Amount Of Credit Card Debt

I wanted to do credit card debt consolidation but I am skeptical if this is a good idea with the economy. I am very far behind on my credit card bills and the only reason I can't afford them now is because the min payment has gone through the roof. The all together debt that I have is less than 2,000.

Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. The hit to your credit score is very bad.
There is a better way.

A. Have a garage sale and sell anything that you no longer need or want.

B.Get a temporary part time job, if you have one, get another.


Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment

Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment

Debt #1: paid off
Debt #2: paid off
Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

You can do it and it isn't as hard as you think. Just follow the plan

2009-04-01 08:44:50 by Andrea

Credit Card Debt

I have about 25K in credit card debt. I am planning to buy a 540K house. Currently I have great credit, is it possible to add my credit card debt into the home loan in order to make it a single monthly payment. What is the loan program called? I am shooting for 5 yr. ARM. Me and my wife plan to live there for about 3-4 yrs.
To add I mean to pay off my credit cards with the home loan.

I doubt there is a loan program around right now that will lend over 100% of the homes value on a home purchase. You can sometimes get them on refi's but they are usually loans that are attached to some type of construction or major improvements.

Value is determined two ways:
In a purchase, the Purchase price or the appraised value- whichever is LESS.

In a refinance- the appraised value.

If this is new construction, the home is probably worth alot more now than when you purchased it. You should have a lot of equity.

Right now, prices are not going up as much as they were, so if this is existing construction, you may have to wait a few months until you have enough equity to pay off the debt.

If you have cash in the bank, try to pay off that debt and get a second mortgage instead of putting that additional money as a down payment.

You can also wait until you close your loan and refinance with a second mortgage paying off your debt- provided there is enough equity in the house.

Sorry to burst your bubble, but let me show you from a lenders perspective.

You have $25,000 in Credit Cards and the average interest rate is probably 15% or greater. You are buying a house that the value is $540K, you want them to lend you $565K for a house they know is only worth $540- at an interest rate of about 6%- less than half of what you are paying on the credit cards now.

If you were to default on the loan, you get to take all the furniture, clothes, handbags, etc that you paid for using the credit cards, however they can only reposess the home that is worth $540K. If they sell it at auction for the full price of $540 (which is doubtful) they would be at a loss after the Realtor takes the standartd 6% commission (approx $32K). That leaves the bank with getting $508K for the house at best, before fees.

This is obviously not a favorable investment for them.

2006-08-01 23:21:49 by Mak

I am paying off my cards which are over 5 yrs old, and they're giving me settlement amnts to pay them off. Most of the balance is late fees, my credit is slowly going up. Am I going to have problems in the future getting credit if they ve seen that even though I paid all my debt, I chose to make a stlmnt amount to close it? Anyone in similar boat?

If you don't have anything in writing showing that they will either delete the negatives or report as closed, paid as agreed - you may end up with it showing as a paid charge off.

You should have also sent them a debt validation letter before agreeing to pay the accounts. That way you would be sure that they have not inflated the amounts. (which they may have done).

I would suggest that before you send your next payment, to at least send them a pay for delete letter.

Request that after they are paid they will:
Delete anything they have placed on your reports.
They will not sell the debt or the remainder of the debt.
They will cease all collections on the debt.

If you do not have anything in writing, you may find that they will report negatively, sell the remainder of the debt etc. So, protect yourself.

If you need any more info about this type of letter or debt validation letters, do some reading in the forums on the site that I have linked.

2006-07-09 21:04:17 by amusic.mana

How much credit card debt do YOU have? Just wondering where I fit...I have about $2500.00 combined debt on all my cards.

When I worked in credit the average household have $25,000 in credit card debt. I have $0...after working in credit and seeing the holes people bury themselves into I stay away and charge maybe $1500 a month then pay it right off.

2006-12-28 08:33:09 by pattycake123

I have a son who I have put through a private Catholic High School (not cheap!) and he is on to college in 2007. I bought a modest house last year. I receive no child support. I carry a balance on my credit card (low interest rate) and I pay as much as I can every month. I am never late and have an excellent credit rating.

I'm wondering if the balance I carry is high/average compared to rest of US? Of course, I'd love to pay it off, but with the mortgage, tuition, expenses, etc. I cannot.

All things in their proper order.

I am older than you by a good many years I expect. I divorced my husband when my daughters were just 11 and 14 years old, and never received a dime in support from him.

I worked full time at a job I absolutely hated while my daughters were in high school, and then college.

10 years ago my parents needed me to live with them in their home to supervise their daily care. My father's mind was going and my Mom couldn't handle him alone.

I had been saving to put myself through University up to that point. My plan was to do the five years of university to obtain my degree. Then to purchase a house afterwards.

Taking care of my parents shelved those plans. And after five years when my mother died, I had to quit my job as well, because my Dad needed full time care.

I was left my parents house after my Dad died last year, but it sounds better than it is. The place actually needs about 50,000 dollars spent on it (minimum) to bring it up to date.

I have a house. And I have no credit card debt. But I have no job either, and no prospects of one now, since I am getting too old to be considered employable in my former profession.

I guess the point I am trying to make is to keep slogging along. And be thankful for each bit of security you can wrest for yourself. Debt is a b1tch, but it beats having nothing. Just be sure that you get well ahead on paying off your mortgage and other debts before you add anything more to it now.

A personal thought...there seems to be a lot more Superwomen out there in the world then Supermen. You don't see too many of them succeeding with this sort of daily pressure hanging over them. Women just seem to have a greater degree of responsibility and staying power.

2006-12-13 10:47:33 by Marcjc