Debt Advice will be highly apprecited

[naji]

I have around $10K in debts with my credit cards, APR is 25%. I also have an overdraft loan with almost the same amount. I am very bad in following up on my expenses and managing my credit cards payments. As a result, I am stuck with this debt for sometime. A friend of mine advised me that I should consider a loan from the bank, pay everything off (interest rate will be around 9% per year) and get myself wiped and clean from the CC's and the overdraft. I have good earning, and I started to make decent saving recently.

My questions:
1) Is this a good strategy?
2) Do I have any other option, not to mention of course how I suck in following up on my expenses. For example, will it be a better idea if I start pay off my debts using the saving I am making on monthly basis?
3) How can I develop my personal finance skills? Is there books to read, or courses to attend?

Please advise.

Thanks for reading.

[maat55]

Getting a loan is an option only if you intend to stop using the cards. Here's a plan to go by:

Be current on all debts. (If you get a loan or not, stop using the cards and make no major purchases until you are debtfree.)
Save up a 1000 EF.
Take all extra money and pay towards your lowest debt to your highest.
Once your debts are paid, build EF to 3 to 6 months expenses.
Once EF is in place, Invest 10 to 15% of your gross into Stock Mutual funds with a ten year track record of 12%.
Make a budget, where you live on 80% take home pay.

Get a part-time job to speed up the process for a while. There are many good books to read, I suggest these:

The Automatic Millionaire by David Bach
The Total Money Makeover by Dave Ramsey
The Millionaire Next Door

There are multiple books on personal finance, I buy mine from Goodwill. Good luck.

[kork13]

One note to add on to that... stick around on these boards and ask questions. everybody's happy to help, and you learn quite a bit just through reading everybody's thoughts. Good luck with everything...

[Merch]

Personally, it might be hard for you to get a loan. You mention having trouble paying on time. This could greatly hurt your ability to get the loan.

I would read The Total Money Makeover by Dave Ramsey. You need to get serious and buckle down, if you want this debt gone.

Also, the budget is a big piece of the equation and use just cash for the next couple of months. You got to change your thought process.

good luck

[mrpaseo]

Good advice from all, keep in mind, you need to change your spending habits. Your "Normal" ways are what got you into this mess, behavior modification is needed to break free from this pattern of debt.

Best of luck, were here to answer any more questions,
Ray

[Tree0164]

I agree it maybe hard to get a loan from the bank-your FICO score might be low as well. Do not do a home equity loan.

Make a budget and be aggressive in paying off it. Once your balance gets lower and you have established a better credit history you maybe able to get lower APR %.

[Paper or Plastic]

Eliminate debt quickly.

We have eliminated over $30K in debt in 18 months by following the plan we wrote:

1.) Make a list of all your debt (payments and balance), then make a list of all your expenses with the average dollar amount.
2.) Set up FOUR bank accounts. DEBT account is used to pay debts only., EXPENSE Account is used to pay all expenses only. EMERGENCY account is used for emergencies only! SAVINGS account is for things we know are coming but usually cost more than we have on hand, such as holidays, birthdays, vacations, etc.
3.) You will have divide each paycheck into your accounts according to Debt payments, Expense amounts, Savings and Emergency fund.
3.) Pay the minimum on all of your accounts and then build up $1000 in your emergency fund. Now pay the minimum on everything and start paying off the smallest debt you have. Then start paying off the next smallest debt and so on. You can do it, but you must STOP using credit cards!

[skydivingchic]

Whether or not getting personal loan, using a 0% balance transfer offer, or other similar method for reducing interest rate is a good idea depends on how committed you are to paying off this debt. You say you have trouble keeping up with your finances, so I would hesitate to recommend this method. The problem is that getting a loan at a lower interest rate to pay off your current debt does nothing to address the real issue, which is spending more than you make. What ends up happening is wipe out your current CC debt, maybe do okay paying the loan off for a few months, and then end up charging up more on your CC since you never addressed the root cause.

Given your description of the problem, I would recommend leaving the debt where it is for now, putting yourself on a bare bones budget, putting every extra penny toward the debt, and most importantly STOP USING CREDIT. Maybe get a second job or sell some stuff to help pay down the debt. Give it 6 months or so and see where you are at. Have you stopped using the CCs? Are you consistently paying down the debt? Are you consistently living on less than you earn? If so, then maybe moving the debt to a lower interest loan is something to consider. But doing so before you fix the root cause is just asking for more trouble.

[anonymous_saver]

My personal favorite is Suze Orman's book the Young Fabulous and Broke. While Dave Ramsey has some good advice, Suze's method will help pay off the debt quicker (Dave's plan focuses on a psychological benefit, while Suze's focuses on financial).

I actually would use both of their methods together.

(1) Contribute up to your employers Match in your retirement accounts, no matter what, it's free money! (Suze)

(2) Save up a $1,000 emergency fund. (Dave)

(3) Pay off highest interest debt first. (Suze)

(4) Save 3-6 month emergency fund. (Dave, a bit of Suze - although she suggests 8 months)

(5) At this point, I think I would look at where you are financially, and make a plan from this point forward.

You can do this, $10k, can be paid off quickly, if you stick to your "plan".

[Well Spent]

Moving around debt to save on interest % only works if you don't rack up CC debt ever again. You can try to get a low interest rate loan from a credit union if you qualify. Look into it.