Is now an okay time to consolidate?
I’ve been yo-yoing for years with my debt and - while I never liked having it to begin with - never really sat down and worked it out. This year I finally decided to make good and pay off all my debts. I’ve been paying more toward my credit cards than the minimum payment, I paid off the one with the smallest balance entirely, I’ve argued with my creditors to bring down outrageous APR’s… and I’m making progress. Slowly, but progress.
However, one credit card company is refusing to co-operate with me. They gave me an APR of 23% when I went over limit some time ago, and when I got serious about tackling my debt they told me they couldn’t lower it until I paid off the overlimit part. Well, okay, I did. And now they still won’t lower it. So I’m hoping to get a loan to consolidate the remainder of my debt to them and pay the whole stupid thing off for a lower APR.
It’s only a grand total of about $1,900, so I’m afraid most banks would think the loan too piddly to bother with, as they did when I initially looked into consolidating ALL my debts, back when the sum total was close to $10K. That said, I’m afraid to even look for consolidating my one card, given the economy. So…
Advice? What should I do? I want to pay the lump of what I owe to the mean credit card company that won’t work with me on this, but I don’t want to saddle myself with something worse, and I don’t know if anyone will even be willing to take this “small” amount on. Ideas? Thoughts? Help me out, here.
Point of Note: I am not a homeowner, landowner, and my car is NOT worth using to take a loan against.
Lonnie
July 5th, 2009 at 4:52 pm
Margaret
Practically any type of loan can be wrapped into the debt consolidation process. Common types include finance charges, late fees and overdraft charges, credit cards, personal loans, utility bills, medical bills, car loans, store cards, gas cards and back taxes. A debt consolidation loan allows you to condense your monthly payments into a single, simple bill, while lowering your interest rates and helping you pay down your debts more quickly and easily. It is also an essential tool in avoiding the much more serious step of declaring bankruptcy.
Unlike bankruptcy, in which debts are cancelled and your credit rating collapses completely, debt consolidation loans are essentially a type of refinancing, where several old loans are replaced with a new one that has more favorable terms. Your loan consultant will negotiate with creditors on your behalf, so you’ll no longer have to deal with harassing phone calls and daily mail.
July 7th, 2009 at 6:42 am
Norma
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. The holidays are coming and there will be plenty of temporary jobs available. It is better to have a no fun year or two than a no fun decade.
C.Whatever you do, DO NOT do a loan consolidation. It goes on your credit report like a bankruptcy, you end up owing more than when you started, and it takes you longer to pay it all off.
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:Mimimum 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.
July 9th, 2009 at 1:06 pm
Eddie
The easiest method of getting a debt consolidation loan is to utilize the equity of your home. Equity of your home is calculated and determined by the difference in the amount you have paid and the amount you owe. If the amount you have paid is more than the amount due, you can use it as collateral. This allows you to borrow money on lower interest rates. Besides, you also get tax benefit on this type of loan. Consult your tax advisor before opting for this loan.