Car debt advice!! Please help

[empyreal89]

Hey all,
I have made quite a bit of financial mistakes and I thought I could handle it but now I am a little worried. So here is the situation: I had a few CC and also bought a decently expensive car. Unfortunately I got into a bad habit of swiping the cards so I went ahead and cancelled all of them. I have closed all of my cards and only have a debit card now. So just to put into persepective where I am at financially...here are my balances:

$7500 barclay CC - this is the big one
$7500 on a personal loan
$2000 pnc CC
$1000 chase CC
$700 bestbuy CC
$600 paypal CC

my car loan is at $34k

as for my income, I bring in $1k every 2 weeks.

I called greenpath for debt consolidation and everything I listed above besides my car payment can be combined for a monthly payment of $540. Is there a better way to handle this? I feel like one solid payment a month is less stressful and also it will avoid the higher interest from the CC companies.

expenses:
$600 rent w/ utilities
$200 car insurance
$550 car payment
$150 gas
$540 debt payment

so with these current expenses, that puts me at a little over $2k/month. Now I did not list food and other random expenses. By selling my car, I could maybe get $22k for the car and $5k for the parts. I have a few other things I can sell that will give me another $1k. So with that $30k, I would have $4k leftover on the car loan that would need to be converted to a personal loan. Am I thinking right on this? I have to have the car loan paid off to have the car title clear.

So needless to say I am quite stressed! I am looking at cars for under $2k so I can find a daily driver beater. I might have found a good one for only $1k which would leave me with a $5k personal loan and the $540 debt payment every month.

Unfortunately I do not have any other money saved up and I am living paycheck to paycheck. I have definitely learned my lesson, but now it is time to take action and solve this!

Any advice on this whole situation would be wonderful! Thanks all!

[dczech09]

What are the interest rates and monthly payments on all of the debts listed? What is the interest rate and loan term for the consolidation loan? If you let us know this, we can determine whether or not the consolidation loan is a good deal.

Are there any fees that you have to pay on the consolidation loan?

As for your car...

You are on the right track. You need to sell the car, and you will need to take out smaller personal loan for the difference. You are absolutely right about that, and that is absolutely what you should do.

A $34,000 car loan is ridiculous on its own and hardly anyone can really afford that. Much less someone only making $2,000 per month. The loan officer who approved that loan should be fired. And I really hope that you know better than to do something like this again. I don't mean to beat a dead horse, but I hope you really understand how bad of an idea this loan was

Why is your car insurance so high? Have you shopped around recently? A $200 per monthly car insurance premium for one car is ridiculous. Perhaps getting a new car will help with the rate, but seriously that is crazy high and is way too expensive!

I really like that you got rid of the credit cards and will not be charging anymore on those. I would have recommended that you did that, so you are one step ahead

So ultimately, here are the three things you need to do...

1) Sell the car and handle that situation. You are on track and it sounds like you know what you need to do. It is really just the matter of doing it.

2) Do something about that car insurance rate. You may need to wait until the car situation is taken car of, but that premium needs to go down. I have NEVER paid that high of a premium, and I used to have upwards of 7 points on my record!

3) You may want to find some ways to increase your income. More money will help clean up this debt mess. You currently have $53,300 in debt (hopefully $30,000 less once you sell off the car).

An extra part-time job could go a long way towards cleaning up this mess. Whether it is a new job entirely, a small business idea, or simply working more hours, adding some income will help you clear out this debt. Time to put on your thinking hat!

[empyreal89]

What are the interest rates and monthly payments on all of the debts listed? What is the interest rate and loan term for the consolidation loan? If you let us know this, we can determine whether or not the consolidation loan is a good deal.

Are there any fees that you have to pay on the consolidation loan?

As for your car...

You are on the right track. You need to sell the car, and you will need to take out smaller personal loan for the difference. You are absolutely right about that, and that is absolutely what you should do.

A $34,000 car loan is ridiculous on its own and hardly anyone can really afford that. Much less someone only making $2,000 per month. The loan officer who approved that loan should be fired. And I really hope that you know better than to do something like this again. I don't mean to beat a dead horse, but I hope you really understand how bad of an idea this loan was

Why is your car insurance so high? Have you shopped around recently? A $200 per monthly car insurance premium for one car is ridiculous. Perhaps getting a new car will help with the rate, but seriously that is crazy high and is way too expensive!

I really like that you got rid of the credit cards and will not be charging anymore on those. I would have recommended that you did that, so you are one step ahead

So ultimately, here are the three things you need to do...

1) Sell the car and handle that situation. You are on track and it sounds like you know what you need to do. It is really just the matter of doing it.

2) Do something about that car insurance rate. You may need to wait until the car situation is taken car of, but that premium needs to go down. I have NEVER paid that high of a premium, and I used to have upwards of 7 points on my record!

3) You may want to find some ways to increase your income. More money will help clean up this debt mess. You currently have $53,300 in debt (hopefully $30,000 less once you sell off the car).

An extra part-time job could go a long way towards cleaning up this mess. Whether it is a new job entirely, a small business idea, or simply working more hours, adding some income will help you clear out this debt. Time to put on your thinking hat!

They are all around 22% and the personal loan is 12%.
As for the greenpath debt consolidation, it was 53 months @ $540 and they can reduce the interest on barclay to 2% and the rest are also in the lower single digits. The only one that was higher was paypal at around 11%.

I am not going to buy any car for the moment. I believe that I can make good use of public transportation to get to work. It would also make me have to plan out my day better so I would also spend less day to day. It is much easier to go somewhere and spend money or to buy that $5 coffee when you can easily jump in your car and drive there.

With all of this being said I will probably end up with closer to $5-10k leftover on the car loan. It really depends on how much I can get for my car and for the car parts. That is where all the debt came from. I can say wholeheartedly that I have completely learned from this and will never go back to being that irresponsible. This is a hard lesson and I am going to be reminded every month when I am paying it off.

I have a few dog sitting clients as well and that can bring anywhere from $200-500 more a month. I actually just picked up one for $200 in april and one for $600 in may. I just finished one this week for another $480. Unfortunately that went right to my car payment. I believe I can stay consistent with this and possibly increase to $500-1000 extra a month in time. It will probably be closer to summer that I could start pulling in that much. I think that is a much easier solution to picking up a part time job for $10-13/hour.

By removing the car payment, insurance, and gas I can put that towards my debt as well. I am really going to push for getting rid of it all in less then 2 years if possible. I would ideally like to get my expenses to just food, rent/utlities, and traveling to work/in general. $600 for rent, $200 for food, and $100 for traveling/misc. That would leave me with $1100 leftover plus any dog sitting money for the month. I am expecting the overall debt payment to be closer to $750 after all is said and done with the car. So $350 plus dog sitting money is leftover. How should I spread that around? EF, 401k, or help to snowball the debt payments more? My work offers a 401k traditional and roth. I was going to start doing the latter and maybe put $50-100 per paycheck. They match 20% and also increase 10% every year up to 80%. I believe this is a wise investment since I am planning to stay with the company for a while. Since I am turning 26 in the fall I will need to switch over to my work's health insurance. It will be $50 per paycheck.

I think this about covers everything! Whatcha think?

Thanks so much for the response.

[LizfromtheBronx]

I agree with most of what dczech09 says, and good on you, OP, for moving forward positively!

My only note - car insurance can vary wildly regionally. My car insurance is $231 a month and is considered a steal in my area. That is for full coverage on one car, female in my 30s, squeaky clean license. I've shopped around and most quotes are 50% to 100% higher, my ins company just seems to have the lock on my market.

Since the OP has a car loan, full coverage is a requirement. Obviously since OP plans to sell the car and use public transp, it's moot, but just wanted to point that out.

[dczech09]

I agree with most of what dczech09 says, and good on you, OP, for moving forward positively!

My only note - car insurance can vary wildly regionally. My car insurance is $231 a month and is considered a steal in my area. That is for full coverage on one car, female in my 30s, squeaky clean license. I've shopped around and most quotes are 50% to 100% higher, my ins company just seems to have the lock on my market.

Since the OP has a car loan, full coverage is a requirement. Obviously since OP plans to sell the car and use public transp, it's moot, but just wanted to point that out.

Fair point. I just thought that seemed awfully high as I have never paid that much for car insurance. The most I ever paid was about half that, and that was for full coverage when I was under 25 and had quite a few points on my record.

[dczech09]

They are all around 22% and the personal loan is 12%.
As for the greenpath debt consolidation, it was 53 months @ $540 and they can reduce the interest on barclay to 2% and the rest are also in the lower single digits. The only one that was higher was paypal at around 11%.

From the looks of it, the debt consolidation is an overall good deal for you! Rate reduction, and you even drop the payment term down. At a rate of $750 per month, you should be able to clear through the debt in a little less than 3 years. If you add a bit more, then two years is definitely possible!

I so go for this. Your credit cards are gone, so you should not have to worry about "reloading."

I have a few dog sitting clients as well and that can bring anywhere from $200-500 more a month. I actually just picked up one for $200 in april and one for $600 in may. I just finished one this week for another $480. Unfortunately that went right to my car payment. I believe I can stay consistent with this and possibly increase to $500-1000 extra a month in time. It will probably be closer to summer that I could start pulling in that much. I think that is a much easier solution to picking up a part time job for $10-13/hour.

That is great! I would absolutely focus on the dog-sitting if I were you. An extra $500 to $1,000 per month is nothing to scoff at!

That would leave me with $1100 leftover plus any dog sitting money for the month. I am expecting the overall debt payment to be closer to $750 after all is said and done with the car. So $350 plus dog sitting money is leftover. How should I spread that around? EF, 401k, or help to snowball the debt payments more? My work offers a 401k traditional and roth. I was going to start doing the latter and maybe put $50-100 per paycheck. They match 20% and also increase 10% every year up to 80%. I believe this is a wise investment since I am planning to stay with the company for a while. Since I am turning 26 in the fall I will need to switch over to my work's health insurance. It will be $50 per paycheck.

Your first goal should be setting aside about $1,000 to $3,000 for a baby emergency fund. You should be able to do that in a month or two. You should not need too much since you rent, so even $2,000 would be fine. Ultimately, you just want some money in the bank should a crisis arise.

After the baby emergency fund is set, I don't think a simple $50 per paycheck towards the 401k is out of line at all. If you can handle it, I would go for it! However, I would not go too crazy with the 401k just yet. Enough to get started and take advantage of the match that you are getting.

Any extra money after all of that should be going towards your debts. Is it all going to be one consolidation loan, or will it be multiple? If it is multiple, then attach the higher interest loan first, then work your way down until they are gone. If it is one loan, just attack that loan until it is gone.

Once you have killed the debt, then you can beef up the emergency fund a bit and invest even more towards retirement!

It sounds like you are ready to rock, which is great! In two years or so, you can look back and smile at how far you've come!

[doingitallwrong]

Greenpath seems to have a fairly good reputation, but it's not a consolidation loan, it's just a consolidated payment. You pay Greenpath, and then they pay your creditors. Sometimes they can negotiate a lower interest rate or minimum payment, and waive late or over-balance fees. They do charge their own fee, of course, they say the average is $36 per month. If you go with this plan, you'll want to continue checking to be sure your accounts are paid on time as agreed every month. (I'm not sure if they'll continue sending statements to you; set up online access before you start the Greenpath plan so that you can keep tabs, and make extra payments on your own if you're able.) I'm not sure if the personal loan can be rolled into a Greenpath plan.

Alternatively, you could try for an actual loan from a peer-to-peer lending group such as Prosper or Lending Club. Their interest rates aren't always the greatest, but may be well under 22%. If you qualify, they give you options so that you can see what your interest rate and payment would be under different scenarios, before you apply for the loan.

You might also try negotiating with the creditors yourself, if you haven't already. Some companies won't work with you until you're behind on your payments, but some have a 'hardship program' in place that will lower your interest rate and put you on a fixed repayment plan. The fact that you've closed all the accounts might work against you there, though.

[snafu]

22% interest is really high, I wonder if you've checked your credit score with one of the 4 credit score providers, The service is free once each year from each provider so you could check quarterly, end of March, June, September, December.

[doingitallwrong]

Just to clarify, what's free is a credit report from each bureau; the credit scores are not. That said, there are several ways these days to get a free credit score (or reasonable facsimile thereof). Many credit cards are now providing free FICO scores with the monthly statement (Discover, Citi, Barclay offhand). Credit Karma offers two scores, one tied to the TU credit report and one to Equifax. Credit Sesame gives an Experian score. (Both also provide free credit reports and monitoring.) They're not FICO scores (sometimes they're called "FAKO" scores) but will give you a general idea of how you rank ("Poor", "Fair", "Good", "Excellent").

[empyreal89]

hey all,
thanks for all the replies! I have made a lot of progress with everything! I have considered some options with having a vehicle. With my job, not having a car is going to make life very hard. A good way to deal with my car situation would be to get a nice newer car for under $10k and get a really good finance rate. This would bring that payment a lot lower. I found a 2010 Chevy Colorado for $8500 w/ 40k miles. It is already MD inspected and I can trade my car in and put the difference on that auto loan. It would be a much lower rate then having a personal loan and it would be a payment I could afford without stress. So besides the auto payment, I will just have the $540 debt payment in terms of debt. I feel like a $300 car payment + $540 debt is manageable. Any thoughts?

[autoxer]

hey all,
thanks for all the replies! I have made a lot of progress with everything! I have considered some options with having a vehicle. With my job, not having a car is going to make life very hard. A good way to deal with my car situation would be to get a nice newer car for under $10k and get a really good finance rate. This would bring that payment a lot lower. I found a 2010 Chevy Colorado for $8500 w/ 40k miles. It is already MD inspected and I can trade my car in and put the difference on that auto loan. It would be a much lower rate then having a personal loan and it would be a payment I could afford without stress. So besides the auto payment, I will just have the $540 debt payment in terms of debt. I feel like a $300 car payment + $540 debt is manageable. Any thoughts?

Rolling $12k of negative equity onto a 5 year old pick up truck isn't really eliminating any debt. How long would the $300 payment be for?

If you really want to get out of debt, then look for a cheaper car that you can buy with cash. Spend $2k for an older econobox, so you reduce your fuel and insurance costs at the same time and use your income to pay off debt.

[CashUp Sammy]

tough stuff

You are a bit stressed at that debt, but hey - i've seen many a friend buy a car that is just a little too good (tends to happen to car fans). Luckily, I was never a car guy... It's making a bit of a rod for your back and glad you've seen the light.

Selling the car will de-stress you totally. Many have said that to you and it is solid advice.

GOOD LUCK. Don't let the stress get to you. You'll come roaring back from this debt and be fine