Lots of debt, whats next?
Date: Mon, 03/06/2006 - 12:13
Our situation isn't too dire as our debt to income ratio isn't too bad. We just plain want to get out of debt. We can see how much money we pay out each month just to pay the minimums and its staggering. I want to start investing, but all of our extra money goes to paying off debt. Heres what our situation is, I'm going to spurt out true figures, so I don't care that people know, I just want some honest advice here:
Our tax return was roughly $5k, we already had about $5k in savings and I just got a student grant for $2k. So We've got $12k sitting in the bank and I want to do whats best. We have about $20k in unsecure debt. Our 2 cars come to about $40k in debt, and roughly $800/month in car payments. After all expenses (rent,food,debt,etc) we have roughly $1k surplus each month coming in to do as we please (we usually go out to eat alot and my wife likes clothes so it goes fast).
I recently contacted a debt consolidation place but it sounded fishy. They didn't 'counsel' me at all. They just asked me what I had in debt and they came with a monthly payment figure of how much we would owe them. They said they could get my interest rate from 0%-8%, but nothing was guaranteed. Also had a fee of $40/month for "account management" and an upfront fee of ~$500. Is this normal???
Also any advice onto how we should handle our debt.
Right now we just plan on cutting eating out and buying clothes to pay off debt, but thats not really a solid plan. What do you guys recommend?
Do you already own a home?If you are sure about going into a con
Do you already own a home?If you are sure about going into a consolidation program,you should talk to someone from this site,the consolidation companies used here dont charge upfront fees,but there will be a small monthly fee,which is understandable,considering what they do for you.If you have a large amount of credt cards,you may want to pay off the ones with the highest interest first.Car loans cant be added into a consolidation program.But my advice would be to payoff the high interest cards with your cash flow and work with a good consolidation company for the rest,always check with the BBB when you chose a company.You didnt say what your credit score was,remember that while you are in a consolidation program your score will go down until you finish the program.Im sure some of the others here on this board will be able to add to my advice.
After covering all your monthly expenses you have $1K in your ha
After covering all your monthly expenses you have $1K in your hand. And car payment takes $800. Besides that you have few more unsecured debts. So I strongly recommend saving some more money by cutting your expenses.
Quote:
Right now we just plan on cutting eating out and buying clothes to pay off debt, but thats not really a solid plan. |
This is a good plan indeed. Once you start following it, you will realize how effective it is. Also think out what else you can do to earn some more money per month, like joining some part time job. Also this is the time to utilize the money that you have right now. If you put $12K towards your debts, monthly installments definitely become lower from the next month.
But if you still allot the same amount for your debts, you will be paying your debts off sooner. You can surely place your unsecured debts under the consolidation program. This site offers free consultation to those who register here. The counselor first analyzes the financial situation of the individual and then work out an affordable payment plan. If your monthly payable for unsecured debts is less, you can pay more for the car loans. So you can get them off sooner.
No, We don't own a home. We would like to within the next year,
No, We don't own a home. We would like to within the next year, hence the urgency to get out of debt. If we could only pay half our debt off within the next year or so we could afford a beautiful home. I would like to pay everything off before we settle into a home, but thats just me.
It doesn't sound like a home is a viable option if a consolidation company lowers your credit score. My credit score isn't so good, maybe low to mid 600's. My wifes is decent, probably high 600's, low 700's. Any lower, and we wouldn't be qualified to buy a house.
Stanley - We have $1k in hand after all expenses INCLUDING the $800 in car payments. Its just we spend spend spend, and that extra $1k is gone before we know it. We've decided to stop eating out completely (yes it will be hard).
debt consolidation can help you obtain a good score. just think
debt consolidation can help you obtain a good score. just think it this way, you do not have sufficient resource in your hand, credit card minimum is rising, so you cannot deny the chance of becoming default in future. And if it happens, your score will be injured a lot. So it will be wiser to ensure regular payments towards your debts. Debt consolidation does that.
One more thing I would add here, while calculating credit score, maximum weightage is given to regular payment. So don't let ???late payment' enter your credit file. Score in the 600's range is not too bad. You can lift it up.