Debt troubles...

[WoodiE]

Ok guys I need some ideas and suggestions. I guess lucky for me I've never had to deal with this problem to this degree, however I have a good friend whom she has managed to get herself into a large amount of debt. Just over $12,000 in credit card debt and I believe about $6,000 +/- in auto debt. Now the auto debit I'm not to worried about as she has a 0% interest on her auto debt from the dealer when she bought it new (Saturn Ion).

At any rate what I think the real problem is, is the credit card debt and their very high interest rates. I believe she said she's paying about $400 a month on her CC debt and of course is strapped for money every week between the auto, CC and rent ($400). I suggested she go to her bank (Fifth Third) and try to get a personal loan so she can use it to pay off her credit card debt or at least the majority of it so that way when she's paying on the loan the majority of it would go toward the loan and not interest. No believe it or not her credit score is awesome, like 715 or something (nice credit, just terribly in debt), but anyways she went and talked to Fifth Third on the 22nd and they said it'd take a few days to get back with her, but said it shouldn't be a problem since she's got such good credit (loan was for $10,000 - max for personal loans). Well Monday they came back and said they couldn't give her the loan due personal loans can't be used to consolidate debt.

So now she's back at square one - paying the credit cards high interest rates. I've suggested going to other banks to try getting a loan to which can be used to pay off or consolidate debt, but I fear she might get the same answer as Fifth Third gave her. So that's where the suggestions and ideas part comes into play.


I know she needs to go on a budget and we're going to go over her spending habits here in the next few days to see what we can do to put her on a better budget. Other then that, what can she do to help get lower interest rates and maybe a lower payment to help her out on her monthly funds each month.



Thanks guys!


-Michael

 

[BazzYboY]

Well this has been big in the uk recently, and the worst thing was that people dont do much about it or try and get it sorted, the best thing she can do is go to the bank and delclare herself bankrupt, so bad as it sounds it appears it the best way, they will then be able to consolidate all of her montly outgoing and be able to like help her put it into one monthly payment still allowing her a bit of leway, and atleast it would her her knowing she has atleast some comfort in knowing that something will be done

By declaring yourself bankrupt it then in the hands of the bank to make sure something is done to help you, i might just add that

Least over here i nthe uk that how we do it if were really serious about gettin yourself out of debt

 

[FastEddy]

The ole CC Trap.
She can play the CC Balance transfer game if she can put her nose to the grindstone and pay it off. Most CC Companies will offer a discounted interest rate for 6 months to a year on transferred balances from another card. If she can transfer to one of these and pay more (A Lot More) then just the interest each month the balance will go down faster and the interest will not be eating her up. If its not paid up by the time the introductory rate on the transfer is up, she can do it again with another card.

The trick here is two fold.
1- DONT CHARGE ANYTHING MORE !!! PAY IT OFF!!
2- The reduction in interest will allow more to be put towards principal.

Another option is Prostitution or learning to pole dance.

 

[FastEddy]

the best thing she can do is go to the bank and delclare herself bankrupt,

Thats the most fiddlesticked up thing you can do. As a young person it will ruin your credit for 7 years or longer. Forget getting a car, house, credit card, or living any kind of normal life for the next 7 years. After that you will pay the highest interest rates on the market to try to establish your credit. This will take another 3-5 years. Forget the dream of a new car or house for 10 years if you follow the advice given above.

Fact is she borrowed the money from someone good enough to lend it to her and she should pay it back. You dont toss the baby out with the bath water!!!

 

[suppaduppa]

I agree with FastEddy maybe she can tansfer some/all of the balance onto another card/cards that have no intrest for a year. Then at the end of the year, transfer the balances again to the same. Just a thought.

 

[vbgagnon]

I had this happen to me when I moved from Cali back to Maine. Our move cost up upwards of $8,000 and we had $1000 on it before for a total of 9k. At 22 years old I did not have the cash to pay this up front so I had to charge it. Well six months later my wife and I said enough is enough (to the interest rates) and went to see our bank. At the time I worked for the Dept of Treasury so my credit had to be good or I wouldn't have a job. The bank loaned us the money. $240 a month for 5 years, we're almost half way through the term and its getting better. The interest rate is double in comparison to our auto loan, but soon enough we won't have to worry about that anymore.

If I were her I would go to a few other banks and get one loan to cover as much of the cc as possible! It makes life so much easier when it’s all in one place.

 

[WoodiE]

Well the plan was to get a personal loan to get the majority paid off then use another CC and transfer the remaining balance just as suggested. However I'm not sure if she's going to be able to find a CC that will give her 0% or darn close to that for $12,000 for 6-12 months.

I don't think I have to worry about her putting any thing else on the CC - i'm sure she's learned her lesson.

I'll see what I can find in terms of CC's offering lower rates.



-Michael


ps. as far as claiming bankrupt - I also agree that's a little over the top. It's just trading in one negative for another, nothing is gained.

 

[WoodiE]

I had this happen to me when I moved from Cali back to Maine. Our move cost up upwards of $8,000 and we had $1000 on it before for a total of 9k. At 22 years old I did not have the cash to pay this up front so I had to charge it. Well six months later my wife and I said enough is enough (to the interest rates) and went to see our bank. At the time I worked for the Dept of Treasury so my credit had to be good or I wouldn't have a job. The bank loaned us the money. $240 a month for 5 years, we're almost half way through the term and its getting better. The interest rate is double in comparison to our auto loan, but soon enough we won't have to worry about that anymore.

If I were her I would go to a few other banks and get one loan to cover as much of the cc as possible! It makes life so much easier when it’s all in one place.

vb - what bank did you go to? She's tried that with Fifth Third only to be turned down saying personal loans can't be used to consolidate debt. Did you own a house or anything?



-Michael

 

[speedticket75]

if she is having realy bad enough problems to file bankrupcy........problem if she or he owns a house or is paying payments on one..........find a good bankrupcy lawyer & dont use the first one you see........talk with at least 3 before you deside which one you use........important that the lawyer does a search on the credit problems to see if a creditor has placed a lean on the house.......if there is no lean then if your gona, file the bankrupcy as soon as possible........i think the one to file is a chapter15 but I'm not positive.......its the one to where you get to keep what you have as long as no lean is in existance.........I've never filed bankrupcy but allmoast did once......went as far as to talk to 4 different lawyers.......when you do file it will be about 7 years before you can get something on credit again but maybe different now.....the 7 year thing was about 8 years ago & could have changed by now......

 

[vbgagnon]

We had bought our house, but we didn't have any equity in it yet. It was a small credit union in our hometown. We went in and talked to a loan officer and explained our situation, we had the loan and all the paperwork done about an hour later. If her credit score is as good as you say you shouldn't have much of a hard time finding a place to loan her the money.


I'd have to agree with the bankruptcy thing thats totally obsurd, especially for under 20k of dept. Also here in the states its going to be harder to have a bank accept this claim of bankrupt, laws have been put into effect to stop these hoax bankruptcy claims.

 

[sweetdiesel]

Another option is Prostitution or learning to pole dance.

I didn't go that far, but I was in this same boat last year. 2nd job helps if she can stay disciplined and not spend more by making more. You will be surprised at how much debt you can pay off by sticking to a budget.

Fact is she borrowed the money from someone good enough to lend it to her and she should pay it back.

Absolutely, I agree with Eddy, bankruptcy is the worst thing she can do right now, not only for the reasons mentioned but it can also effect future employment. My company will not give anyone a corporate AMEX if they have bad credit or have declared bankruptcy. Unfortunately for her she needs to do whatever it takes to pay her cards off. Maybe it's time to sell the car and ride the bus for a little while. If she does nothing else, an extra $400 towards principle would get her out of debt in about 4-5 years. She'll also save money from not having to purchase auto insurance/fuel/maintenance, etc.

 

[SMaxxin]

The ole CC Trap.
She can play the CC Balance transfer game if she can put her nose to the grindstone and pay it off. Most CC Companies will offer a discounted interest rate for 6 months to a year on transferred balances from another card. If she can transfer to one of these and pay more (A Lot More) then just the interest each month the balance will go down faster and the interest will not be eating her up. If its not paid up by the time the introductory rate on the transfer is up, she can do it again with another card.

The trick here is two fold.
1- DONT CHARGE ANYTHING MORE !!! PAY IT OFF!!
2- The reduction in interest will allow more to be put towards principal.

This is exactly how I cleared my cc debt. At the great age of 18 I started getting cc's and wasn't afraid of using them. Like your friend I had great credit, so I would get the 0 interest for 6 months and do a balance transfer. Before the 6 months was up I had a couple of other cc companies that had sent more 0 or very low interest rate cards to me. It took me 2 1/2 years to finally pay it off but it can work. To this day I don't use a cc unless I have the money to pay it as soon as the bill shows up.

I don't agree with getting a loan to pay off another loan, you only extend the loan and in some cases end up with two small notes.

Bankruptcy is definitely not the answer, one of my friends did it years ago. 12 years later He has been at his job for 9 years and makes a very good salary but had to have a cosigner to buy a new truck.

 

[4u2nv]

its better to file bankruptsy when your younger at least and dont have much to loose. At least thats how I've always looked at it. I see these commericals on tv called "Free in Five" where you work with this company to roll all your payments into "One low payment", and your suppose to be debt free in 5 years. I guess they work with the CC companies to lower interest rates and stuff, so that might be something to look into.

If I was her, Id sell the car and get a older one so she can have lower payments. Thatd be my 1st thing I done. If she has been current with all her payments she can call in to her cc company and ask for a lower interest rate. I just did this on my CC, and it went from 11.9% (Crazy I know) to 7.99%.

 

[FastEddy]

Getting a fixed rate loan over an extended time is a great option if you can get one. It reduces your payments and interest. If you are in the groove of getting it paid off sooner then later you can add a principal payment at any time. The trick is to not charge any more....

Credit Unions are her best bet for a personal loan. The are usually a lot more open to working with their members than an open bank. Everyone is eligible for a credit union you just have to find one in your parts that you qualify for. My credit unions requirements are that you are a resident of Sonoma County. May want to find one and have her chat with them about what she needs before joining.

4u has a great point about contacting the CC Company and having them lower the interest.

 

[BazzYboY]

noting ofc i sid alot of people in england would and do declare themselves abnkrupt, Hell I'm only 18 and so far my credit rating is pretty high, even in comparison to come adults, so i can quible, however gettin into debt yes, is very easy and can be a hell ofa struggle to get out. we all have a ways and if she plays the game right I'm more than possitive she can get out of it.

 

[NvNitro]

This is exactly how I cleared my cc debt. At the great age of 18 I started getting cc's and wasn't afraid of using them. Like your friend I had great credit, so I would get the 0 interest for 6 months and do a balance transfer. Before the 6 months was up I had a couple of other cc companies that had sent more 0 or very low interest rate cards to me. It took me 2 1/2 years to finally pay it off but it can work.

I agree with Maxxim, We get at least 2-3 cc companies a year wanting us to do this. If your ok in changing cc companies every year and putting your balance on a new one with 0% intrest, then this I think is the way to do it. 0% is 0%. If she has good credit, I think this would be a good place to start IMO. But along with this, she has to be disaplend enough not to rack up charges, as it will put her in the same boat she is in now.

 

[WoodiE]

I don't agree with getting a loan to pay off another loan, you only extend the loan and in some cases end up with two small notes.

SMaxxin - I agree and this is something my father has always told me as well. Using one debt to pay off another debt isn't the answer, however I also agree with Eddy that what I'm hoping to get done here is lower interest rates for her and maybe even smaller monthly payments.

Bankruptcy is without a doubt out of question. Her credit score is awesome and the only thing that's really a huge problem for her is that's she's just barely making it from week to week. It's not like she can't pay the bills, it's just stressful and very tight.

Ideally I'd like to see her in a five year loan that will offer a little more breathing room for her so she can start making payments with a little breathing room so it will ease up a bit on her stress. If all else fails I'll start looking online for her for 0% interest credit cards to start transferring the balance to.

I'm planning on sitting down with here and collecting all of her receipts for the last week or two and figuring out exactly what she's making and what her money is being spent on and weed out what she doesn't "need". I've also been talking to here about getting just a part time job, nothing crazy just another 10-15 hours a week to make a few more bucks for some more funds to go towards her bills.

I completely forgot about credit unions and I've always been told they usually give better loans (thats why I still have my account in my home town) and I know she went to UK college at one time so maybe that will be enough to get into that credit union.


-Michael

 

[Monkey Wrench]

Guys, what no one has mentioned (or I missed it) is that Congress just passed legislation making it virtually impossible to file a chapter 17 (personal bankruptcy) anymore. Besides, as has been mentioned, it'll crush you for life (forget that 7 year BS, they say that, but if you mark "yes" on any credit application, you're sunk).

Wood, does she have any property (land, vehicles, etc.) she can post as collateral? She can't use the car because there is already a lien against it, but things like stock, pension plans, retirement benefits, etc. can be. Does she have a 401K she can tap? She might take a hit on the taxes, but I'll bet it's less than the combined interest she's shouldering.

Good luck, man! She's got a good friend helping her out!

 

[vbgagnon]

MW thats what I was leaning torward in one of my posts. Very hard to file bankrubpcy nowadays.

 

[sweetdiesel]

Does she have a 401K she can tap? She might take a hit on the taxes, but I'll bet it's less than the combined interest she's shouldering.

Just another thought along MW's ideas, some companies allow their employees to borrow against their 401K, with regular weekly payroll deductions to pay back the loan. There is a small charge for administrative duties, but the interest paid on the loan goes right back into the 401K.