Am I on the right track?
Date: Mon, 06/07/2010 - 06:37
My wife and I currently have $23,000 in credit card debt, which is eating us alive. Most of this was racked up during our college years as my wife had to put herself through school on her own. We are now both 27.
I started tracking expenses 2 months ago, after all the monthly bills are paid we have $600 left over- or should. The problem is the $600 gets eaten up by clothing for our daughter, toys, vet bills, all the random things that just don't get on the monthly bill list.
I contacted a national bank and requested a $23,000 personal loan to pay the credit cards off. They would only do $15,000 which would pay off the largest credit card we have. The interest rate is 9.9% and would save us $50 a month- and be paid off in 5 years vs 85!
This leaves us with $8000 in debt.
I have 3 options here:
-Apply for another personal loan at a different bank (doubt they would give me one?)
-Ask for a loan from a family member.
-Ask my parents to take a home equity loan out for the full $23,000 and let us make the payments. I do not know if they would help us like this or not, their house is paid for and has been for awhile. The payment would be low enough that defaulting should not be a concern.
I also have $70,000 +/- in a 401K but have been told I can not take a loan out against it (due to program rules?). We are very responsible with our money, but can't seem to get these cards behind us.
My goal here is to just get all the debt off the cards and into something that is a low fixed rate.
Any thoughts out there?"
those random things do eat up the "extra cash" but even then you
those random things do eat up the "extra cash" but even then you gotta start looking at what is being purchased. Toys?? Hell young kids can do wonders with a 50 cent package of crayons and brown paper bag or plain brown box. Are these things your daughter "needs" or "wants"? Clothing...easy....go thrift store. My girls had a fabulous clothes when they were young and I could outfit them for $50 combined for the season. Again you gotta weigh out those "needs" and "wants".
Soap is right. You need to take a hard look at what you're spen
Soap is right. You need to take a hard look at what you're spending that extra money on. Are you going out to eat, going to happy hour on Fridays, buying unnecessary items, etc. Toys aren't a necessity. I'm betting your kid has plenty of toys and doesn't need new ones. You have to commit to not buying ANYTHING that is not a NECESSITY until you've paid off this debt.
Little things can make a big difference. Turn the lights off when you're not in the room, brown bag your lunches, stop going out to dinner and/or happy hour, change the AC temp by 1 degree, shop at thrift stores and discount stores, buy generic/store/less expensive brands of everyday items (e.g. shampoo, conditioner, face wash, orange juice, over the counter meds, soda, snacks etc.). Do you have an Aldi near you? You can save a fortune doing your grocery shopping there.
If your parents would do the home equity line for you, I think that would be your best option. Getting the $15K is another good option as long as you take the money you'll save with the lower interest rate and use it to pay extra on the new loan or on the other cards.
"NO. It doesn't. That leaves you with the same $23,000 in debt b
"NO. It doesn't. That leaves you with the same $23,000 in debt but instead of owing it all to credit card companies you owe some to the credit cards and some to the bank. It does nothing to reduce your debt. It just shuffles it around a bit.
You can not borrow your way out of debt. Not from a bank. Not from a family member. Not from a retirement plan. You just can not borrow your way out of debt.
The only two ways to get out of debt are 1) increase income and 2) decrease spending. Number 2 is generally the easier of the two to accomplish. You have at least $600/month going to ""random things."" That needs to stop. You and your wife need to sit down and go through the budget with a fine tooth comb and cut out all unnecessary spending - new clothing, toys, entertainment, cable tv, fancy phone service, gym membership, haircuts, charitable donations, dining out, etc. As for number 1, go through the house room by room and collect anything that you don't need and can sell either on ebay, craigslist or a yard sale. I've read that the average family can make at least $1,000 by doing that. I don't know how old your daughter is but sell all of her outgrown clothes and toys she no longer plays with and books that are below her reading level. Sell tools you never use, wedding gifts that have never come out of their boxes, unwanted holiday gifts that you never got around to returning. Anything and everything that you can live without needs to go. The other piece of number one is working more. Do both of you work now? Get second jobs. Turn a hobby into a business. Whatever it takes.
Don't forget to look at every possible expense. Get new quotes for auto, home and life insurance and see if you can get cheaper policies. Buy more store brand groceries and clip more coupons to cut the food budget. Be more mindful of your driving to conserve gas and make sure you know which stations in your area tend to have the lowest prices. Lots and lots of ways to trim spending that can all add up to big savings.
What shouldn't you do?
DO NOT borrow from family.
DO NOT borrow from retirement plans.
Sam, I agree with you to an extent. If he can borrow money at a
Sam, I agree with you to an extent. If he can borrow money at a lower interest rate to pay off balances on higher interest credit cards, that IS saving money and will get him out of debt faster. You can't borrow your way out of debt but sometimes shuffling things WILL save you money.
Greetings, I concur with [URL="http://www.debtconsolidationcar
Greetings,
I concur with [URL="http://www.debtconsolidationcare.com/forums/member.php?u=224156"]Sam Ruban[/URL] "You can not borrow your way out of debt. Not from a bank. Not from a family member. Not from a retirement plan. You just can not borrow your way out of debt."
You've got a sinking ship.....start throwing stuff overboard.
You can do it.
Regards,
King "Kash" Jabba Labba
