Credit Debt

channah · #1 (**permalink**) 10-04-2005, 07:43 AM

Good Morning. I am a newbie to this forum who is trying to conquer my debt issues. I am not a homeowner and I have about 22K in revolving debt. I have consolidated almost all of it into one loan, but the 14.9% for 96 months is killing me. I make about 47K per year (teacher salaries, gotta love 'em) and I am stretching that money thin. I have gotten quotes from debt management programs, but they say that basically my payment total will be much less, and for half as long, but the $ will be going to an account and I will basically be delinquent on the balances, then the debt management company will negotiate my payoff after 3 years. Now, this sounds all well and good, but it would destroy my credit. I have never been delinquent on an account, and this seems like it would destroy that. Does anyone have experience with this? Ideas? I would really appreciate your advice!!! Thanks

cicy33 · #2 (**permalink**) 10-04-2005, 07:51 AM

Without knowing all the other info it isn't likely to know where to begin. I personally make about $21000 per year so 47 sounds like a lot to me. But your rent may be a lot higher. How long have you had the loan? Perhaps after a year you can negotiate a lower interest rate. How much is the payment? Sometimes paying it in halves twice a month is easier. I would personally say do not do anything that will hurt your credit. Income tax refund time is coming. Can you put any of that on it? I hope any of these helps. I wish I had come to these boards much sooner myself!

sweeps · #3 (**permalink**) 10-04-2005, 08:12 AM

Hi channah,

My vote is to avoid the debt mgmt companies. It sounds like you have the desire and determination to get rid of the debt, which in my opinion is half the battle. You did the right thing by consolidating your loans, but I agree with cicy about trying to negotiate a lower rate down the road.

Is taking on a 2nd job an option? You mention you're a teacher, how about tutoring? Or maybe taking on some work in the summer?

Bluezy · #4 (**permalink**) 10-04-2005, 08:49 AM

Hello!

Since you do not own a home, perhaps there are some ways to scale down to get out from under that debt.

I encourage you to post for us an overview of your budget. Generalized with no personal information listed, so we can put our heads together and see where you might be able to free up funds.

Best to you!

PRICEPLUS · #5 (**permalink**) 10-04-2005, 09:16 AM

channah,

It is crunch time. You need to look and see where, besides the CC, all the money is going. Keep a log for a month and see where every penny goes. It is a pain but I think that when you have an idea as to where you are spending money you then can make effective and informed decisions.

Where can you cut? Do you take a lunch to school rather than buy? What are your transportation options? Are there other options? You need to go into absolute "need" versus "want" mode. It is difficult but you can do it.

Shop around for a balance transfer offer that may lower your interest payment.

Go through this site and glean all the information that is germane to yur present situation. There are also links to other sites that are helpful. Good luck with your dilemma! I and others here are all too familiar with it!

sweeps · #6 (**permalink**) 10-04-2005, 09:42 AM

Quote:

Originally Posted by PRICEPLUS

Where can you cut? Do you take a lunch to school rather than buy?

That is a great point. Buying lunch every day really adds up. If I'm in a hurry, I'll pack a PB&J sandwich, chips and a granola bar. Saves about $5 - $7 a day.

Bags of chips and granola bars can be ready to go to save time -- just need to make the sandwich.

I'm not a big fan of Lean Cuisines, but even buying a bunch of those at $2 or $3 a piece is cheaper than hitting a restaurant for lunch.

channah · #7 (**permalink**) 10-04-2005, 10:07 AM

Thank-you for the replies!!! It's good to know that I have resources like this. Hey, at least I recognize that I need to do something. Well, I'm also a musician, so I do get other income, maybe 500 a month, but it varies. My take home is about 2400 per month, but that is only for ten months,as I am a teacher. My current bills are...
Car payment- 370 (at 9.9% because of the year of vehicle and amount owed)
Loan for consolidation-390 at 14.9%
Cellular- 85
Rent/Utilities-700
Car insurance-90
EZPass/Gas-400 (I drive 95 miles per day)
Misc- groceries,etc

This is a start to why I live check to check...

byusteeler · #8 (**permalink**) 10-04-2005, 11:12 AM

Wow the interest on the car payment sounds really high. My sons car is a "91 and the interest rate is 5.25%. Do you have a credit union. At our credit union the age of the car does not matter and you can borrow up to 100% of the blue book value. Also, Even if you could not get the whole 22,000 on a lower rate perhaps you could at least lower half of it. I got a chase bank visa with 0% interest for 12 months on balance transfers and 7.9% fixed after that. Perhaps you could get 2 or 3 similar deals and pay off the entire balance and save a substantial amount on interest. Not sure what this would do to your payments though and this may not help, but just giving you some thoughts. Since you are renting why are you driving 95 miles a day? Could you rent a smaller place closer to your work for the same price? I also vote "NO " on the debt counselors.

channah · #9 (**permalink**) 10-04-2005, 11:17 AM

Well, for the living situation, I am moving in with my girlfriend. She owns a condo and I will be paying half the expenses and I will be added to the mortgage if we "take the plunge" (which I am sure we will). I'm afraid this will really affect our relationship. In a couple years, after I am on the mortgage, what about taking a home equity loan to pay off? She didn't pay anywhere near what it appraised at.

cicy33 · #10 (**permalink**) 10-04-2005, 11:18 AM

I think the consolidation is high! how many months do you have left of the 96? If you were to pay that amount for 96 months, you would pay back: 37,440.00 and you stated that it is a $22K debt. or is that what is left?

channah · #11 (**permalink**) 10-04-2005, 11:20 AM

I havent even begun to pay it. I just got the loan a couple weeks ago

cicy33 · #12 (**permalink**) 10-04-2005, 11:31 AM

It just doesn't sound right. No offense but are you sure that it is 96 months? I mean that is almost double the loan amount. you should be paying around $250 a month. That would mean you are paying close to 40% interest. not 14.9. I would definitely check on that. Interest alone is going to cost you $15,440.00. PLEASE check on this asap.

byusteeler · #13 (**permalink**) 10-04-2005, 01:55 PM

I am adamantaly against paying off unsecured debt with secured debt such as your primary residence. I'd say "NO" to the home equity loan.

byusteeler · #14 (**permalink**) 10-04-2005, 02:10 PM

Quote:

Originally Posted by cicy33

It just doesn't sound right. No offense but are you sure that it is 96 months? I mean that is almost double the loan amount. you should be paying around $250 a month. That would mean you are paying close to 40% interest. not 14.9. I would definitely check on that. Interest alone is going to cost you $15,440.00. PLEASE check on this asap.

I am not quite sure of your methodology here. I get approx $390 a month on a $22000 loan over 8 years (96 months). I think you are figuring it as 14.9% life of the loan interest rather than annually, which is typically how interest rates are quoted. Annual Interest rate on an 8 year $22000 a month loan would have to be below 3% to warrant a payment of $250 a month.

channah · #15 (**permalink**) 10-04-2005, 02:51 PM

I feel like I am so screwed

34saving · #16 (**permalink**) 10-04-2005, 03:20 PM

You can feel screwed if that motivates you, but you have a job and good credit and in America that means you have lots of options, you just have to figure out what they are.

Are you part of a union (or do you work for a private school?) If you are, there are tons of loan programs out there for teachers. Check with your union rep. he/she will be able to point you to the right places for low interest loans.

What about this 14.9% loan? Are there any prepayment penalities? Let us know and we'll go from there.

cicy33 · #17 (**permalink**) 10-04-2005, 03:38 PM

Quote:

Originally Posted by byusteeler

I am not quite sure of your methodology here. I get approx $390 a month on a $22000 loan over 8 years (96 months). I think you are figuring it as 14.9% life of the loan interest rather than annually, which is typically how interest rates are quoted. Annual Interest rate on an 8 year $22000 a month loan would have to be below 3% to warrant a payment of $250 a month.

I so do not understand interest rates. But I did take the 390 x the 96 months and got the super large amount. and I guess I feel that paying $15,000 in interest alone on a $22,000 loan is pretty high for only 14.9% interest. it is more than half the original loan. Could you explain the interest rate thing to me. I would love to understand it. I have always wanted to. I just find it so confusing!

Snoopy2645 · #18 (**permalink**) 10-04-2005, 03:39 PM

Cut everything to the bare minimum & pay off as much as you can as fast as you can. If you are single & this is what you make a year with no kids you can do it. My dh & I together make about what you make & we have 3 kids.

Ok first I would cut the cell phone I dont believe these are necessities for a second!! Then I would cut anything else I could. Maybe get a second job on weekends or at night. I know here their are afterschool tutoring programs teachers get paid for. And maybe sale the car & get a cheaper one at least for now.

cicy33 · #19 (**permalink**) 10-04-2005, 03:40 PM

Quote:

Originally Posted by channah

I feel like I am so screwed

Please don't feel that way. I unfortunately am beyond your point so I am starting from bottom up. but, I feel so much better when I am reading these boards. I just wish I would have come here when you did. I understand things so much better now. at least you are willing to try. The cell phone bill seems high but i know that area to area is different. We pay about 60 here for unlimited plus long distance.

34saving · #20 (**permalink**) 10-04-2005, 04:15 PM

Quote:

Originally Posted by cicy33

I so do not understand interest rates. But I did take the 390 x the 96 months and got the super large amount. and I guess I feel that paying $15,000 in interest alone on a $22,000 loan is pretty high for only 14.9% interest. it is more than half the original loan. Could you explain the interest rate thing to me. I would love to understand it. I have always wanted to. I just find it so confusing!

Actually, that's about right for 14.9% . . .unfortunately . . . The whole compounding interest while you're making payments is kind of mathematically complicated. You're best bet would be to go to an online amortization table and plug in the numbers. However, here's a long way to get pretty close that has pretty easy math.

Month 1 = $22,000*(.149/12) = $273 in interest. You pay $390, so $390-$273 = $117 applies to principle.

Month 2 = ($22,000-$117)*(.149/12) = $272 in interest. $390-$272 = $118 applies to principle

Month 3 = (22,000-117-118)*(.149/12) = $270 in interest. $390 - $270 = $120 applies to priciple.

Rinse, lather, repeat

as I said it's a long method, and an amoritization table is definitely easier, but hopefully this give an idea of the underlying math. If not, I'm sorry