hard to miss!
After that, yea; do the "snowball debt" method. BUT, order it by Interest rates, not loan amount.
List out all your loans, order them from highest to lowest interest.
Pay on the highest one first and then minimum on the others.
Also, you can do balance transfers. Read the fine print though, since they try to "get you".
For the stories I've heard, you can go to hell and back and they won't "forgive" the student loans. From what I've read, they are near impossible to get rid of with bankruptcy.
Also, you need to figure out how to manage your money. If you declare bankruptcy and keep doing whatever your doing without changing your spending/debt patterns then you're going to have the same problem in 5 or 10 years from now.
If you don't know exactly where every dollar you spend is going then you are shooting at a moving target.
Also, you MSUT stop accruing debt. You did not say if you were still living on credit at all, but if so you are just making the situation worse.
If possible take advantage of any offers to shift your high interest debt to a lower interest offer. It does cost some cash to do it. However, in the long run it may be worth it. We moved much of our debt to a 4% for the life of the loan offer, which helped a lot.
It is a lot of work and no fun, but it is enormously rewarding. It will take time, but you can do it if you want it bad enough. You may need to deliver pizzas or start living on Ramen, but it can happen. My wife and I buckled down and paid off over 20k in debt in the last two years. I can't describe how good it feels to be debt free.
Also, set some rewards for yourself. My wife and I allowed ourselves a small allowance of cash each week that we could spend on what ever we wanted, no questions asked. We could buy coffee every day or save up and buy a video game, no guilt. That helped us stay on track.
You can do it.
Earlier this year I came to the realization that my credit card use had become out of control and I needed to change it.
The first and most important step in this process was determining where all my money was going and what I could do to help myself. Eventhough I did not log in every penny spent for a month, I did the following.
1 - I determined what the minimum payments on my credit cards were and averaged out my monthly utility bills. (FYI, I contacted my power comapny and they have this system where they average out your bill over the year, its good to prevent heavly fluctuations from month to month). I then created a spreadsheet to track the spending. I split my payments as equally between the two paychecks I receive a month so that I could keep a stable amount of money in my pocket.
2 - I looked at areas where I could save money. For example, I lowered the amount of services from my cable company. Called my credit card company and see if they can lower my interest rates. I lowered my entertainment budget.
3 - With left over money I set up an emergency fund ($1500) using ING Direct. This is only to be used in emergencies (hospital visits, car breaks down).
4 - After my emergency fund was set up, I diverted all extra money towards paying off my debts in order from lowest to highest. When i finish paying off that debt, I snowball the money into the next lowest debt so on and so forth.
Some tips I can suggest:
- Cook your own meals and bring in lunch. Aside from the fact that it is probably healthier, its tons cheaper. You can buy non-perishables in bulk and save loads. (Find a friend that has a Costco or Sams Club card and go with them
- If you do decide to go out, take cash and limit yourself to that money. If you only got $20 budgeted take $20 dollars.
- Cut up your credit cards or place them in the freezer in a tub of water. This forces your to really think about wether or not you want to spend the money.
Nice blogs to read:
The Simple Dollar
Wisebread
If you have a CC bill that is $500 with an interest rate of 9.5% and a $5000 loan with an interest rate of 19% then pay off the $500 bill first.
The snow ball effect is incredibly encouraging to keeping you on track. It's also highly effective in that you're able to put more money toward the next lowest bill much quicker.
My wife is a Dave Ramsey devotee and she was pretty adamant about being debt free ASAP. This sucked for me because she was already debt free and I was almost $30k in the hole.
In a year and a half we were able to get rid of it all and now we have a very hefty amount in savings.
These are the monthly bills (outgoings) we had:
- $0 for a $1000 Guitar Center bill (one of those no payments till 200X deals still had 6 months before I needed to pay anything on it)
- $50 for a $1500 personal loan
- $90 for a $3000 Best Buy bill
- $250 for a $10k Car note
- $300 for a $14k Credit Card bill
- $700 for rent
- $300 for utilities
- $100 for gas(cars)
- $150 for internet/cable/phone ($50)
- $120 for cell phones($70)
- $50 entertainment (which includes $30 for MMO monthly fees)
- $400 for food
Our combined income was $2800
So we had about $290 to play with.
We cut out the cable and home phone. Now our OGing was $50.
Got a cheaper cell phone plan. Now our OGing was $80
We put the MMO fees under entertainment which cut our play money to $20. Playing City of Heroes together actually saved us money! :winky:
After the cuts we had $440 to play with.
After this we had a huge "garage sale".
We made about $2500 selling clothes, cd's, my brand new 42" plasma (so sad) and some guitars I had laying around. We also tried to sell my car (hers was paid off) and my comic collection, but to no avail.
So we paid off two bills with that money. The GC bill we weren't actually paying anything towards but at least we didn't have to worry about it. We paid off the personal loan as well.
We took the $50 we were paying on the personal loan and started applyng it to the Best Buy card. So instead of $90 a month going there it was now $140. We also took $300 of the extra $440 and put that towards the BB card as well. We had that paid off in 6 months.
So now we have $440 + $250 to pay towards the car loan.
With tax rebates and bonus's from both of our jobs, we were looking at quite a large chunk of cash. We decided to put the whole sum onto the CC bill because it had a higher interest rate. This is where balancing the loan amounts vs the interest rate comes in.
After we got the CC paid off, we cut it up and closed the account. We do not have a CC.
We were able to pay off the car note very, very quickly and had a debt free party a year and a half after we got married.
BTW you wouldn't believe what financial security does for your sex life!
I recommend reading Dave Ramsey's book not only for the advice on how to get out of debt but also for the advice on how debt should be viewed. It opened my eyes to some stupid beliefs I held.
Good luck with your plan! Knowing you WANT a plan to get out of debt is half the battle. Staying on it is the other half so stay focused. I'm rooting for you.
There's a joke in here about a "money shot" somewhere. :winky:
Can trade TF2 items or whatever else you're interested in. PM me.
Damn you're good. 8-)
ENDER:
I am in your EXACT EXACT EXACT situation buddy. 40k in CC debts over the last 2 years due to my wife's unemployment and stupid spending by both of us. I'm currently doing fine and paying off a TON of debt. HEre's what I did;
First, I gathered up EVERY expense I had and put it in a spreadsheet. All my minimum payments, bills, food coffee everything.
Then, i averaged out my income. I did this on a 2 month average as I make a salary and my wife makes commission. Then, I had an idea of what I was looking at. Here's what I did next:
I opened 2 separate accounts. Why? Because i'm a fucking moron and any account with an ATM card attached to it gets sucked dry. The first account is at Chase. Our paychecks go in that account. It has no ATM card. I pay all my bills from this account by check and it's strickly monitored. I have a spreadsheet where I allocate money towards every bill every month and i know exactly how much i need and whether i have more I can allocate to my highest bill.
I write a check to my Bank of America account which has our ATM cards. That account has our "petty cash" for stuff like gas, food etc. It can't go overdraft so we can't spend ourselves into a hole.
I have 5 Credit cards. I consolidated my highest interest one by getting a loan from my wife's parents. This will be paid off in 10 months instead of the 4 years the CC company wants, and at a WAY lower interest rate.
Like the others have said, I pay minimums on my lowest interest cards until my highest interest card is paid off.
Lastly, do you have rewards points? sometimes you can apply them to the card's balance to help you save some money. Might be worth a shot!
"Oh what a day, what a LOVELY DAY!"
? o_O
No worries, I think the mods nuked the scammer's post already.
As someone who does limited credit counseling, the advice (for the most part) is spot on. Remember that this is a long-term plan. Snowballing works beautifully.