Debt Consolidation?

**jIM_Ohio** · 08-25-2008, 09:46 AM

List each credit card with it's monthly payment, interest rate, payoff balance and credit limit here, then maybe we can answer the question better.

**disneysteve** · 08-25-2008, 09:58 AM

We also need to see income info to know if you have the means to repay that debt. And give details on the other debt (car and student loans) also because without seeing the whole picture it is impossible to answer your question.

**kristinmarie** · 08-25-2008, 11:05 AM

added all the debt info and income.

**bjl584** · 08-25-2008, 11:16 AM

Just remember, debt consolidation only works if you stop using the credit cards and incurring more debt. Otherwise, you will end up no better off than when you started. Before I did anything else, I would cut up all of those cards if you haven't already. Then, I would make some serious sacrifices in your daily living, only buy what you absolutely need, get on a budget, and maybe even consider a part time job. I'm not a big fan of debt consolidation. I feel that it gives people a false sense that they are getting out of debt and living responsibly. I don't know your specific circumstances, but as an overall generalization, I think that doing this simply to get out of a jam is a bad idea. Especially if the person doing it has no intentions of changing their lifestyle or spending habits. Again, I don't know your circumstances, and hopefully you realize that you can no longer live the way that you have been. I just get a bad feeling when I see something like this suggested.

**disneysteve** · 08-25-2008, 12:49 PM

I see a few things:

At least $300 of clothing from Old Navy that can go on ebay or to a consignment shop. Nothing sold there is a necessity - all wants.

At least $3,000 worth of electronics from Best Buy that can go on ebay or craigslist. They do sell necessities (home appliances) but most stuff there is luxury purchases.

Can't comment on the other credit card bills because I don't know what you spent that money on, but I would be looking to sell anything that isn't nailed down.

You only have 1 year left on the car loan. What is the loan balance and what is the current resale value of the car? Go to kbb.com to get the value. It may be worth selling the car and replacing it with something cheaper but it would depend on the numbers.

It looks like you've been living way beyond your means. You dug yourself into a pretty deep hole. I think it is time to stop digging and start climbing out. Get a 2nd job. Same for your BF. Sell everything you possibly can and put every penny you get toward debt reduction. Stop eating out. Stop going to the mall. Stop going to the movies. Cancel cable TV. Get rid of cell phones (if any).

I think you can dig out of this. It won't be fun or easy but it is possible.

**Merch** · 08-25-2008, 01:29 PM

I agree with Steve.

Start getting on a budget. You need to know where every dollar goes. You liseted about 1500 in expenses. You have another 1400 of income.

If you both get a second job of 20 hours a week at 10/hr, that's another 1,100 a month.

If you get on a budget (no more entertainment, shooping, eating out, movies) and parrt time jobs, you might have 1500 - 2000 to throw at the debt. And then you are talking about 10 or 11 months to clean up this mess.

Start paying of smallest to largest. You could knock out old navy, target, and capital one in the first month. Then 2 months later chase is gone.

I like that plan. Just get on the budget and focus. you can do this.

**jIM_Ohio** · 08-25-2008, 03:15 PM

Where would you consolidate this debt to? I saw no card with a high enough limit for all the debt?

You need to stop using the cards
Then create a budget
then create a payoff plan. If you cannot send at least 20% of your gross income to the debt, you need to redo the budget until you can.

**kork13** · 08-25-2008, 03:52 PM

I would agree with the others with a minor change... pay down the highest-interest debt first. Case in point: over $6k balance with >20% interest, why put the money first on the $200 @ 0% or $6k @7%? So my advice would be to pay off first what will hurt you the most.

another thought.... this 'equalizer plan' for the electricity.... are you sure that's the best way for you to go? Sounds to me like a good way for the power company to make money on the premise of being easier for you. Sort of like a cell phone contract plan--they charge you a certain amount of money regardless of what you use, and any of that 'allotment' that isn't used is wasted. So what you might look at doing is getting out of that equalizer plan, then taking steps to decrease your power usage. Change to low-watt/fluorescent bulbs, only use what lights you need, raise the A/C thermostat a couple degrees, don't use big-power-consumers (washer, dryer, A/C, dishwasher, etc.) during peak times (your power company can tell you what these are), and so forth. just a thought, but something to consider.

**maat55** · 08-25-2008, 04:05 PM

This is what I would do.

Set up a budget that only includes the necessities. Food, utilities, rent, auto gas, auto payment.

Sell everything you can as steve said.

Stop paying on all cards and save up 500 EF.

Cut all unnecessary expenses such as cable, cells etc.

Get part-time jobs.

Take every every penny after basic needs and while keeping SL current, start paying off CC's from smallest to largest. Your credit is and will be wrecked for a while. The only way you have to consolidate is to get a personal loan, which is not likely.

Your general mentallity is to cut your expenses to the bone and sell everything possible while getting second jobs to earn more money. Cut up all of your CC's NOW. If you have very much equity in your car, sell it and buy a beater then take extra funds to pay toward debt.

Getting out of debt will take you a while but if you are very aggressive, you can do this much quicker.

Once you are back in control of your money, save up an larger EF and start living on only 80 to 90% of your take home pay.

**kork13** · 08-25-2008, 04:30 PM

Originally posted by maat55 View Post

This is what I would do.

....Stop paying on all cards......

......don't see how this can be beneficial.... esp with nearly all of the debt racking up >15% interest (significant amount over 20%), paying off the cards can't realistically be a step in the 'best scenario' recovery process. I haven't read any of the personal finance giants' books (orman, ramsey, whoever else), but wherever that idea came from can't be a very good one... Yes, an emergency fund is important to have, but not when you're suffocating in debt. the EF is supposed to be there to prevent going into debt when you run into hard times. this person is already in hard times.

**kristinmarie** · 08-25-2008, 04:58 PM

Not sure if you are familiar with the equalizer plan or not, but in case you're not, the way it works is that they take your last 12 months of bills and usage, and average it out, then that's your monthly payment. I live in Phoenix where a/c is pretty much a necessity the majority of the year, so in my case it actually helps me 8 months, where my bills would have been way more than 160, and then the 4 months of "winter" that we have, my bill would normally only be about $50 because we don't use the heater. Paying the extra money for those 4 months seems well worth it to me to get out of paying $200-$300 bills in the summer that would put me even farther behind.

**Gailete** · 08-25-2008, 05:00 PM

What you put for outgo isn't all your outgo as there isn't any provision for eating, gas, smoking & booze (if you do that),etc.

Get out all your checkbooks and credit card stubs for the last 6 months and figure out where all that money is going. How much did you spend on going out to eat, grocery stores, gas station (was it all gas or coffee, etc. too). while you have the credit card stubs out find their 800 number and call and cancel each card and then chop them up. You have fallen into the American lie that if you have a card for Old Navy, Target, Best Buy, etc. that you can afford to shop there until you have reached your credit limit. You now know the truth. Hopefully you will soon understand the truth that all those bills have to be paid for and that having cards from these stores don't make you a special person which they try to make you think. Your one First Limited card is the only one left with any credit left. TRY not to use it, but in the event that is the only way too pay for gas to get to work use it (not coffee or snacks, just gas).

After you have figured out where all the money is really going then you need to set up a budget of pure necessities. A roof over your head, basic cheap food, a cheap way to get to work, clothes on your back--as of this point I'm sure you don't need to spend anything on clothes for years as most adults can go for years with the same stuff. See if you can wear out your clothes. If you have stuff in your closet that you aren't going to wear out and still looks okay sell it at a yard sale or on line--find one of the cheaper on-line sites that isn't charging the astronomical fees that ebay is doing. Always think basic and NEEDS. Before any purchase ask yourself if you really need this.

Call me a fuddy-duddy but why is your money and bills mixed up with your boyfriends? Whose bills are they? Are you both spendiholics or just one of you and which one? Is he going with you on this trip to paying off your bills or is he going to be wanting to spend money that needs to go on bills, although if he didn't make them, it isn't his responsiblity to pay them. I realize I'm old fashioned about this but when you aren't married, your money and bills are your money and bills and his are his. You need to take personal resonibility for your own debts, expenses and savings plans. Boyfriends have ways of disappearing and if you aren't financially self-sufficient you will be in really big trouble. When you set up your budget it should be YOUR budget and HIS budget and your spending plan and his spending plan. If money is one of the leading causes of divorce, I can't even imagine what it does to unmarried couples. I don't mean to sound harsh but I suspect I've had a good many more years under my belt of living and I know how hard life can be when in debt past all reasoning. There is only one way out of debt and that is hard work and honesty about where your money is going.

**maat55** · 08-25-2008, 05:25 PM

Originally posted by kork13 View Post

......don't see how this can be beneficial.... esp with nearly all of the debt racking up >15% interest (significant amount over 20%), paying off the cards can't realistically be a step in the 'best scenario' recovery process. I haven't read any of the personal finance giants' books (orman, ramsey, whoever else), but wherever that idea came from can't be a very good one... Yes, an emergency fund is important to have, but not when you're suffocating in debt. the EF is supposed to be there to prevent going into debt when you run into hard times. this person is already in hard times.

Credit card debt is not emergency debt. OP is not able to pay everthing and pay the minimums. My suggestion is to start with a budget from the basement and move up.

OP is falling behind, I'm suggesting an order to the recovery. If OP is quick to get more income, she may be able to get the minimums back in place and work through it. OP only knows.

**disneysteve** · 08-25-2008, 05:48 PM

Originally posted by Merch View Post

Start paying of smallest to largest.

Originally posted by kork13 View Post

I would agree with the others with a minor change... pay down the highest-interest debt first.

Ah, the age-old battle. Do you do the plan that saves the most money or the one that makes you feel the best (the Dave Ramsey method)?

I am normally a proponent of the "saves the most money" plan but in this particular case I would be willing to agree, at least initially, with the DR way.

I get the sense that OP may be feeling overwhelmed and hopeless. Knocking out a few small debts and seeing the list of creditors shrink in just a few months could provide some much-needed motivation.

Also, consider that the 0% Old Navy deal may be a limited-time offer. That 0% might jump well into double digits after a certain date, so I'd want to know that.

One other thing to think about when choosing repayment order is the effect on OP's credit score, which is probably lousy right about now. Several cards are maxed or even over the limit. Paying each card down to less than 50% of the limit would help her score considerably. That, in turn, might give her the negotiating power to call and get her rates lowered, saving her even more money in the long run. So a reasonable argument could be made for spreading out extra payments with that goal in mind.

Debt Consolidation?