Suggestions Needed.

[nutterbutters]

I'm not sure this is possible, but I figure if anyone knew if it was, they'd be here.

I have around $35k in unsecured debt spread out across 4 credit cards and one personal loan. The credit cards total up to around 23k and the APRs range from 7 - 10%. 2 of them are on BofA, and 2 of them are with Chase.

The personal loan is 12k and also from BofA. The APR on it is 3%.

I have managed all these through a Debt Consolidation Plan - I'm aware of the profiteering nature of them, but at the time it helped me organize everything at a point where I was in no headspace to organize anything.

I'm ready to move to the next level of organization and hopefully leave the DMP behind.

I have not touched/opened/used any line of credit since October 2008 - the date I went on the DMP. I have made regular payments of $1200 each month since October 2008, with possibly one late payment in 2008 and have records to back it up.

I've been good about budgeting and this plan works for me - however, it leaves me almost empty every month. I can live on this and will be debt-free in 4 years, however, I'm not really getting any significant savings, which is something I'd like to change. This plan basically depends on me staying employed, and recent murmurings in the company aren't good for my department, so I'd like to start working on something that could possibly improve my cashflow situation and allow me to save up for an emergency.

My credit score is on the low end of good or the high end of fair - scores from all 3 reporting bureaus range from 660 - 700. It took a hit with the DMP plan years ago but the steady payments have caused it to rise nearly to where it was when I realized I was in trouble - I used to be at 720-750.

I've applied for loans recently to get an idea of how much I might be able to get. My ideal situation is to consolidate the entirety of the debt under one loan with a low APR/lower monthly payment and blast the cards away completely, but my credit score and debt-to-income ratio really won't allow for it when applying online. I've spoken with BofA and Chase regarding this, and neither has anything constructive to say.

Now - here's my question: Would a credit union or smaller bank give a differing opinion given my timely payment history with the DMP? Or, failing that, are there other lending options which might take such a history into account? I'm exploring some of the P2P Lending sites, which seem to initially score you based on your credit - the loans offered to me at first weren't worth it - but there are some social aspects that may pan out.

Or, since I've now got the level of organization and discipline required to maintain a steady monthly payment with my debt, would it be worth it to contact my credit card companies individually and ditch the DMP? I imagine I'd be paying the same amount, but would my credit take a positive hit after it's reported I'm no longer on a DMP?

Thanks for any suggestions you can give.

[jpg7n16]

Let me give you the answer you'll get from many people: you cannot borrow your way out of debt. Your plan seems to be "maybe if I could just borrow from the right sources, I could get out of this mess faster." That's not true.

Even if you had 0% interest on all your debt (the best case scenario for a borrower), at $1200/month it'd still take 29.17 months before you were debt free. That's nearly 2 1/2 years in the best case scenario (that will never happen).

But the thing that bothers me is why is this going to take you 4 years?? At $1200/month, at 10% interest (the max on all the debt) it would only take 33.55 months (less than 3 years). Something's not adding up.

By my math, if the personal loan were on a 350/month payment, it would take right at 3 years to get it paid off, and the extra 850/month going to the credit cards should eliminate the debt in 30 months (used 8.5% interest, which is the midpoint of your interest rates).

So what's going on there?? If the DMP is telling you 4 years, I'd ditch them in a hearbeat! No thanks! I can pay it off faster by myself!



The solution to getting out of debt isn't 'borrow at lower interest rates' - it's 'pay more money each month' Look for a 2nd job and pay MORE than the 1200/month. Maybe you could find a night shift somewhere and make a couple extra hundred bucks a month. Put that all towards the debt.

An extra $600/month would cut your time down to 17 months on the credit cards. That's only $150/week. Which is very doable.

[nutterbutters]

Yeah, I came to the same conclusion in regards to the 4 year estimate too, I'm chalking it up to the DMP gouging me at random.

Hence my wanting to ditch the DMP since I've built my lifestyle around making that payment regularly for a while. I was hoping given the history I outlined I might have more options and be able to save more than I did 3 years ago when I was on the verge of drowning, but I'm well aware it was a long shot.

Trust me, I'm not excited to be looking at loans, nor am I in any huge rush to get them. I haven't had much experience with negotiating consolidation loans or going through credit unions at all, so I was hoping for some insight regarding them as a possible cheaper alternative to the DMP - mainly, if it's even worth my time to inquire with them at this point. I assumed they would be better for my credit as I'd no longer have the DMP on my credit report, my cards would be settled and I'd be paying a fairly large, single loan account regularly - I guess I can only wish for a lower monthly payment in that convoluted mess of financial wizardry I just described.

If the consensus is that they're not a viable alternative at this stage, then I suppose the next question is: does anyone have experience with getting off a DMP halfway through? From what I've read, it runs from 'kind of annoying' to 'hell'. I'll be calling my individual creditors tonight to see what their policy is, my main worry is that my APRs will be re-evaluated to the bank's benefit.

As for a second job - it may very well boil down to that. As it stands, I'm putting most any extra money I get towards this, including any random profit sharing bonuses I receive. This helped a lot during the initial few years, but as I said, my company's going through some issues so they're now nearly nonexistent.

Thanks for the advice.

[snafu]

What is the fine print on the DMP? Can you cancel the contract without penalty? Is the government operated Debt Consolidation Program that doesn't charge fees still functioning in your state?

[littleroc02us]

The math doesn't add up. You say you owe 23k in cc and 12k in BOA and your making $1200 payments each month. You also say you've been making payments since October and have 4 years to go. So that means you've made 6k of payments so far. If you paid $1200 for the next 4 years that would be something like $56,000. Tell me where I've gone wrong with my math?

[littleroc02us]

Originally Posted by nutterbutters

Yeah, I came to the same conclusion in regards to the 4 year estimate too, I'm chalking it up to the DMP gouging me at random.

Hence my wanting to ditch the DMP since I've built my lifestyle around making that payment regularly for a while. I was hoping given the history I outlined I might have more options and be able to save more than I did 3 years ago when I was on the verge of drowning, but I'm well aware it was a long shot.

Trust me, I'm not excited to be looking at loans, nor am I in any huge rush to get them. I haven't had much experience with negotiating consolidation loans or going through credit unions at all, so I was hoping for some insight regarding them as a possible cheaper alternative to the DMP - mainly, if it's even worth my time to inquire with them at this point. I assumed they would be better for my credit as I'd no longer have the DMP on my credit report, my cards would be settled and I'd be paying a fairly large, single loan account regularly - I guess I can only wish for a lower monthly payment in that convoluted mess of financial wizardry I just described.

If the consensus is that they're not a viable alternative at this stage, then I suppose the next question is: does anyone have experience with getting off a DMP halfway through? From what I've read, it runs from 'kind of annoying' to 'hell'. I'll be calling my individual creditors tonight to see what their policy is, my main worry is that my APRs will be re-evaluated to the bank's benefit.

As for a second job - it may very well boil down to that. As it stands, I'm putting most any extra money I get towards this, including any random profit sharing bonuses I receive. This helped a lot during the initial few years, but as I said, my company's going through some issues so they're now nearly nonexistent.

Thanks for the advice.

Quit the stupid program Asap and pay $1200 on the debt yourself. 23k in debt only takes 20 months making $1200 in payments.

[jpg7n16]

Originally Posted by nutterbutters

Hence my wanting to ditch the DMP since I've built my lifestyle around making that payment regularly for a while. I was hoping given the history I outlined I might have more options and be able to save more than I did 3 years ago when I was on the verge of drowning, but I'm well aware it was a long shot.

I understand the desire to save, but you honestly aren't in a position to save right now. You have $35k of debt from prior spending you have to take care of first.

Sorry if this is confusing, but this is how I think:
If debt is taking from tomorrow to pay for today, then over the past few years you already took $35k from today - which is why you don't have anything today.

Trust me, I'm not excited to be looking at loans, nor am I in any huge rush to get them.

Oh I never thought you were excited about loans (I mean who would be?? ) But I thought in your mind it would be possible to free up money, and catch a breath by borrowing from someone else somehow. That just won't happen.

I was hoping for some insight regarding them as a possible cheaper alternative to the DMP

There is - just handle it yourself. No sense paying a company to force you to repay some CCs. Pay them yourself and save the trouble (and the fees).

A debt management plan is different than a debt consolidation. If you consolidated, you would have a single loan with a fixed interest rate. A DMP is something different. Not sure how hard it is to get out of the plan - but you don't have a new single loan. You are paying a company to pay your credit cards for you.

I guess I can only wish for a lower monthly payment in that convoluted mess of financial wizardry I just described.

What I'm saying is that this mindset is backwards. You want to pay a HIGHER monthly payment, because that will get you out of debt faster.

Obv it would be nice to have a lower required payment in case you lose your job, but if that doesn't happen - you should be trying to pay MORE, not less.

Originally Posted by littleroc02us

23k in debt only takes 20 months making $1200 in payments.

OP has 35k in debt, not 23k. I posted the math on this above.

[littleroc02us]

So 29 months to pay off the debt, that's totally doable.

[jpg7n16]

29 months doesn't account for the interest, with interest it will be a few months higher up to 33.55 as described above... but still nowhere near 4 years.

[littleroc02us]

Originally Posted by jpg7n16

29 months doesn't account for the interest, with interest it will be a few months higher up to 33.55 as described above... but still nowhere near 4 years.

That was just a rough number not including interest. The poster will get the idea that it is a reasonsable amount of time to retire the debt.

[maat55]

If walking away from the DMP is an option I would do so. Then, I would call the banks to get payoffs and minimums and plead for lower rates(not likely but cannot hurt).

I would also be looking for additional work, finding things to sell and cutting my bedget to the bare bones.

If I were not able to pay the minimums, I would stop paying all of them for 6 to 9 months(or until they contact you), while building up as much savings as possible. Once you have about 75% of the money you need to payoff the cards, I would call the smallest first and make a 50% offer. If they take it, pay it(do not give personal account information and get the agreement in writing)with a money order or cash at the bank if possible.

Then move to the next card. This will trash your credit, but getting out of debt is the priority, you can rebuild your credit later with good personal finance.

If you can pay the minimums, do so and pay all extra funds towards the smallest debt until paid and move to the next.

[disneysteve]

I'm surprised no one has yet asked the standard question: Can you post your budget? Let's see what you are earning and what you are spending. You've only given us one tiny piece of the big picture.