credit card debt - solutions? not drowning yet - but I'm in the deep end of the pool

[say_der]

After years of medical problems, being out of work at times and just plain bad luck, credit card debt has caught up to me. I can pay my monthy minimum and then some. But the balance is not going down as fast as I want. I can't remember the number I heard for average credit card debt per American household. Possibly $8,000? That's a scary number when it's unsecured money like that.

Would a non-profit debt solutions company be able to help me? It's not like I can't pay my bills. I'm not sure how these companies work and I'd like a little advice on how these companies work before I call one and get tricked into believing they are something they are not. Does using one of these companies do anything to my credit rating? Are they only for people who can't pay their bills?

Thanks for any advice on these companies and/or other debt solutions.

Not trying to be a jerk - but please don't tell me to cancel and cut up my card. That's not really what I'm looking for here.

[mpete54]

Whatever you do, do not go through those non-profit debt solution companies! I have heard from several people, including a couple of my friends who are financial advisors at reputable banks, that those non-profit debt solution companies report to the credit agencies that they are working with you and it WILL negatively effect your credit.

The best thing to do is to go to a reputable agency or bank and talk with a financial advisor and develop a plan. Places such as Luthern Brotherhood (or whatever it's called now) or a credit union are good places to start. Our credit union offers financial planning and management as a free service to it's members and it will not effect your credit rating.

Hope this helps!

Matt

[taxmancommeth]

I was once in yoru shoes... I had a car with 12%, two or three CC with near $9,000 on them, and then student loans. I also lost my job (just after we bought a house).

Those debt consolidation companies can be trickie I heard. Some do effect you credit scores by talking with the CC companies and negotiating a price that they can pay off the CC. You just have to check around.

If you have a house with some equity (Market value is greater then what your loan is) I would look into cash out refinance. That we you can refinance your house with teh CC on that bill and you write off the interest on you taxes.

Can help you out with more information.

(sorry, not allowed)

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GET-ER-DONE

[This message has been edited by Jim W (edited 07-28-2004).]

[sami0115]

do you or anyone in your family have anything that you could put up as collateral at a local bank? you could get a loan to pay off all your CC's and get a fairly good interest rate.

[say_der]

Thanks for the advice.

I'm glad I asked about it.

It's not exactly an easy thing to talk about due to the embarassment of having gotten myself into the situation.

I know a financial planner in my area will give free consultations. Maybe I'll go see him.

Sami - I do have a car that's paid for that's worth an OK amount - I just have a hard time borrowing against it since I worked so hard to get it paid for and to me it is a worthless investment. But so is my current situation too.

Thanks again.

[MNice]

First of all I wish you well in your situation. I would go see the finacial planner for sure, I think it's in your best interest. IMHO, I would sell some assets to get the CC paid off, guns, boats, etc. I commend you for posting thhis here and I really hope you work things out.

Jeff

[mrkastni]

I would get a loan against that car. The interest rate will be lower than the card rates and it is at least "something". Not a terrible thing to have a car payment, unsedured credit card debts are crummy though.

I have been in this situation before too. Trust me you are not in as bad or a spot as you could be. My route would be to borrow as much towards your car from a Credit union and apply it towards the Highest rate card. then do what you can to pay down the balance if any as you can. Another good thing to do is to contact the credit card customer service dept. and ask for a lower interest rate. If they decline to give you something in the 8-10% range, transfer balance to a more attractive rate card, and close the first one. It can save a ton of money.

Just my thoughts from experience...

Mike

[Swamp Scooter]

Say-der,

I feel your pain. Been there myself. We did find a company, I will look it up, that was able to get the interest rates cut way down or eliminated in some cases.

We paid the company each month on a plan and they paid the cc companies. I still got statements from the credit card companies.

We did buy a house during that time too.
The credit report listed these accounts but it did not reflect negatively on getting a loan. They asked what it was and we told them we consolidated them and were paying them off. The credit cards you list with the service are frozen until they are paid off. My advice is to not consolidate ALL of them so you can have one to use during the time and when it is over. They worked with the store cards too. If you give me your e-mail I will get you the information.

Hope this helps.

[BigMike]

I work for a mortgage company and as someone who sees credit reports all the time, and definitely DO NOT go through any credit reduction/solution non-profit organization. When you do your credit scores will be dramatically affected - almost to the same extent as declaring bankruptcy!

As was mentioned, one of the easiest solutions would be to get a cash-out refinance and apply your money directly to your credit cards. You will get tax credit (from your new home payment) for those cc's. If you don't have a home, I might try an obtain an unsecured or secured loan from a local bank or credit union and the lowest possible interest rate (probably anywhere from 7-11%) and that will be much lower than most credit cards that usually push 20-25% interest.

What I've heard many financial planners do is basically look at your bills, cut out anything that is not a necessity (some examples may include: cell phones, highspeed internet, cable/delux cable, clothing expenses, eating out at restaurants, etc.) Most people think they "need" these things when in reality there are always things you can cut out. And think of it this way (using cable as an example), would you rather be without cable for 1 year and pay off $500-1200 on a credit card or pay for cable and not put any dent in your payments? If you only make minimum payments, it will take you 15years to pay off a $3000 balance and you'll end up paying close to $15-25K depending on your interest rate! If you cut just a couple of those things mentioned above, you could easily be saving anywhere from $100-300 a month and in one year that is $1200-3600 off of a credit card. Ok, so it takes you three to four years to pay off a $9000 balance, it's better than 15 years!

The best thing to do is keep paying your bills every month and DON'T USE your cc's at all until they are paid completely. Use cash to buy things - these keeps you from going in the hole and relying on credit until you get your balance down or completely paid off. If you have to, think about a second job. Even if you only work 5hrs a week - that is 20-25hrs a month and even if you made minimum wage that would be about $100/month after tax that you could apply to a card payment.

For 1 month write down every expense (it may be hard but worth it) and then look at what you are spending your $$ on. I bet you'll be able to find things to cut out. When you cut them out, write a check out right to the cc company for that amount. You'll be surprised at how much you spend on things that you really didn't need to buy and how fast your balances will start to come down when you apply that right to your cc.

Good luck!

[Uncle Grump]

Say-der

You can dig yourself out - but its going to take some self disipline on your part.

#1) Lock up those CC's somewhere - ie a safe deposit box, etc. Do not carry them - then you can't use them. If you can't pay for "it" (what ever "it" is) in cash and/or your checkbook, you don't buy it. Further - Do not take out any new cards - no matter what the "come on" is.

#2) DO NOT stop making any payments - even if it's only the minimum amount. Meet those monthlys - and you will not damage your credit rating.

#3) Analyze your bills - who is gouging you for the highest interest rate (APR)? This is the card/bill you will attack first - even if it's not costing you the most each month in terms of $ paid. You want to tackle the card/bill with the highest APR, as that APR rate is reducing the amount of your payment going against the principle (amount you owe).

#4) By attack, I mean do everything you can to come up w/ extra cash to pay on the card / bill with the highest rate. Save your pocket change in a jar each day, carry a bag lunch, skip coffee breaks, etc. But come up w/ a pool of "extra" funds. Add the extra funds you collect each month to the minimum amount of that highest APR card/bill - this becomes your accelearated payment. Keep doing this each month until the balance is zero on that specific card/bill.

#5) Once you zero a card/bill - don't stop. Keep going. Roll that extra cash, and the former monthly payment together with the minimum payment for the next highest card APR, and do it over, and over, and over.
It may take a while - could be 2-3 years - possibly even longer - it all depends on your level of debt, but it will get you out of debt.

#6) Once you nail all your un-secured debt, you can then either save your new "extra" money and build a savings account up, or roll it over to your house payment - if you own a home, and start knocking it down as well.

Best of luck....

UG

[Dave B]

Good info Uncle Grump. That was what I was going to say, dont chip away at all balances, attack one w/ all you have, then look to the second.

Look for extra income, my wife is a stay home mom and 2 1/2 years ago we bought a new house that we knew would stretch us thin. We had a second child soon after and things got real thin. So I delivered pizza for a year 2 nights a week for almost $20/hour (less wear and tear). It got us through until my income grew.

As far as borrowing against a car, look into credit unions. They will sometimes offer better rates on late model used car loans. Ours here at work offers new car rates for 2002 and newer.

The important thing is to get going in the right direction and stay there. Spend less than you make and pay down debt EACH month.

[New Yankee]

All good advice so far. Used to be in collections/repo business and the key is to communicate with your lenders if you're falling behind - but your a step ahead recognizing the issue.

I've heard a good way to go is to start with the card that has the highest interest rate, and pay any and all you can additional above the minimum on that one til it's paid, then the next, the next and so on.

As also mentioned, call the CC companies and ask for rate revisions, and/or if you've got fairly solid credit you can transfer to a card with lower rates.

The key is to not put any more on them (easier said than done, I understand!). Refinance is a viable solution but can leave the devil at the door if you don't close the old CC accounts out after you've paid them.

The counseling companies simply gain concessions from your CC companies on what they will accept as a monthly payment and usually can negotiate a reduced rate, but the CC companies usually still will report to the credit reporting services that you are in default - they just don't take action if you're in the program - not a good deal if you can make the minimums as you mention. They (the counselling companies) take a percentage of what you pay them as well - they may be non-profit but DO take their expenses (at sometimes questionable levels)!

Good luck - and remember it's always coldest just before dawn!

EDIT - Noticed much of the same advice given before my fingers could finish typing the above - bunch of good folks on this site!

Uncle Grump - I enjoy your thoughts on the Political page!

[This message has been edited by New Yankee (edited 07-28-2004).]

[STILLNOFISH]

Say_Der,

I am a Financial Advisor for a large investment firm located in the twin cities. What you may want to look into when talking with these planners, is if they offer a different credit card that one can transfer their balance over. Our firm has a Visa card in which one pays no fees, has a 12 month 0% apr and after the twelve months the rate is 7.9%. This will allow our clients to pay down the principle amount significantly faster, due to the 0% interest for the first twelve months. The previous posts offer some great ideas as well. Good Luck to you.

[This message has been edited by STILLNOFISH (edited 07-28-2004).]

[Big G]

Say-der;

I may be able to assist you.

Give me a call @ 952-854-8899.

Ask for Gary.

DON'T GO TO A CONSUMER CREDIT COUNSELING SERVICE!!!!!!!!!!!!!!

[say_der]

Thanks for all the great advice.

We eat out once a month at Quizno's. Don't have cable. We do have high speed internet, but I need that connection for school (I take online classes from the U). I tried with a 56k dial up and it simply would not work.

I'm going to talk to a financial advisor about borrowing against my car vs. just continuing to pay as best I can since it's not like I'm missing payments or anything. I am a member of a credit union so my interest rate will be pretty good.

[hanson]

I can completely understand what you are going through. I'm not out of the woods yet with my credit card debt but I'm on my way!

I am currently on my third job in 1 year. Unemployment doesn't pay the bills, that is for sure. Between my 1st & 2nd jobs, I had emergency surgery to remove my appendix. Thankfully, I had taken out a short term health insurance policy but I still ended up with a big chunk of that surgery I had to pay for.

It finally came down to this solution this summer- I got a 2nd job working nights and weekends in addition to my full time job. I'm sacrificing alot of free time but in the end when the bills are gone, I'm going to be much happier. I've still got a little time to fish but not as much as I'd like.

I was also able to do some balance transferring with my cards so half of what I owe is at 0% interest right now and the other half is at 3.9%. May not be the ideal solution but it seams to be working for me.

[Uncle Grump]

NY

I believe you have me confused w/ my "brother", Uncle Dave. I surf the political forum, but haven't posted there.

That said, Dave and I don't disagree a whole lot.

UG

[New Yankee]

UG -

Sorry, you're right. And it appears we share some common thoughts!

[mnrstrider]

Money is well spent to visit a good financial advisor, they can tell you the best way to do this. I am not one, but...

My one quick piece of advice is, if you have extra money to pay on bills, pay all of it on your lowest balance, concentrate and work off paying the easiest one off first, then you can use that money once one is gone, to work on the next one. Do not pay a little extra on, one one month and a little extra on another the next month. Pick the bill with the smalles amount owed, and work on that. That will make you some progress.

I'd suggest probably not getting a consolidation, just for the simple reason, that say you consolidate, then run the cards up again, then you are digging a really deep hole, and many people do this, this is a trap for most people, I know I'd have a hard time with that one.

As bad a s it sounds, a penny saved is a penny earned.

First step, is recognizing you need help, good job, you'll get there.

[walleyehawk]

I have been working for banks and finance companies for 15+ years. Uncle Grumps advise is real good, sounds like an article I just read about the issue.

Be VERY cautious about these debt consolidation and counseling services that advertise on TV. The charge huge fees-which they put into the loan. Your payments go down a little, only because they have stretched the term. There are alot of complaints about these companies

Some of the consumer counseling companies take your paycheck and pay your bills. They charge the creditor a fee and may charge you a fee. And this may appear on your credit bureau. Only a last, last resort.

If you know someone at the bank or credit union, swallow your pride, you are not the only one in your shape. You would be shocked how many people have large credit card debts and medical bills to pay.

DO NOT put this debt on a home equity line. Makes no sense to stretch this debt out over 30 years and pay a SIGNIFICANT amount more in interest. That and you miss a payment or have another bad stretch, you can lose your house.

Right now the credit card company has no collateral on the loan. Why give them your most valued asset, a home. Foolish.

And like Yankee said, if you are going to be late, or run into problems, talk to your creditors. Most will help.

And give the credit card company a call and tell them you are moving your debt to another card with a lower rate. They will offer you a lower rate so you can pay your balance down sooner.

You have to be patient with debt.

Get yourself a budget and stick to it. And be disciplined to pay what you plan on to get rid of the smaller or higher rate cards/debts first. Once you get rid of them, lock them up and do not use them. If you have to use a card, use one with a balance over one without a balance so you don't have to mess with another minimum payment--and the temptation to use it just one more time.

Once you start getting these debts paid and take the amount from the paid one and applying it to other debt, you make real good progress.

Another idea that worked for me is a savings account where I put money to pay off my debts. When I had enough to pay one off, I did. Gave me the flexibity in the event of a real emergency.

Good luck.

[Guest]

say-der
Shoot me an email I would like to discuss this with you. Use subject "financial woes"
frozenminnow at mcleodusa.net

[Dobber]

What a GREAT site this is! Not only does it make a person a better fisherman, it also helps with personal problems as well! I know first hand what a great bunch of folks FISHINGMN people are. Keep up the good work!

Dobber

[Guest]

I'd invest a few hundred in a knowledgeable
attorney who knows how to handle the creditor's best.

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Chells

[Jarrod32]

New Yankee was right on with his comments. First, tally up the totals...do a 'personal financial statement'. I understand your comment about taking a loan against your car, but you will have the debt either way...by taking the loan against the car, you get a better loan terms, and it looks better on your credit report in the future. Same thing goes for a home equity loan, if that is an option...don't be afraid of doing that. You will get a better interest rate, and you can use most any repayment period (five years, seven years, ten years, etc.).

Also, CALL YOUR CREDIT CARD COMPANIES. If you are having problems, they will help you out. They would rather work something out with you directly than have you go through one of the couseling services (avoid them if you can) or bankruptcy.

Visit a financial advisor (or banker), and pencil everything out. Then you can figure out a good plan of action. Good luck.

[This message has been edited by Jarrod32 (edited 07-29-2004).]

[Guest]

Calling your credit card companies can seem to help, but your credit rating is still heavily damamged as with going through credit counseling. When it becomes a write off it stays on your record for 10 yrs. If you file bankruptcy it means that you admit fault and is gone in 7 years. Sometimes the dark alternative is the only solution,
Add up all of your expenses, see where your percentage is
I hope you can get through this ok.

[LEECH21]

Frozenminnow, you wrote that calling the credit card company and asking them to lower the rate will hurt your credit rating? Really?

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[Jarrod32]

frozenminnow is right in that if the CC company takes a "charge-off", that it will show up and adversely affect your credit rating. However, just setting up a lower interest (and often times lower fees) repayment schedule shouldn't...as long as you keep up the payments, of course.

[Howieroch]

I've been in your situation. My first advice would be to call your credit card company and ask for a lower interest rate - don't tell them you are having trouble, just tell them you are thinking about changing companies for a lower rate. If you have kept up your payments in the past they WILL lower your rate rather than lose you to a competitor.

After that I would go to a credit counselor and get help figuring out your options. If you are careful and work at it you should be able to get out of this without any negative marks on your credit history.

[say_der]

Yeah I'm not worried about having negative marks on my credit from this - now that I know that those debt consolidation companies will negatively impact my credit.

I do have an appointment set up with a financial advisor.

I just hate owing money on the stupid card and paying the interest on it. Someone mentioned being patient with it. I think that's my main problem right now is that now that I'm working again and my medical problems are HOPEFULLY done I'd like to be rid of the debt. But I've got to be realistic about it.

I'm glad I had insurance to cover the majority of the medical costs. It's still expensive as heck to have surgery with all the co-pays and fees. I think after everything was said and done I was out a few thousand for just that stuff.

[New Yankee]

Say,

U duh MAN, all the posts offer good advice, and you wisely asked before the wolves were at the door (and I don't think they were close...).

All good messages posted here - take what you can and leave the rest.

If we all had the answers, well, then we wouldn't be here.

I've stopped saying never and always because I'm usually proved wrong....

I'm confident you'll not have any issues going forward, although it ain't going to be fun as you know, for the next year or so.

Give us a post in a year or two when you can look back at this and with a grin !

Gods speed and good luck; we always need the former but the latter is usually our doing...

Take care and good fishing! (some one has gotta catch tham!)