Ideas to pay off massive debt? Our appointment with a financial councilor was pointless. UPDATE...

[Chamomile Girl]

So DH and I saw a financial councilor yesterday. I had pushed for the appointment because now that DH has a somewhat stable, permanent job we need a long-term plan to pay off all the debt we racked up in school. Luckily the session was free (paid for by DH's job) because it was of very limited usefulness. I'll bet that you guys will have much better advice that "Financial Dude" (who will now be referred to as FD).

We have 20K in credit card debt. All of our cards are at pretty much the highest interest rate and the companies have told us in the past they will not change it...even though we have not been late, nor missed a payment in years. We can only pay the minimum balance though...so we have been getting noplace.

We also have 80K (maybe more) in student loans. Most of these are mine and we are currently paying interest only on those (DH's are being paid currently).

Add to this equation the fact that I am unemployed (which is how we could get a SL deferment in the first place). DH has a pretty good job, but we also live in a very high COL area. We are already pretty bare bones on everything else...no car payments, no commute, no television, not much eating out etc...

FD's advice was that we borrow 20K from a family member and pay the credit cards...then pay back the family member at a much lower rate of interest. However there is no family member who has this money so that is a no-go. FD was shocked by this..."Doesn't everyone have an Aunt Millie who is looking to divest 10,000 from her estate?". Seriously?

So then FD suggested we get a loan from our credit union to pay the CCs instead. I'll look into that but I doubt that we would qualify for much. Their signature loans top out at 10K anyways.

He also suggested we put off paying back student loans for as long as possible and focus on credit cards. This seems like sound advice as the SLs are at a pretty low interest rate. If we do this than we can throw about $400 a month at the credit cards for a year or so. DH is also teaching this summer and will probably earn about $2000 that we can put towards CC debt.

What is the best way to go about this? Does anyone know of any other way we can consolidate these loans at a lower interest rate? 20K is about the price of a new car...when I bought my 18K car (at 14% interest) we were only paying $365 a month...the CC's are eating up twice that! So its all going to the stupid interest.

Anyone got anything here? Sorry this is so long.

[happysmileylady]

Ok, what a nutcase. He seriously suggested borrowing from a family member? Wow.

If you absolutely HAVE to get the interest rate down, you might look into a HELOC.

But, really, transferring debt around to try to get a better interest rate isn't the best way to get it paid off fast.

Your best bet is to do a debt snowball, a la Dave Ramsey.

You list everything that is not in forberance or deferrment (sorry I can't spell) going from smallest to largest. Each individual credit card payment and student loan and all other debts as well. Then, you send minimum payments to everything. And all the extra money you can squeeze out to throw at your debt, you throw that all at the smallest one on the list. Then, as soon as that is paid off, everything you were paying on that one, you add to the minimum on the next one. That's the fastest and most satisfying way to pay them off, rather than worrying about interest.

Then, once you have got that chunk all paid off, you take all of that that you were paying to all of those, and see about putting your loans back into repayment and do the same with them, using all that money you used to pay off the other debts.

[Chamomile Girl]

Originally Posted by happysmileylady

Ok, what a nutcase. He seriously suggested borrowing from a family member? Wow.

If you absolutely HAVE to get the interest rate down, you might look into a HELOC.

But, really, transferring debt around to try to get a better interest rate isn't the best way to get it paid off fast.

Your best bet is to do a debt snowball, a la Dave Ramsey.

You list everything that is not in forberance or deferrment (sorry I can't spell) going from smallest to largest. Each individual credit card payment and student loan and all other debts as well. Then, you send minimum payments to everything. And all the extra money you can squeeze out to throw at your debt, you throw that all at the smallest one on the list. Then, as soon as that is paid off, everything you were paying on that one, you add to the minimum on the next one. That's the fastest and most satisfying way to pay them off, rather than worrying about interest.

Then, once you have got that chunk all paid off, you take all of that that you were paying to all of those, and see about putting your loans back into repayment and do the same with them, using all that money you used to pay off the other debts.

This makes sense, and is what we would like to do. But it seems like the debt will get paid off faster if its not accruing so much interest. I mean most of our cards are currently at 30%. At that rate all the extra money we are throwing at them disappears into the vampire black hole of nothingness.

Although I see the point of being able to pay something off being very gratifying.

If we were to consolidate we would still be paying the same amount per month to the debt, but it would get paid off much faster. With just what we are currently paying to tread water, we could eliminate this CC debt in 4 years or less.

And, yeah...I though FD was a bit out of touch. I guess most of his clients actually have money.

ETA: HELOC is not an option since we don't own a home (and at this rate never will).

[happysmileylady]

Originally Posted by Chamomile Girl

This makes sense, and is what we would like to do. But it seems like the debt will get paid off faster if its not accruing so much interest. I mean most of our cards are currently at 30%. At that rate all the extra money we are throwing at them disappears into the vampire black hole of nothingness.

Although I see the point of being able to pay something off being very gratifying.

If we were to consolidate we would still be paying the same amount per month to the debt, but it would get paid off much faster. With just what we are currently paying to tread water, we could eliminate this CC debt in 4 years or less.

And, yeah...I though FD was a bit out of touch. I guess most of his clients actually have money.

ETA: HELOC is not an option since we don't own a home (and at this rate never will).

Doh! I misread, I thought I saw something about a mortgage.

If you throw all the extra money you have at just one card, more of that should go to principal than interest. Yeah, on the rest, for the moment, all of the minimum goes to interest.

[kijip]

What can you do to increase your income/reduce your other expenses. Can you get a job when your husband is at home for awhile and throw all that towards your debt? Can you get rid of car payments by replacing your cars with beaters?

Because of the very high rate, I would consider a consolidation to reduce the interest rates. Some companies will drop to zero or under 8% if you enter a debt management plan. It's not ideal, but you are right that you are just going to tread water on 30%+ interest unless you have a lot more money. And I know a number of couples who did that, used a debt snowball to pay it off faster, committed to using no credit and then a few years later were able to buy houses for reasonable rates. It's not great for your credit but if you are committed to not using credit, your credit score does not matter much.

[Chamomile Girl]

Originally Posted by kijip

What can you do to increase your income/reduce your other expenses. Can you get a job when your husband is at home for awhile and throw all that towards your debt? Can you get rid of car payments by replacing your cars with beaters?

Because of the very high rate, I would consider a consolidation to reduce the interest rates. Some companies will drop to zero or under 8% if you enter a debt management plan. It's not ideal, but you are right that you are just going to tread water on 30%+ interest unless you have a lot more money. And I know a number of couples who did that, used a debt snowball to pay it off faster, committed to using no credit and then a few years later were able to buy houses for reasonable rates. It's not great for your credit but if you are committed to not using credit, your credit score does not matter much.

I would love to get a job, and I have sent out many resumes with no luck. I am a teacher and the job climate in education in California right now is very bleak. Hopefully next year will be different, but it looks like this year I am stuck not working...at least not working a traditional teaching job.

We have no car payments as it is. Both of our cars are paid off and we have insurance at the bare minimum required by law.

I would love to do something like debt consolidation or debt management that lowered our interest rates, but I am afraid of choosing something at random and then getting screwed. I have no idea how to find a reputable place that offers that kind of service. And I am not that worried about our credit score since its already pretty trashed by our debt to available credit ratio.

It just seems like there should be something we can do to jumpstart this process. Especially since we'll soon have a bit of money to throw at the problem. I want to get as much mileage out of that cash as I can.

[mamadonna]

Are you still adding to your credit card debt each month? If you have committed to no longer using the credit cards, then a consolidation loan might be a reasonable option. I know you're a teacher and there are some companies that do consolidation loans for teachers--do you get any California Teacher, NEA Today or any other teaching mags? It seems they often have ads in them for consolidation loans.

If you're still adding to your cc debt each month, though, a consolidation loan could be very dangerous and just land you in a worse position a bit down the road.

If you do someday want to buy a house and get a loan for that, I would definitely not do anything that will ding your credit. If you have a good payment history and no current dings (besides the high ratio), you will see your score increase as you pay down the debt.

Can you sub to bring in some extra money?

[kittywitty]

We were in a fairly similar situation but with less debt. $10k credit card, ~$20k student loans. We do the income contingent student loans. I would put every penny you have into paying off that credit card. The interest rate might not be lowest, but I would still get them gone-especially if the company is unwilling to work with you.

Is there anyway you can babysit or find even a job delivering papers to make a teeny bit of money to throw at the credit card to make them go away faster? Ours was NOT getting paid off even scraping by to put extra on every month until we bought a house and got the housing tax credit. Thank the gods for that!

Teaching jobs are not good here, either. Is there any way you can move to somewhere with better job opportunities and a lower COL? Or could you tutor or do the ACT thing online with your degree?

[CarrieMF]

30% interest rate. I would try & get a loan & do the snowball from there on. Even if it's only on $10,000 of it that's still a huge difference.

You NEED to get that interest rate lower.

[Chamomile Girl]

Originally Posted by mamadonna

Are you still adding to your credit card debt each month? If you have committed to no longer using the credit cards, then a consolidation loan might be a reasonable option. I know you're a teacher and there are some companies that do consolidation loans for teachers--do you get any California Teacher, NEA Today or any other teaching mags? It seems they often have ads in them for consolidation loans.

We need to keep one credit card because DH has to travel sometimes for his job, and repayment is through CC reimbursement. But otherwise no, we don't use the cards unless we have an emergency.

Originally Posted by mamadonna

Can you sub to bring in some extra money?

Not really because then I would have to pay for child care.

Originally Posted by kittywitty

Is there anyway you can babysit or find even a job delivering papers to make a teeny bit of money to throw at the credit card to make them go away faster? Ours was NOT getting paid off even scraping by to put extra on every month until we bought a house and got the housing tax credit. Thank the gods for that!

Teaching jobs are not good here, either. Is there any way you can move to somewhere with better job opportunities and a lower COL? Or could you tutor or do the ACT thing online with your degree?

Moving is not an option. DH is in a field where jobs are extremely scarce. The fact that he landed one this year is a miracle...and a godsend of epic proportions. I might be able to find a job tutoring or teaching online. IRL there is a huge number of unemployed highly-educated folks around where I live so competition for these types of positions is fierce.

Originally Posted by CarrieMF

30% interest rate. I would try & get a loan & do the snowball from there on. Even if it's only on $10,000 of it that's still a huge difference.

You NEED to get that interest rate lower.

Yes!

[EmsMom]

I totally hear you that you are a teacher and even tutoring jobs are scarce right now. You probably don't want to hear this, either, but sometimes with debt like that you gotta bite the bullet and just take what you can get. Even a few hours at the local grocery store would give you a few extra bucks to throw at the debt. Or babysitting, dog sitting, etc. Once you get one of the cards whittled down to nothing, things will start looking and you won't feel so desperate. And try to think about the student loans. Just keep them in deferment as long as you possibly can or until the credit cards are paid off.

Just out of curiousity, how much are your various card balances?

Don't forget to ruthlessly go through every single budget item and cut, cut, cut. I once grew out my hair to one length so I could only get it cut every 6 months or so. I didn't really like the way it looked, but it saved $ every month.

Some people have posted their budgets on here and gotten some very good advice on where to cut (and helped the rest of us learn at the same time!)

[34me]

Several years ago we used a local agency of this non-profit http://www.cccsstl.org/

[Chamomile Girl]

Originally Posted by 34me

Several years ago we used a local agency of this non-profit http://www.cccsstl.org/

Thank you for the concrete suggestion! Unfortunately they do not have a branch or affiliate near me .

I am in the San Francisco Bay Area if anyone knows of something like this that is local to me.

[bobandjess99]

this is probably FAR from ideal, but where you live is insane for COL. So - Could you look into maybe moving you and the kiddos to someplace with MUCH lower COL, while DH stays there and gets like a shared apt thing with several roomates/rensta a room type deal??? For example, where I live, you can rent an efficiency apt for you and the babe for $375/month with gas included. If the monthly savings would be substantial enough from what you are currently paying, it might be worth it.

[smokeylo]

I'd get the loan interest down, and read through Dave Ramsey's book(s) and work on a plan together. Create a budget, see where you have room, and start selling/working/whatever to pay down your debt.

Other things you can do to bring in money:
- sell books, clothes, furniture, whatever (I sold a canner I wasn't using, some baby carriers I was done with, a bed we were storing)
- look for online work opportunities, you may be able to do tutoring or teaching courses online. also, test grading through a site like ETS.
- pick up a paper route or something extra that you might be able to do while the kids are sleeping/DH can stay with them

You'll have to want it really badly, basically. I think Dave Ramsey would be helpful to you, just to get you thinking about it in a new way. He's been great for me even though I don't necessarily feel the same way as he does politically or religiously. You can listen to the show/podcast for free on his website, which I also do all the time. REALLY helpful. daveramsey.com

[smokeylo]

Originally Posted by Chamomile Girl

Not really because then I would have to pay for child care.

You also might try to strategize around this problem. Do you have any local friends or a Mom's Day Out group where you could get a few hours a week of free childcare, or trade with another parent? If the cost of childcare was kept low, then doing something could end up paying off.

For that matter, could you babysit a child or two to bring in some extra money?

[elsie123]

http://www.creditcounseling.org/

This is the place I used a few years ago to get a handle on my debt. No need for local, they did everything over the phone. They worked with the credit card companies, helped me budget, it was great, changed my life. I've been debt free since 2003.

[SleeplessMommy]

Originally Posted by Chamomile Girl

FD's advice was that we borrow 20K from a family member and pay the credit cards...then pay back the family member at a much lower rate of interest.

Does FD work for the credit card companies or something? I would suggest the credit union loan ($10K). And another round of calling the cards to beg for a lower interest rate.

You may be able to refi your cars and put cash towards cc payoff.

If you are 100% sure you are done charging (except for work travel) you could try to get a few NEW cards with zero or low interest teaser rates. This is the path of the desperate, but you sound desperate. Close the old cards as they are paid off.

I would pay off highest interest rate first, not the dave ramsey approach of smallest first.

IF DH has a 401K, he could take a 401k loan. (also path of desperation)

If you have a college fund for your child, cash it in. (sorry kiddo!) At 30% interest rate, you can pay the kid back later.

Since you are in a high col area, you may be able to make $$$ with part time child care. Get a kid the same age as your baby and it will even be fun! Put your education credentials in your craigslist advert. Many families need evening, weekend, overnight or backup childcare.

Set a specific $ goal each month, even $100 will help.

Apply for Pearson (online scoring) now, it starts up in Feb/march. $12 a hour, 20-50 hours/week (flexible!) for about 3 months.

[cristina47454]

Just popping in to say, one of my bst friends lives in SF and is a school teacher in Atherton. She sometimes babysits in the evenings in SF (the kids are usually asleep!) and she makes $20/hr!!!! SHe thinks it's ridiculous and often tries to tell the parents "no", but they are so desperate to keep her, that they insist on that rate. Just something to consider!

[Vaske]

Since you aren't too worried about your credit score, you might want to check with a lawyer about your state's laws, and what would happen if you just stopped paying on the credit card debt. Maybe the companies would be more willing to settle with you for lower amounts and interest rates if the alternative was for them to get nothing. I've heard that some people have gotten away with this, but I wouldn't do it without professional advice first. !! Morally, it sounds like you've more than paid off the original debts there.

Anyway, see if you can put your husband's student loans into deferment/forbearance while you work on the credit card debt. Try to consolidate credit card debt into a lower-interest loan. Vow never to use evil credit cards, except for work, ever again. Have your husband ask at work about alternatives to using his personal credit card for work expenses.

Since your job prospects look so bleak, maybe you could sell one car and use it to help pay off CC debt? You said there was no commute, so it sounds like you might even be able to sell both cars. (I would keep back enough to start an emergency fund big enough to buy a beater car, if you don't have one. This will also spare you from having to resort to credit cards for most emergencies.)

Look for other ways to use your teaching experience...do you have any skills that you can teach others? In informal or club settings? Even teaching others how to teach? Anything from teaching people how to make a killer loaf of bread, to how to help their children learn to read. This might be a good time to start acquiring some hyperfrugality skills that you can teach others, as well as use yourself.