Looking for some advice! Here's my story...

[6FeetUnder]

I found this website, and everyone seems supportive so I figured I'd let everyone know my story (forgive me for the length), and see if I can get headed in the right direction.

I am 24 years old, and I have a (hugely) significant amount of debt. I have good credit, and took advantage of it when I was in college and not working due to a work injury. I'm paying for it now.

Heres roughly what I owe:
College Loan $13,700 @ 7.870% Min $180/mo.
Signature Loan (From Dad) $13,100 @ 10.00% Min $380/mo.
Car Loan $4,500 @ 6.600% Min $200/mo.
Motorcycle Loan (CC) $7,500 @ 4.900% Min $39/mo.
Credit Card $4,700 @11.000% Min $0/mo. =(

The bad news is that after I pay all of my bills, I really only have around $200-300 extra dollars each month.

The good news is that I put 10% of my money into my 401K, which has $14,000 in it now. I also have parked my motorcycle, so I don't have to pay insurance on it. I have recently made it a goal to stop eating out so much, (going to start cooking!) so that should help as well. I am also working hard to curb a poker addiction.... It has not contributed to the CREATION of debt, but has prevented me from paying it off as fast as I should... My bills and financial obligations alwasy come first.

I am looking for any suggestions at all. I also have the following questions. (In the near future (roughly 5 years) I'd like to purchase a house)

A. Because I do not have much extra cash coming in every month after I pay my bills, would it be beneficial to consider my Credit Card my Emergency Fund and worry about paying down bills faster?
B. Even though the Signature loan with my father is at a higher interest rate, would it be more beneficial to pay down other loans/CCs first for the debt-to-income decrease (The loan with my father is not reported) in terms of looking to buy a house?

Thanks for your time!
Chris

[6FeetUnder]

Geez... First post on the board and I already slip up.... Can a Mod please move this to the "Personal Finance" section.

Thanks!

Chris

[Haku]

Hey Chris. First of all, good for you for wanting to turn your life around. Please don't worry, you're in good company. Yes, this community is indeed quite supportive. I mean, hey, they put up with me if that says anything.

The debt is quite sizeable, yes, but it's also quite doable for you to get rid of them IF you are disciplined and is willing to work on it.

The following is just my personal opinon, and I'm sure the others will chime in soon enough.

First, let's look at what's actually in your favor, and you have two bigs ones.

1. You are young. That means you still have time to get rid of these debts and enjoy the rest of your life in relative financial freedom.

2. You can pay all these bills and STILL have 200-300 a month to work with! Some people are so tight with their money, they literally have no breathing room but to pay the bare minimum. That's really sad. You, however, have quite a bit of potential.

So, now let's take a look at your debts. If I was in your shoes, I would throw my 200-300 per month extra at the CC debt first. The reason is two-fold: First, you would be paying down that ugly debt. Second, it COULD serve as your emergency fund if a real emergency arises.

Once the CC is paid off, I would attack the signature loan from your father. It's got a high balance, high interest rate, AND a high monthly payment. Perfect target.

From there, you'll be over the hump because by then, you would've freed ~$580-680 per month to attack the rest of the bills. I would knock out the car and motorcycle loan after that. Which you prefer to start with is entirely up to you.

I would save the student loan for last.

To jump-start all this, I highly recommend to sell your motorcycle. I hope you're not attached to it. If you can get away with it, I would also sell the car. Use the proceeds to give you that critical initial push and make some serious headway.

Poker. It's a great game, isn't it? However, as much fun as it is, I wouldn't gamble any money. If you must gamble with money, I would only set aside a tiny amount, and leave the table when all used up. I'm thinking along the lines of $20 per month. Yeah, harsh, I know. If you can't curb the temptation to bet big, then I would suggest going cold turkey.

The last thing I would add is that this financial transformation of yours isn't going to happen overnight. Actually, mine either, so I completely understand wishing that it could be done over-night. Alas, it won't. It will be years.

What that means is that you have to change your entire lifestyle in order to be more financial responsible. It's a part of growing up, I guess. However, don't worry. If you keep at it, the best in life is yet to come. If you don't, your debt nightmare will only worsen.

[Ima saver]

Why is the minimun payment on your cc loan at 0? You don't pay anything. Second, do you live at home, or do you pay rent?

[6FeetUnder]

Haku,
Thanks for the great words of encouragement. It's always good to know that you aren't the only one.

Parking the bike was the first step. Here's my delimma. I have thought of selling it, and even more as of late. The problem is that I would end up taking about a $1,000-$1,500 hit on it. Right now I have a $39.00 minimum payment at 4.9% interest until a year from now. Then it jumps up to the non-promotional rate. At that point I would look at transfering the balance to a 0% card (Its actually a Yamaha CC, not a loan) and continue to pay it down. Lastly, I would end up buying a motorcycle years down the line when I get everything paid off...

Do you (or anyone else) feel that selling it for the $1000-$1500 hit would still be worth it?

Thanks!.

Chris

[6FeetUnder]

Originally Posted by Ima saver

Why is the minimun payment on your cc loan at 0? You don't pay anything. Second, do you live at home, or do you pay rent?

Ima: My credit card only requires a small minimum payment roughly every 3 months. I also rent with some roommates, I pay $300.00 plus utilities every month. My goal is eventually to get a house, but that is a few years down the line.

Chris

[pyotr]

I can sympathize, as I remember being in huge debt coming out of school and went after several immediate gratification material possessions when I started to make a salary. Here's what I'd do (your plan may vary):

1. I'd try like heck to sell the motorcycle off, maybe get someone to assume the loan along with the cycle - motorcycling is high risk, high insurance gambit (we in the health industry call motorcyclists "organ donors."). If you're using the cycle as a "chick-magnet" reconsider - you don't really want the type of girls that are shallow enough to be attracted to motorcycle badboys anyway.
2. I'd concentrate most of my efforts into paying off the credit card debt - and stop adding to it with purchases.
3. I'd beg my dad to forgive the parental loan until I can catch a break. If impossible, concentrate on paying this one off next.
4. I'd next concentrate my efforts toward paying off the car debt. From there on, I'd only purchase a car after I've scraped together the money in cash I'd need to purchase my next car (used car only if limited budget).
5. I'd worry about accelerating payments toward the student loan last since it is partly tax deductible.

[sakigt]

1. College Loan? Why is that so high? Can you refinance?
2. Dont worry. Everyone has been in a financially uncomfortable spot but it seems like youre ready to be out of it
3. You say you only have an extra $200-$300 a month. What else to do you spend on? Do you budget going out expenses? Clothes? Where can you cut back?


If I were you...Id do this:
Save what you will get hit on with the bike. If you can sell it for $6,500...save $1,000. Then sell it! The payment is low (for now) but you need to get rid of it before the payments increase. Plus if you want to refinance other things your credit will look better. (Which means lower intrest which means more savings)

Hit that Credit card with no payment. That balance is easy to pay off and the intrest is scary!

Credit card number 2

Then divide money between Dad and your student loans.

I wouldnt worry about the car payment. Youre a few years away from paying it off, it is HELPING your credit, and the intrest rate is reasonable, especially considering your other debt.

The point is not to lower your monthly payments...its to lower overall debt that you cant easily justify. Imagine being in front of a loan officer. If he asked you to justify each one of your loans which ones would you say: "Im not sure why I need this" are the ones you need to get rid of first.

It will be worth it!

[abowers]

Can you consolidate your loans? I know it depends on what kind of loans you had (stafford loans, plus loans, subsidized vs. unsubsidized, etc).

I consolidated last year with nelnet at 2.6% but that was before rates went up, here's some info on consolidating:
http://www.consolidation.nelnet.net/...er.asp?lang=en

My boyfriend just consolidated his undergrad loans (he's not in repayment yet though because he's in grad school) which were Direct Loans (from the government):
http://loanconsolidation.ed.gov/borrower/bconsol.shtml

He just consolidated at something around 4.7%, which I think was guaranteed if you consolidated your loans by early June.

You should definitely not be paying as high as 7.87% on a student loan right now! Good luck!

[Snoopy2645]

The first thing I would do is sale either the car or motorcycle or both & get a cheap thing to drive cheap bike or car. That should free up that money & ins you are paying on both. THen I would get a better or a second job. I would also have a sale or go on ebay & sale what you dont need including college books & dont buy anything for awhile except food.

[Ima saver]

I would sell the bike too, even though you will be taking a loss on it!

[tgavin71]

If you are single I would sell the car and keep the bike. Bikes are cheaper to run and the repayment is less. $39 compared to $200. The difference of $161 I would pay toward the credit card, then pay off the other debt in order of high interest rate to lowest.
Not sure whats available in your area but most places have supermarkets that home deliver.
Do your roommates have cars? If you really need a car ask them if you could rent theirs for say $15 a hour.
I use my cc as an emergency fund and it works just fine for me but you have to be really disciplined and only use it for really emergencies. A case of beer or a new outfit is not an emergency. I learnt this the hard way.

[Bargainacious]

I would recommend looking to minimize your monthly spending on groceries, gas and eating out. You don't have to eliminate all the fun stuff, but cutting back on non-essentials will allow you more cash to pay down your debts.

I routinely save 65-90% on groceries and drug store purchases by combining sales and coupons. Rebates mean I sometimes make money on top of that. This has allowed me to save several thousand dollars towards a down payment on a house. I buy my gas at the cheapest place (usually WM here - and use a shopping card for 3 cent/gal. discount), and combine trips to save on fuel. Finally, I always look for restaurant coupons if DH and I are going to eat out. I also find savings on oil changes, cat vaccines etc. For more information on this sort of thing check out dealagogo.com.

Personally, I enjoy spending my money when I don't have to worry about it. I would rather spend those dollars on a new car or house than every week at WM!

[PrincessPerky]

my two cents:

1. pay off high CC not emergency fund, you can use the CC if you need to (try not to!)

2. poker..find a promotion to let you play free, and set an allowence of fun money. I can get you links to free rolls online, but you have to be disciplined to stick with them. If you prefer in person try to cultivate friends who like low or no stakes and have fun. (less you need to drop the 'bottle' entirely.) live near charloote (we have monthly, just for fun games .)