Consolidation options

[Frügal]

We went off the deep end with debt this year. Bought a house, two motorcycles (which don't work now), appliances for the house, space heaters, etc. Long story short, I'm looking to consolidate $18,000 worth of debt.

My average current APR is 17%, with the two highest being 24 and 25%. Here are my options:

Consolidate max of $10,000 to a 11.25% personal loan over 5 years.
Consolidate to my LoC (which has a current balance of $12,300, so it would then get $5,700 more put on), which is at 10.75% variable.
Edit: I also have an 8.9% variable LoC with a limit of $7,000. Current balance is $3,400. So that accounts for some of the debt, but is a possibility for consolidating some other higher interest debt.

One of our debts is through BillMeLater (now PayPal Credit), which only allows cash payments. It's the 24% account, with a balance of $1,950. They also don't appear on my credit report for some reason. Fishy.

What do you all think?

[creditcardfree]

Sorry to hear you got into debt, especially at such high interest rates. Can you give us a breakdown of debts, minimum payments and interest rates?

[Frügal]

Amazon Store Card - 25% - $540 - $45 min.
BillMeLater - 24% - $1,956 - $35
Visa Card - 8.9% - $3,406 - $91
Line of Credit - 10.75% v - $12,200 - $175

[BuckyBadger]

Looks like we haven't heard from you (apart from a spreadsheet question) since January. It seems that you make have gotten in over your head a bit with the new house.

Rather than focus on the debt consolidation, maybe you need to reevaluate the whole budget? You need to not just pay off this $18k at insane rates, but you need to make sure you're not just going to end up at the same place.

Think about what you said in this this blog post:

http://frugal.savingadvice.com/2013/12/27/owning-up_106335/#comments

Are these the same debts? Have you been paying interest on them all year? How did you get here?

I think you need to reevaluate your expenses from the ground up. You may need to get a room mate. Your wife may need to get a job. I think you need to make some tough choices.

Perhaps it's time for a new budget evaluation thread?

[Petunia 100]

We went off the deep end with debt this year. Bought a house, two motorcycles (which don't work now), appliances for the house, space heaters, etc. Long story short, I'm looking to consolidate $18,000 worth of debt.

My average current APR is 17%, with the two highest being 24 and 25%. Here are my options:

Consolidate max of $10,000 to a 11.25% personal loan over 5 years.
Consolidate to my LoC (which has a current balance of $12,300, so it would then get $5,700 more put on), which is at 10.75% variable.
Edit: I also have an 8.9% variable LoC with a limit of $7,000. Current balance is $3,400. So that accounts for some of the debt, but is a possibility for consolidating some other higher interest debt.

One of our debts is through BillMeLater (now PayPal Credit), which only allows cash payments. It's the 24% account, with a balance of $1,950. They also don't appear on my credit report for some reason. Fishy.

What do you all think?

What is the plan for the motorcyles? Are you going to repair them? Sell them? Both?

Are you still living on a budget?

[Frügal]

Bucky and Petunia,

Oh yes. Definitely still on a budget! Always!

The plan for the motorcycles is to fix and sell both of them. I might be able to repair them myself, but I would feel more secure having someone else do it, as I have had recurring electrical issues with one of them. I would love to keep one, but if I'm being honest with myself - it's not in the budget.

Yes, these are mostly the same debts as before! Oy! I have been making larger payments but crap happened. I thought I could own and maintain a motorcycle, so that got out of hand. Then our car was totaled so I spent $6,600 on another one (which is coming up on needing some service).

We have reviewed our budget and cut out the following:
Dining (that was a good month when we had it!) - $50
Halved Health & Beauty budget by cutting my own hair. - $35
Canceled home security monitoring. - $15

The only other one we could cut is our business insurance, but then we can't operste our business on the side. Despite it not making much money yet.

My wife spent all day yesterday looking for jobs and at schools for out four year old. Daycare is horrible, so we were looking at Waldorf schools. $13,600/yr for all day. But jobs are about 40-50 miles away from our home I already work 30 miles from home. I am looking into taking the bus but it would be $45 more per month, but that would be 60 miles less per day on the car.

[creditcardfree]

I agree with the others that you need to look at your entire budget and spending habits you have developed recently. With that said, I would NOT go with a personal loan at a higher rate than what you already have for most of your debt. You have $2500 at very high rates. Those need to be your priority. Those rates should scare you into selling stuff, doing without. taking on extra work, and get those debt paid ASAP. Don't consolidate them and let that money linger around for five years!!

While you focus on those high rate debts, keep the others at minimum payments. Work the snowball plan and you can get out from the debt. Consolidating doesn't solve the real problem of overspending, thus why I am not recommending it.

[BuckyBadger]

I would consider renting the house and moving back closer to where you work and where your wife could find a job. This is kind of DEFCON level 5 here. That's a LOT of money compared to your annual income, and the rates are CRAZY high. If you could get out from the house and closer to work (which realistically I think you should sell, but one year in you'll probably take a loss especially considering how little you put down on it, also I'm sure you don't think that you should sell it) you could get rid of all the vehicles and save commuting costs and your wife could get a job.

I don't know what your side business is, but if it's not making money and it's costing you money and time you could be using to get, perhaps, a second job, then it might be time to shelve it until you're in a better place.

If you can't or won't move closer to work, you need to make more cuts - in addition to the $100 you just mentioned. If it is really truly true that there is nothing else you can cut than you need to realize that your lifestyle is UNSUSTAINABLE and you need to make a drastic change. It's bad now, but it could get worse - and quickly - if you don't do something fast.

Lets see a WHOLE budget. What's your mortgage? What rate/PMI? Utilities? Everything. You need to find more to cut.

[Frügal]

Renting this house out except to family would be a no. I could not handle the stress of having to fix this house for other people. I'm honestly thinking about bankruptcy and/or foreclosure.

Budget:

Keep in mind, if I take the bus, the fuel cost will go up by $60/mo. When my wife starts working, that shouldn't be an issue. Unfortunately, taking the bus will take my time away from home for commuting from two hours to three hours per day.
edit: Income = ~$2,500.

We are considering selling my wife's iPhone. Mine is used for social media marketing (photos, etc.) for the side business. Also, I haven't moved the Squarespace expense to the business checking account yet, as I had forgotten. Doing this has reminded me, so I will do so tomorrow.

As well, we are compiling a list of items to sell, as we are in search of a more basic lifestyle as well. We don't have much in the way of monetary value, but we'll sell what we can. Hardest part will be selling the motorcycles that aren't running.

I contacted the NFCC to get a debt management plan option. Here is what they came up with:

Debt Free                                     Interest                 Monthly Payment
Minimum Payments: 3/31/2050            $36,391.58              $588.79
Debt Management Plan: 3/31/2018      $2,482.54                $485

[b]Debt Totals:[/b]       $20,781

I'm not sure which is better. As you can see from my budget, I have budgeted quite a bit extra for the first debt I plan to knock off. However, I am not sure how to figure out if doing the snowball method or doing the DMP through them is better.

Or, hell, bankruptcy.

Edit: Just double-checked the email. They said the cost would be $545/mo with their $35/mo fee. I emailed back asking how $35 + $488 equates to $545. It doesn't sound like I have many options here...

What could happen to our tiny business if we claim personal bankruptcy?

[Petunia 100]

You have listed $2640 of outgo, including additional payments towards one debt, and income of $2500. Where is the additional $140 coming from?

How much are the motorcycles worth? Can you sell them and eliminate some debt?

In my opinion, you don't need to declare bankruptcy. You need to sell things you don't need and look at adding some income.

Does your wife stay home full-time with your little one? Maybe she could provide child care for 1 other child?

Edit: Your tiny business is operated as a sole proprietorship?

[Frügal]

You have listed $2640 of outgo, including additional payments towards one debt, and income of $2500. Where is the additional $140 coming from?

How much are the motorcycles worth? Can you sell them and eliminate some debt?

In my opinion, you don't need to declare bankruptcy. You need to sell things you don't need and look at adding some income.

Does your wife stay home full-time with your little one? Maybe she could provide child care for 1 other child?

Edit: Your tiny business is operated as a sole proprietorship?

I meant to type ~$2,600. That is rounding down.

As I've stated;

- Motorcycles are worth nothing right now until I get them running, which is proving quite difficult.

- We have a list of what we could sell and it doesn't even amount to $2,000. It would amount to over $8,000 if we could get the bikes fixed.

- She stays at home with out almost four year old, but she is looking for work to pay to send our daughter to school and pay down debt.

- Sole proprietorship, yes.

[Petunia 100]

I meant to type ~$2,600. That is rounding down.

As I've stated;

- Motorcycles are worth nothing right now until I get them running, which is proving quite difficult.

- We have a list of what we could sell and it doesn't even amount to $2,000. It would amount to over $8,000 if we could get the bikes fixed.

- She stays at home with out almost four year old, but she is looking for work to pay to send our daughter to school and pay down debt.

- Sole proprietorship, yes.

Oh, OK. So you don't have a shortfall, you are using every spare dollar towards debt. Smart.

Why is it proving difficult to repair the motorcycles? Are the needed repairs expensive? Are you unable to pinpoint the problem?

Even 2k would eliminate Amazon and 3/4 of Bill Me Later. You'd be almost done with the really outrageous interest rate debt.

Since you are a sole proprietor, your business is not a separate legal entity. You are the business. You are personally liable for all of the debts and liabilities of the business. The assets of the business really belong to you and are available to satisfy your personal debts.

Do you (and your wife) want to keep the house?

[creditcardfree]

A few thoughts. Please, please don't file bankruptcy. You overspent and if you can't learn now how to dig out and live on less, bankruptcy sure won't teach you.

Go to What's The Cost calculator to enter in your debts and look at how that might work. You setting it up is free! There are no fees if you do your own snowball, saving you $35 a month to go with a debt management plan.

Your motorcycles are worth money even though they don't run. They are simply worth less than if they are running. Somebody who has the ability to fix, sell and make a profit might be very interested. Look/post on Craigslist or your local Facebook sale page. Call some small engine repair shops, or bike shops to see if anyone is interested.

Could you rent out your garage, or a bedroom for cash?

This isn't going to be a quick fix. But it is so worth it if you do the work yourself!! Please don't use a debt management company or file bankruptcy.

[creditcardfree]

Even 2k would eliminate Amazon and 3/4 of Bill Me Later. You'd be almost done with the really outrageous interest rate debt.

I agree! I would jump at the chance to sell some things and pay off part of the debt. Some debt paid off is better than just throwing in the towel! Getting rid of the high interest first is key to keep it from compounding and growing higher.

[Frügal]

We are not attached to keeping the house. However, at the monthly cost, it is the most affordable option. Aside, it does need a new roof soon, and the kitchen subfloor is rotted, as well as the joists. And power cost is high due to probable drafts, old insulation, etc.

I would much rather spend money to fix the bikes and sell them for what I bought them for, but who knows. One bike may just need a new battery, and a friend told me today he would get a new one for it. The other bike may need a lot of stuff, but I need to speak with someone about it.

That snowball calculator confirmed my suspicions. If I snowballed with $450/mo, I would have the debt cleared in 4.3 years. That sounds decent. But still doesn't help me maintain the car, make taking the bus an option, or leave room for health stuff (glasses, specialists, etc.).

The two people I know that filed bankruptcy said it was the best financial decision of their lives, and both are doing well with their spending. Even if I paid some of it back along with bankruptcy might be worth looking into?