Should I take out a personal loan? PLEASE HELP!

[kswag934]

Here's my situation... I am self-employed and don't have enough capital at the moment to get where I want to be. However, I am very confident that given a 6 month window with the correct assets, I'd be able to accomplish my financial goals.

Current savings/checking: $800
Savings/checking on May 1st: $5000
CC #1: Limit of $2000, balance of $1900 - VISA
CC #2: Limit of $2000, balance of $1900 - Mastercard
CC #3: Limit of $2000, balance of $700 - Best Buy
CC #4: Limit of $600, balance of $550 - Macy's
Total debt: $5050
Total monthly living expenses: $1500
Work capital needed: Several thousand, I haven't pin pointed a $ amount yet - say $5000 to be safe

It wasn't but 6 months ago that I had $9,000 saved up and no debt but I decided to open my own business due to the lifestyle I want to live. Well, I got lazy and now I'm in some trouble. I checked my score on FreeCreditScore.com and I still have a 700 according to 1 report. I have NEVER had a late payment on anything and prior to 6 months ago, my balances were always in great shape. However, I was told this is a fake score and my score is probably much much lower.

My goals are as follows:
- Gain consistent income through the marketing plan I have created using the funds from a personal loan.
- Pay off all debt to 1-9% of the balance (I hate not knowing if I can use a card nowadays because of the worry it might overdraw.)
- Live comfortably on my $1500 monthly living expenses for the next 6 months before I can get the business booming. I need a buffer of a few months because I can't expect a return RIGHT away.
- Buy a home in early 2009!

My questions:
- How much money should I look for in a loan? - What kind of payment could I expect to have monthly?
- Will this help my credit score?
- Where should I attempt to get a loan from? I understand due to lack of consistent income, I would not qualify for DTI reasons on a high personal loan. I also heard (correct me if I'm wrong) that they look at your high credit on your cards for eligible personal loan amounts.

HOWEVER, I believe I can get my father to co-sign for me. He makes a lot of money and the DTI won't be an issue at that point. He also has 700+ credit.

I'm only 22 years old and I'm trying to get my life started here. Please help me with any and all advice. Thank you in advance!! I'll be checking in here very frequently because I need to make a move soon!

[maat55]

I suggest you read Dave Ramsey's book The Total Money Makeover. I wouldn't worry so much about your credit score, I would focus on getting out of debt completely. Get a part time job and get on a tight budget, I mean survival budget.

A second job can knock this debt out quick, then only use your cards when you can pay in full each month. SAVE money, build an emergency fund. Your credit score will shape up when you get your debt under control.

I'm currently debtfree and still living on a tight budget for other wealth building purposes. Read books like, The Millionaire Next Door, Financial Peace and others on personal finance for something to do other than going out spending money. When your focused and have a plan with goals, working long hours and sacrifice is easily worth it. Good luck.

[disneysteve]

I think you need to re-evaluate your plan, goals and priorities. You want to get your life started. Being in debt and taking on even more isn't really the best way to get started. You will be getting $4,200 this month. Is that your tax refund, perhaps? I'd say to keep $1,000 in savings as an EF and use the rest to pay down debt. That will leave $1,050 in debt. Work on paying that off as soon as possible by living really lean as maat55 suggested.

I hate not knowing if I can use a card nowadays because of the worry it might overdraw.

This statement tells me that you are still looking to use credit to buy things you can't afford. With over $5,000 in CC debt on 4 cards already, you should have those cards locked up. You shouldn't be carrying them or even thinking about using them until you have them paid off and have your spending under control.

The last thing you need is a personal loan. Remember, you can't borrow your way out of debt. Plus, you mention wanting to buy a house next year. What are you planning to use for a down payment? It doesn't sound like you'll be able to save up 20% of the purchase price between now and then.

As for dad co-signing a loan, I would certainly advise him not to. That's a common mistake that a lot of parents make thinking they are doing their kid a favor until it backfires on them.

[Daylily]

I am concerned about what this small business is.
There are organizations that can help with small business funding. However, you need to have a 'Business Plan.' The fact that you are asking how much you should borrow makes me think you haven't thought this all the way through. You mention a marketing plan, but not a business plan. Search in your community for small business resources (often times connected to a community college). You will find someone able to assist in putting together a comprehensive business plan which will guide you to coming up with reasonable estimates for how much you actually need to borrow. The business plan is also a document that you will present to lenders to help them make the decision whether to lend funds or not.

I am afraid that by asking 'how much should I borrow', you're likely to borrow too much.

[Seeker]

Originally Posted by kswag934

Here's my situation... I am self-employed and don't have enough capital at the moment to get where I want to be. However, I am very confident that given a 6 month window with the correct assets, I'd be able to accomplish my financial goals.

Current savings/checking: $800
Savings/checking on May 1st: $5000
CC #1: Limit of $2000, balance of $1900 - VISA
CC #2: Limit of $2000, balance of $1900 - Mastercard
CC #3: Limit of $2000, balance of $700 - Best Buy
CC #4: Limit of $600, balance of $550 - Macy's
Total debt: $5050
Total monthly living expenses: $1500
Work capital needed: Several thousand, I haven't pin pointed a $ amount yet - say $5000 to be safe

With the "correct" assets, that you "haven't pin-pointed a $ amount yet" you'd be able to accomplish your financial goals?????

Hmmm. On May 1st, you'd have 5k in your current savings/checking... yet, that's what you pin-pointed? Hmmmm.

Two of your credit cards are pretty much max'ed out at the moment. Total debt: little over 5k.

A lot of matching numbers here. Maybe you should take that 5k and repay your two max'ed credit cards?

It wasn't but 6 months ago that I had $9,000 saved up and no debt but I decided to open my own business due to the lifestyle I want to live. Well, I got lazy and now I'm in some trouble. I checked my score on FreeCreditScore.com and I still have a 700 according to 1 report. I have NEVER had a late payment on anything and prior to 6 months ago, my balances were always in great shape. However, I was told this is a fake score and my score is probably much much lower.

Hmmm. Who told you this? Have you already been talking to someone about taking on a personal loan?

What interest rate are you paying on the CC's?
Have you even looked at interest rates on personal loans?

Wanting to "live a lifestyle" and having the determination and dedication and yes even the one-track-mindset that starting up a small business requires, are two very different traits.

You will probably be spending a whole lot more time with this activity than you would with working for someone else. And we are talking probably more than 40 hours per week. Startup and Setup maybe even more than 60 hours per week. It's not something you can afford to be "lazy" with.

My goals are as follows:
- Gain consistent income through the marketing plan I have created using the funds from a personal loan.
- Pay off all debt to 1-9% of the balance (I hate not knowing if I can use a card nowadays because of the worry it might overdraw.)
- Live comfortably on my $1500 monthly living expenses for the next 6 months before I can get the business booming. I need a buffer of a few months because I can't expect a return RIGHT away.
- Buy a home in early 2009!

My questions:
- How much money should I look for in a loan? - What kind of payment could I expect to have monthly?
- Will this help my credit score?

The only thing that improves a credit score is maintaining a good repayment policy and not being late with payments.

- Where should I attempt to get a loan from? I understand due to lack of consistent income, I would not qualify for DTI reasons on a high personal loan. I also heard (correct me if I'm wrong) that they look at your high credit on your cards for eligible personal loan amounts.

HOWEVER, I believe I can get my father to co-sign for me. He makes a lot of money and the DTI won't be an issue at that point. He also has 700+ credit.

I'm only 22 years old and I'm trying to get my life started here. Please help me with any and all advice. Thank you in advance!! I'll be checking in here very frequently because I need to make a move soon!

Just because your father makes a lot of money and you may be able to get him to co-sign, does not mean that you should. Question for you: If you defaulted (we're unable to repay your loans to whatever lending agency), how would you feel when they approached your father for repayment?

That is a possibility, so you need to answer that question for yourself.

Until you've worked in whatever business, it would be rather difficult for you to see how the real world works. Owning and running your own business is hard, hard work. Adults who know what they are doing, fail at it. The ecomony is rather bad right now, and IMO your first priority should be to get to a point where you've cleared your debts. You should work for someone else doing this plan before attempting it on your own.

Good luck.

[maat55]

Your getting alot of tough feedback, but it is exactly what you need to hear. Do not take on anymore debt, use your May 1 money to payoff debt and have a 1000 EF as DS suggested. Work hard and get a second job if you need.

I personally had to work for an competitor for a while while I was building my business.

[kswag934]

Well, I think you guys talked me out of it.

I'm actually an independent mortgage broker. I had been working for a few different companies but they don't treat their employees very well and the hours were ridiculous.

The downside is I have to find my own business now but I have created a lot of great marketing materials in the past few weeks. I am confident this will generate some activity.

I think I am going to use $2500 or so to pay down some debt. $1000 on each major card and $250 on the minor ones. That would leave me with $2500 to live on and market with.

I have another loan closing toward the end of May that will get me another $1500 or so.

I really didn't want to go to the second job route. It's more of an ego hit than anything. I want to be successful at my current profession.

EDIT: I might only use $2,000 and not $2500. I'm not sure how much money I'll have coming in so the $500 could go a long way.

What do you guys think of this alternative?

[maat55]

The second job is only for paying debt and getting ahead in the short term, it's not for longterm purposes. The sooner you are debtfree, the sooner you can build your dream.

IMO, your alternative is half hearted, but much better than the original. Read the Millionaire Next Door, it will help you put in perspective your ego.

I just recently resigned my golf membership, down graded my cable, tightened my budget and have my motorcycle up for sell. My friends think we are mad at them because we don't eat out with them anymore. I'm debtfree doing this, but the goals I have set for myself are worth it, in the short term.

Radical achievements call for radical sacrifice, how badly do you want it?

[kswag934]

Originally Posted by maat55

The second job is only for paying debt and getting ahead in the short term, it's not for longterm purposes. The sooner you are debtfree, the sooner you can build your dream.

IMO, your alternative is half hearted, but much better than the original. Read the Millionaire Next Door, it will help you put in perspective your ego.

I just recently resigned my golf membership, down graded my cable, tightened my budget and have my motorcycle up for sell. My friends think we are mad at them because we don't eat out with them anymore. I'm debtfree doing this, but the goals I have set for myself are worth it, in the short term.

Radical achievements call for radical sacrifice, how badly do you want it?

I understand the importance of paying down my debt but I can't use all my money on doing so. I'm not sure what type of second job I could get that would be able to support me and still give me time to work on generating business.

[sweeps]

If you have a good business plan (as Daylily has pointed out) and you will truly buckle down to work on your business, some debt is to be expected. The Dave Ramsey-philes will tell you that all debt is bad, but it's simply not true. If you can turn that debt into a thriving business, you'll leave all those people doing the baby step plan in the dust.

I second Daylily's comment that you should seek out small business resources in your area. Like, now. We can't really advise on the financing for your business without knowing the business details.

If, OTOH, you don't think you have it in you right now to run your own business, cut your losses, go to work for "the man" and pay down the debt. You can always give it another go later.

[disneysteve]

Originally Posted by sweeps

If you have a good business plan (as Daylily has pointed out) and you will truly buckle down to work on your business, some debt is to be expected. The Dave Ramsey-philes will tell you that all debt is bad, but it's simply not true. If you can turn that debt into a thriving business, you'll leave all those people doing the baby step plan in the dust.

True. Debt is not bad. "Bad" debt is bad. Debt incurred to start up a successful business is an investment that pays off many times over in the future. maat55 recommended reading The Millionaire Next Door. One thing you'll learn in that book is that a high percentage of millionaires are business owners.

But you must have a solid plan. You can't just make it up as you go along.

[kswag934]

Originally Posted by disneysteve

True. Debt is not bad. "Bad" debt is bad. Debt incurred to start up a successful business is an investment that pays off many times over in the future. maat55 recommended reading The Millionaire Next Door. One thing you'll learn in that book is that a high percentage of millionaires are business owners.

But you must have a solid plan. You can't just make it up as you go along.

I see what you're saying. The debt that I have is 80% from living expenses though. My credit score is horrible right now. I need to get things down to the penny before I make a decision.

[disneysteve]

Originally Posted by kswag934

I see what you're saying. The debt that I have is 80% from living expenses though.

That's different. So 6 months ago you had $9,000 saved and no debt and now have $800 saved and $5,000 debt. That means in 6 months you overspent your income by over $13,000. I'd say that's a significant problem. You need to figure out what happened and correct it before you think about anything else or any major spending like a new business.

[kswag934]

Originally Posted by disneysteve

That's different. So 6 months ago you had $9,000 saved and no debt and now have $800 saved and $5,000 debt. That means in 6 months you overspent your income by over $13,000. I'd say that's a significant problem. You need to figure out what happened and correct it before you think about anything else or any major spending like a new business.

I didn't make any money

I made roughly $4000-5000 over that 6th month time. It wasn't irresponsible spending. I was just spending money to live. I went in to a personal funk and I'm trying to climb out of it.

I began to focus on other things like fitness, a social life, and emotional health. I left out financial health...I'm trying to include that now and have a well-rounded life.

[maat55]

Dave Ramsey shows you how to budget for unpredictable income and learn to prosper without debt. Like sweeps said, well used debt can be useful for building a business, but using it for living purposes can be a disaster.

I started my business with 2500 of debt and worked 7 days a week until it was succeeding. I still suggest you get a second job. If you truely want one, you will find it and set a date that you will leave the job, as one of your goals.

When my business was in trouble, I could have gave up and went to work fulltime for my uncle, but working parttime elsewhere got me through and now I'm doing great.

[kswag934]

Originally Posted by maat55

Dave Ramsey shows you how to budget for unpredictable income and learn to prosper without debt. Like sweeps said, well used debt can be useful for building a business, but using it for living purposes can be a disaster.

I started my business with 2500 of debt and worked 7 days a week until it was succeeding. I still suggest you get a second job. If you truely want one, you will find it and set a date that you will leave the job, as one of your goals.

When my business was in trouble, I could have gave up and went to work fulltime for my uncle, but working parttime elsewhere got me through and now I'm doing great.

Any good second job ideas? I don't have a degree.

[maat55]

Deliver pizza, UPS stocker, Bank teller, Call centers. Get with a employment service, my wife has easily got jobs with them. When I say call centers, I don't mean those pesky phone sales type. Lots of businesses have shipping and recieving positions.

Look in your local paper want adds and online, you will find something that suits you. It may not pay a lot, but it will be temporary. Every penny you earn goes to progress. Maybe these other guy's can help us out with ideas.

[kswag934]

It just really hit home that I need a 2nd job. Fast.

[disneysteve]

2nd job cab be virtually anything that allows you to work on a different schedule than your regular job. In addition to the things listed, you could deliver papers, mow lawns, walk dogs, sell things on ebay... there are literally hundreds of options.

[LuckyJB]

hi there...your young...I AM TOO (24 YEARS OF AGE AND SELF-EMPLOYED TOO)..and DISCIPLINE IS THE KEY.

HERES A LITTLE SOMETHING DIFFERENT AND EASY...SINCE YOUR YOUNG.

#1 JOB IS TO INCREASE YOUR CASH FLOW.
- You shouldnt have more debt than you take home every month!!!
- Chop up your macys and best buy card now...
- Stop using cards
- No loans - think about how you will end up having to start worrying about paying that off.

#2 You do need debt mgmt. Pay down your debt and you will INCREASE YOUR CASH FLOW. Which you then in turn will be able to put money away for your dreams/ goals....retirement? dont forget that.
-***Remember you don’t need to wipe it all away fast…discipline yourself by paying it off with the $ you will be getting and also using the $ for emergency funds, retirement, short term goals.

#3 PROTECTION

#4 investments - once you start from #1 and then down then you can invest the right way...

and # 1 should be protection but your young so just work on your discpline with debt mgmt to increase your cash flow.


What do you pay a month to CC?
Do you have any assets?


Hope this helps