HELP! Need financial advice.

C

chars2boys

Cathlete
I am wondering if any one has advice on getting out of debt. Due to some bad decisions and some unfortunate circumstances over the last few years I am now in about $38,000 of debt. All credit cards have been cut up and I have never been late on a payment but it seems like I am just getting nowhere in getting the balance down.
Any advice? This is weighing so heavily on my shoulders. I am not looking for a quick fix just a way out!

Thanks so much!!!
 
Have you thought about consumer credit counseling? Or a consolidation loan? Maybe you could look into these options further. HTH and things will get better once you have a plan.
LD
 
Cutting up your credit cards is a very good step in the right direction. :)

Here's a snippet from Clark Howard's web site about reducing debt. His suggestion is in line with advice that we've also gotten from our accountant. It's pretty straight-forward:

----------------------------
http://clarkhoward.com/shownotes/category/7/40/224/382/

There are several steps you should take to get out of credit card debt. Paying off several thousand dollars or more in credit card debt takes time, so you must discipline yourself.

1) If you have several cards, your first goal is to pay off the card with the highest interest rate. This process is called laddering.

2) Pay more money toward that credit card and slightly less toward the other cards, and eventually you can rip it up. Then you move onto the next card, and so on, and so on...

3) One proven way to pay more toward the most expensive card - and to get rid of it faster - is to make a separate payment every 14 days to the credit card company. Mark your calendar every 14 days and write that check or send your online payment that day. Making a payment every 14 days equals one extra month's payment you've made at the end of the year. Work these payments around your statement cycle to avoid paying lates fees.

# For help during the process, contact the NFCC at nfcc.org or call 800-388-2227.

------------------------------
 
A home equity loan is usually the best way to handle these situations. I've been there--& I'm proud to say that after about 10 years of seriously working on my credit I'm finally financially secure.

Definitely DO NOT do one of those so-called "nonprofit" credit counseling services. Not only do most have a service fee (about $30-40 per month), but they'll adversely affect your credit. It happened to me about 6-7 years ago & took me a while to undo that damage.

If you don't own a home, perhaps you can consolidate it all onto one or two cards that have low interest rates?

My only other advice is that you not close your credit card accounts. I found out after the fact that closing your accounts doesn't help your credit. Having an open account with a balance that's less than half the credit limit will IMPROVE your credit fairly quickly.
 
I don't have anything concrete to add, but wanted to just let you know what we did to get out of debt. We sold our house last September and paid all our debt off. We had many, many people tell us it wasn't a good idea, but we did it anyway. For us it worked out great, we are out of debt and bought another house that is smaller but with lots of potential to grow and a new area we love.

I guess my suggestion is to try and not think how most people think of ways to pay off your debt. Does that make sense?

Good Luck!

Mary

ps -- another person to check out is Dave Ramsey. He might have some different ideas too.
 
I'm in a similar situation and its going to take a lot of patience and reducing expenses, paying as much down as you can, maybe a second job or source of income. Can you try to do a balance transfer one time to a 0% card?
 
THANK YOU TO EVERYONE!!! I really appreciate all your advice. I know it will take time but it feels better know I have a plan of attack.

Thanks guys!
 
Hi there

Just wanted to add a couple of things that I think might be helpful to you. I enjoy watching Suze Orman on MSNBC on Saturday nights at 9pm ET. She really gives great financial advice and also has some great books out there that you can get on ebay for very little $$. There's also info on Suzeorman.com

I'm not sure I would agree that a home equity line of credit is the way to go. At least not if you don't stop the spending habits that got you into trouble in the first place. If it was due to an unexpected medical expense, then maybe so, but credit card debt does not fall into this category. You don't want to end up losing your house. Also, I would make sure you are only spending 25% of your income on a house payment. You house will always have control over you if you are paying more than that towards your home.

You might also want to call your credit card companies and ask them if they will lower you interest rate. I also second the advice that you should not close your account when it is paid off if you want to improve your credit score. Leave them open but with a zero balance.

Also, pay at least the minimum on all of your debts every month to keep your credit score above water. Pay the extra towards the debt with the highest interest rates. Make sure you know where you stand with each and every bill and account. Being organized is essential.

If you don't have an extra source of income to help out, then you will need to get frugal in order to pay down the debt in a timely manner. Cut out the fat in your budget. Cancel the cable TV, ditch the lattes, pack your lunches, eat at home, stock up on sale price items you will need within the next month, clip coupons, etc. Buy only the bare essentials in life. It's not a very fun way to live, but it will trim your expenses so that you can get out of debt faster. Just keep in mind that your sacrifices will be rewarded.

You sound like you are doing the right things.:) Keep up the good work. Wishing you all the best on your journey!!

Angie
 
I am in the mortgage business & am always going to trainings, etc... and the company I work for actually has David Bach's book the "Automatic MIllionaire Homeowner" on our internal website for us to order & send to our brokers, they even gave us all a copy of the book too. I know he has many other books including one "the secret system for debt-free home ownership: why you must Make It Automatic. So, I would say any advice from him would be good.

Also, an old boss of mine at the same company I've been with for 10 years also gave us the book- Dave Ramsey- the total money makeover. I know someone above also mentioned him & his advise should be sound advice also.

With being in the mortgage business I would also agree that if you do own a home & can get a home equity loan (I'd try to get a HELOAN and not a HELOC if possible since rates aren't real stable right now) to do that as you can write off mortgage interest and consolidate all your bills into one payment. If that isn't an option maybe talk to a local bank to see if a personal loan is an option for you, taking multiple payments & putting them into one would help. If that isn't an option I would highly encourage you to call your credit card companies & try to get the interest rate on your cards reduced. You'd be amazed at how they will work with you some if you ask & tell them it's that or the possibly of not getting paid- they are making LOTS of money off consumers so by lowering your interest rate they aren't losing money but they will if you don't make the payments at all.

Anyway, good luck & hang in there you will get through this!
 
Another vote for Dave Ramsey. I listen to his radio show and have read one of his books. I would have read more of his books, but all the library's copies are already checked out. WITH GOOD REASON.




"She's living in sin with a cowboy, and hell--he can hardly even walk!" --J.R. Ewing, "Dallas"
 
First, do not get a home equity loan. That is a dangerous way to go-a very slippery slope. And don't cut up your credit cards! Those cards will preserve and raise your credit score as you get them paid off and add years of credit to your credit history, which is only as long as your oldest account, so keep those accounts open. Put them away, but do not cancel them just yet!!! There will come a time for closing after you're back on your feet.
You should read THE AUTOMATIC MILLIONAIRE by financial planner David Bach. It is a no nonsense plan for getting out of debt and saving money. He is very well known and respected (you've probably seen him on the news or on Oprah). He tells you what to do, how to do it and in what order so you can get out of debt, save money and raise your credit score. You can also purchase the workbook (though you don't need to) that goes along with the reading so you can map your own plan. You can get these books at Barnes and Noble, Amazon, just about anywhere, and they are about $12 each. It's not at all gimmicky; all easy to understand, common sense stuff that you'll kick yourself for not doing before now!
 
>Hi there
>
>Just wanted to add a couple of things that I think might be
>helpful to you. I enjoy watching Suze Orman on MSNBC on
>Saturday nights at 9pm ET. She really gives great financial
>advice and also has some great books out there that you can
>get on ebay for very little $$. There's also info on
>Suzeorman.com
>
>I'm not sure I would agree that a home equity line of credit
>is the way to go. At least not if you don't stop the spending
>habits that got you into trouble in the first place. If it
>was due to an unexpected medical expense, then maybe so, but
>credit card debt does not fall into this category. You don't
>want to end up losing your house. Also, I would make sure you
>are only spending 25% of your income on a house payment. You
>house will always have control over you if you are paying more
>than that towards your home.
>
>You might also want to call your credit card companies and ask
>them if they will lower you interest rate. I also second the
>advice that you should not close your account when it is paid
>off if you want to improve your credit score. Leave them open
>but with a zero balance.
>
>Also, pay at least the minimum on all of your debts every
>month to keep your credit score above water. Pay the extra
>towards the debt with the highest interest rates. Make sure
>you know where you stand with each and every bill and account.
> Being organized is essential.
>
>If you don't have an extra source of income to help out, then
>you will need to get frugal in order to pay down the debt in a
>timely manner. Cut out the fat in your budget. Cancel the
>cable TV, ditch the lattes, pack your lunches, eat at home,
>stock up on sale price items you will need within the next
>month, clip coupons, etc. Buy only the bare essentials in
>life. It's not a very fun way to live, but it will trim your
>expenses so that you can get out of debt faster. Just keep in
>mind that your sacrifices will be rewarded.
>
>You sound like you are doing the right things.:) Keep up the
>good work. Wishing you all the best on your journey!!
>
>Angie
>

I agree 110% with everything Angie said;) . Good luck to you.
 
I tottered on bankruptcy twice and now I have a 750 credit score (850 being perfect). Not filing bankruptcy, paying down my debt and keeping those accounts alive have increased my score.

Cut up the cards if you have to (you can always order new ones), freeze them in a block of ice, whatever, but do not close off the accounts!

I would not use my house to pay off the cards. In a bankruptcy filing you usually get to keep a house, a car etc. If the house is borrowed against, the bank could foreclose and you lose the home.
 
Thanks again for all the advice. I really do appreciate it. I wish there was a quick fix but I know it will be a slow process.
 
>First, do not get a home equity loan. That is a dangerous
>way to go-a very slippery slope.

I don't understand this--why is it a dangerous, slippery slope? I consolidated all my debt into an 8.5% home equity loan about 5 years ago & went from paying $1000+ per month to $120 per month. I just sold my house for a substantial profit & everything is paid off, including the HE loan (obviously). I'm totally debt-free other than house, car & student loans & my credit score FINALLY went over 700 in 2006.

It worked beautifully for me, so I'm wondering what specifically is problematic about it?
 
LauraMax,

If the revolving debt is large then even the equity loan pmt will be large. If you get behind on the equity loan you will lose the house.
If a family sustains a personal disaster or a cash flow problem then they are on the streets.

If I had the choice I'd go bust on a charge card, its unsecured debt.

I looked at bankruptcy, I suppose I could live keeping a house and a car. But if I ever lost the house I would never have the "seed money" to start over. My mortgage is less than the prevailing rents
 
My thought is that if you are in too deep then putting this debt on your house can be a big mistake. It basically transfers your unsecured debt to a secured debt. What that means is that if you can't make your payments after you switch your debt to a secured debt, (as in an HELOC) you will face foreclosure on your house. However, if you can't make your payments on credit cards it'll just ruin your credit score. Neither of these options is a pleasant one, but at least I would prefer to have some place to live over a good credit score.

However, if you are optimistic about your future, your job, and future financial difficulties seem unlikely, it is an option to consider. I would only consider this if the future looked particularly rosy and you knew you wouldn't make the same mistake twice. However, in this financial climate, where things are so volitile right now, I would take great care in going this route.

Just my thoughts

Angie
 
>>>>I don't understand this--why is it a dangerous, slippery slope? I consolidated all my debt into an 8.5% home equity loan about 5 years ago & went from paying $1000+ per month to $120 per month. I just sold my house for a substantial profit & everything is paid off, including the HE loan (obviously). I'm totally debt-free other than house, car & student loans & my credit score FINALLY went over 700 in 2006.

It worked beautifully for me, so I'm wondering what specifically is problematic about it?<<<<


Laura,

The only time this would be a slippery slope if the person doesn't change their spending habits and continues to spend. There are people who stick to their original plan, but others who slip into their old ways.

I've seen this happen. The people have all the intentions of curbing their spending, but all that equity is very tempting. Many, many homes are foreclosed because of this.
 
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