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  • #1

    How to proceed?

    Here is a quick run down of my situation. I just found out that there is a fair chance I could be laid off by May. My current Job provides housing so I will lose my home in addition to my job if it happens. Like a fool I have not set aside an EF whille times were good and am just now trying to figure out how to proceed if things go bad.
    Here is my finances

    Currently my net income is about $2300 per month

    Current debt:
    $6200 on personal loan at 10% $200 per month payment
    $7200 on car payment at 7.2% $510 per month payment
    $5800 on Credit Card at 9.9% Usually pay about $100 per month

    I expect to get about $7000 back on income taxes this year and my plan prior to hearing about lay-off was to pay off CC and put the rest on the car. Now I am wondering if I should pay off the car so I don't have to make a that $510 a month payment with out a job. Or should I refinance the car for a lower payment and still pay off the CC? The personal loan was for a camp trailer that we bought last year. I would just sell that and be done with it but I may have to live in it if I lose my job, and the $200.00 monthly fee is cheap rent.
    Thanks for any advice you can offer.
    Scott
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  • #2
    Normally, the advice would be to pay off the highest interest rate debt first - the personal loan and CC in your case. However, given your situation, I agree with paying off the secured debt first - the car. If you can't make the CC payments, you wreck your credit but they can't come repossess anything. As for the personal loan, is it actually secured by the trailer as collateral? That could change the advice.

    The other thing I would do is go into work right away and change your withholding so that you aren't grossly overpaying your taxes this year. A $7,000 tax refund is insane. That's $583/month that you are overpaying. That's enough to make your car payment and have money left over every month. Why are you loaning it interest-free to the IRS?
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

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    • #3
      The personal is loan is unsecured, so no collateral there. I will check into changing my witholdings. I guess I just liked getting a big return back but your right I could be making the interst on the money instead of the IRS
      thanks

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      • #4
        "The personal loan was for a camp trailer that we bought last year." We? Is there a second person involved in the income & outgo of your household? Is there a second person responsible for that personal loan?
        "There is some ontological doubt as to whether it may even be possible in principle to nail down these things in the universe we're given to study." --text msg from my kid

        "It is easier to build strong children than to repair broken men." --Frederick Douglass

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        • #5
          I'm going to offer the oddball take on this, as I do most things. I like playing devils advocate.

          First, Joans issue. Who are you providing for? Just you, or are there kids involved, a wife, etc? The level of comfort for you and a wife is entirely separate from if kids are involved.

          Total debt of $19,200.

          I don't know what you drive, but I have a 2006 Ford Fusion SE 4cyl that KBB lists at $8,100 having 67,000 miles on it. So I would hope that since you still have payments, your car is at least a 2006. So you reasonably should be able to get what you owe on the car. Sell the car. Take $2,000 of that $7,000 tax return and buy a clunker that a high school kid would be driving.

          Selling the car knocks the debt down to $12,000. Buying a different used one out of your tax return doesn't raise it.

          I seconds Steve advice of changing your with-holding. That extra $541 a month between now and May would pay for that $2,000 car. So you're back to $7,000 as your return.

          I don't advise living in a trailer either. It's difficult to get a job when you can't show a permanent address. It's also difficult to find a place to park the trailer with utilities and live out of it for no costs. A $200 a month payment might be cheap rent, but how do you get a new job with that as an address? So sell the trailer and find a little old lady with a room or loft to rent for cheaper than the fourplex down the street. That should knock out a good chunk of the $6,200. At least $3,500. So you're debt would be down to $8,500 worst case on that.

          Forget about the CC's. No one cares. If you don't have a roof over your head, food in your belly, clothes on your back, and a job, why are you worried about paying the CC's? Let them trash your credit. What's going to happen? They can't take anything from you and you already are paying high interest rates.

          So you'd be sitting around $8,500 in debt with about $7,000 cash. If it is just you, you should be able to live on $1,000 or less a month. So the $7,000 plus whatever unemployment you would collect should get you through to your next job, when you can worry about repaying the credit cards. That personal loan, well, if you sold the trailer, the bank can't repo anything. You can ask them to work with you and take maybe $50 a month if you can spare it, but if you can't, well, then it sucks to be the bank.

          Shelter, food, clothes, and utilities first, always. After that, pay what you can to who you can but make sure you have a way to provide for the shelter, food clothes and utilities over the next few months before you start repaying debt.

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          • #6
            Thanks for the advise so far. I guess I should have mentioned that I am married and I have three boys. The car is a 2004 Suburban. My wife does child care at home and she often needs thr extra car to haul kids around. If we end up living in the trailer we could park at a family member's house and not have any extra fees there, although it would be tough for all of us to live in such a small space.
            Keep the ideas coming. This site has a lot of great info, I only wish I would have found it sooner.
            Scott

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            • #7
              I'm probably with Swanson on this.....

              Now is really not the time to be paying off debt. Paying off debt is almost always the right thing to do, but not here.

              Hunker down, and pay only on things that are absolutely necessary. Everything else is debt that should be paid at some point in the future, but not now. Besides, the banks can't eat you.

              In fact, stop making payments to all debt that doesn't give you and your family an immediate benefit.

              As a side note, after you get thru this mess, try to pay off the debt. If for no other reason than because you owe it.

              Hang in there...
              Jeff

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