General Debt Question

stellar1April 20, 2006


I have been lurking on here for a while and wanted to ask a few general questions. My husband works for an autmotive company and we are recovering financially from a 2 year lay-off still. We were lucky, despite deciding "Hey we are laid off let's have a baby!" we survived pretty well. A lot of his co-workers were living off the unlimited overtime and lost everything, house, car etc. and had to file bankruptcy. We survived by always buying less then we can afford, but when you go from making $28.00 per hour to $9.00 you take a hit regardless of your situation.

We have a few debts that I would like to get paid off as soon as possible. We have a loan payment and 1 credit card that is higher then I would like it to be (I want it to be zero!). I would like to meet with someone to tell me that best way to do this. I don't want to do debt consolidiation, that is totally not necessary in our case. All payments are being made on time but I am making minimum payments on the credit card due to the minimum payment increases and I know this is not going to get us anywhere soon. I have contacted another company about transfering the balance to a zero interest card but have not heard anything back yet. I want someone to counsel us as to the best and quickest possible way to pay these off. I would really like to be home with my baby who is turning 2 today and we really need to get on the right road to retirement saving. (We do have a Roth and 401K but I am paranoid about the future!) Any advice or website that can you direct me to would be appreciated!


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first congratulations on getting through a tough 2 years.
couple questions.
what is the intrest rate, min payment and balance on the credit card
same with the loan and what kind of loan is it.
not being nosey but helps to know what we are starting with

    Bookmark   April 20, 2006 at 11:43AM
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I guess I should clarify that, he has been back at a different division of the same company for about a year and a half now (after being laid off for 2 years. But is still making less then he was before). In those 2 1/2 years I have paid off every outstanding debt that I can except for these two and they have me baffled. I wrote this at work (bad me!) and did not have the figures in front of me. Hate to throw my shame for all the internet to see but if it helps me get it paid off quicker then so be it. The loan is about a 14,000.00 balance with 3 years left to pay. The interest rate is 6.99% fixed. The credit card is 7500.00. Geez is makes my want to cry to even type that. I have NEVER in my life had that much credit card debt! The interest rate is 31%. Of course this started out at 6%. That went up since the last time I checked which was last month! I am in the process of starting the process by transferring this to a 0 percent FIXED interest rate card. I am awaiting approval on that as we speak. As soon as the balance is transfered I don't care if I take a hit on our credit I am canceling that card. I don't even want it around anymore. While I am awaiting approval on this, I am going to call the current card and get that lowered. There is no way my interest rate should be that high with A1 credit. Any advice you can offer for getting this paid off faster would be appreciated. My husband and I have recently shuffled around who does what finance wise and I am trying to get all of our ducks in a row and then knocked out! I appreciate any input.

    Bookmark   April 20, 2006 at 10:03PM
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first of all you are not in a bad situation . I have helped allot of friends who have had 3 times the debt load you do.

the first thing i would do is call the credit card company and tell them you received a BT offer at a lower rate what can they do to keep you as a customer. If they say they cant ask to speak to somone in account retention. it dosnt matter that you may be transferring the balance get the rate lower while you are waiting.
also check to see if the 0 % is for a promotional period and what it will go up to after. you dont want to end up with a higher rate than your current card will lower theirs to. if it is 0% till you pay the balance you need to make more than the min payment.
there are a couple of things you can do to pay the credit card off faster. if there will be intrest charged, look at your statment see how much the finance charge each month is if you add this ammount to the min payment you make each month the bal will go down faster.
another way is to treat the bal as if it were a car payment.
for example $7500 24 months at 7% apr payment would be $336 per month 36 months would be $232. allot will depend on how much you can handle paying each month. you can go to and pull up the payment calulator and play with the numbers. they also have really good advice on different financial matters.
remember anything extra you can send will bring the balance down faster.
also you can get a free credit report(you have to pay a few dollars if you want your credit score) I would do this to make sure there isn't something on there that could cause them to raise your apr so much. as a matter of fact everyone should get their credit report yearly just to make sure thinds are listed properly
hope this helps

    Bookmark   April 21, 2006 at 8:10AM
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Call the credit card company. Get that rate back to where it should be. I would review your taxes and make sure you are getting all the deductions you should. One example is mortgage interest deduction. I hope I am right in thinking you have a home. Automotive work is really rough right now and the rumors are horrible so I wish you the best at finding a great approach to getting a handle on all this before it gets worse. Some will convert credit card debt to home equity debt but that puts the home at risk in the event the additional bills can't be paid. You don't have an adjustable mortgage do you? If so, I would evaluate reducing that risk by changing to a fixed rate and perhaps take cash out to cover some of the debt. Again, that is risky since you roll in the house. I support the idea of rolling the card debt to a lower rate and card.

    Bookmark   April 21, 2006 at 12:18PM
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Great advice above!

Please don't be insulted by what I'm offering... I was skeptical about it, too. Everyone has "pocket money". Everytime you make a purchase, use a BILL and pocket the change, don't spend it! Put the coins in a bowl and roll them at the end of the month, take them to the bank and have that amount put into your checking account. Write a check to the credit card company, noting it is to be applied to PRINCIPAL and MAIL IT.

I used this simple technique to pay to principal on a car loan I had. I paid the thing off a little less than a year early. You have to tackle the principal because your interest rate is so high.

I don't think you're in a really bad place, either... you are obviously wise enough to understand that things could get nicely out of hand if you don't put the kibosh on the credit card debt right now. Good for you! I admire your candor and willingness to do the hard work you know will be required.

    Bookmark   April 21, 2006 at 4:39PM
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I live in Canada so I don't have answers for you. However, if you can switch to a "0" interest credit card, what happens if you add other purchases to this card? I'm wondering if that might do a way with the "0" interest terms? If so, there is no way you would want to use the new card for any new purchases.

    Bookmark   April 21, 2006 at 6:29PM
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Please don't feel ashamed at coming here to share your dilemma with us.

As several have said, you've done well at keeping your ducks in a row, it seems to me.

Quite often it seems that when you get a 0% rate on debt transferred in to a new card, one of the requirements is that your regular payments go totally toward paying off that loan until it is totally liquidated.

Which means that, should you choose to use that card for new purchases - they just sit there, racking up interest, that gets added to the total owing ...

... and you don't get to pay a single dollar of that debt off - until all of the transferred-in debt is paid.

During which time you've been racking up interest on the debt, and interest on that interest, as well. At a high rate.

Which pretty well means that you're back where you started from.

Not my idea of a happy ball game - for you, anyway.

Best method is to find out precisely what the rules are, and if they are as I outlined ...

... store that card way back at the bottom of the deep freeze - or at the bottom of a neighbour's well.

And don't use it to charge anything new, until the transferred-in debt is fully paid.

At which time, should you choose to use it, you'll be paying their regular rates on new purchases.

Good wishes as you work toward your goal.

It seems to me that it's a good one.

And you're working hard to deal with it.

Congratulations are in order, it seems to me.

I hope that you're having a beautiful week.

ole joyful

    Bookmark   April 26, 2006 at 6:12PM
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Thanks for all of your help and advice! It was nice to hear someone say our situation is not as bad as it could be. My husband and I always seem to see the things that we still need to do and not take stock in the things that we have done. It is nice to have someone point that out.

First of all, we do own a home and have a fixed rate mortgage at a very low interest rate on a 20-year loan. (I think it is around 6.5) We also have a line of credit that we have locked in the rate on at 7.5. It is a 15-year loan. We do not or never have used any of the credit from this line and are paying it down and viewing it as a regular mortgage. The interest rate goes up on this and you have to relock every time you use part of the line so I don't want to mess with it. The mortgages were done this way to eliminate PMI, which saves us some money.

As far as the credit card, my husband called and the reason that they rate has jumped like that is that we had two late payments in the past year. Mind you these payments were a couple of days late, never 30 days or anything else. They take that rule very literally apparently. My husband let them have it and they are reviewing our account. We are also in the process of transferring this balance to a new card, which we will not be using for any new purchases. If we have an emergency, we have a credit card from our credit union with a $1,000 credit limit that we will use and pay off every month. We are getting in the mindset that cash is best. Mind you we have always been in that mindset but at times could not practice what we preached. The late payments issue is the reason that I have taken over the finances. My husband paid everything, but not always by the due date and I know how important that is. Since I am the anal one with the bill spreadsheet I know I am the best one to handle this. We struggled so much when my husband was laid off that bill paying and updating the check book gave us both panic attacks and I don't think he has gotten out of that mindset even though we have enough with extra to cover everything so he put it off to the last minute. We had it out and I pointed out to him that just makes the situation worse. After a couple of months I have us back on track and he actually commented "Gee there is a better way!". No kidding:)

    Bookmark   April 27, 2006 at 9:00AM
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Those late payments will get you. One of dh's cards is sitting in a drawer b/c the turnaround time for bill-paying was only 20 days or so. I even set up bi-weekly auto payments, so we'd always at least have paid the minimum due (in case I missed the due date w/ full payment), and then one month they applied 3 to the prev month and only one to that month--guess what? Late fee again. That did it--the card was history.

If you pay your cards online you can schedule what date you want them paid, or have a set amount paid every week/2 weeks/ etc. Plus you eliminate the cost of a stamp.

    Bookmark   April 27, 2006 at 1:30PM
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I agree with the advantages of doing the online payments. I do all my charging with one card that pays 1% cash back. As soon as I know the statement has closed for the period I go to the web site, download all the transactions into Quicken and then do an electronic transfer from my checking account to pay it off. It's not a scheduled payment, I just know that I have to go in and do it on or around the first of the month. I've never had a late fee and I usually see the money coming out of my checking account two days later, so I know they got the money.

    Bookmark   April 27, 2006 at 3:23PM
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Mind you these payments were a couple of days late, never 30 days or anything else. They take that rule very literally apparently.

They take it literally because that is their opportunity to boost your interest rate.

    Bookmark   April 27, 2006 at 6:13PM
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