Credit Card Debt

[wdwfan16]

Another Ramsey convert here.

There's a forum, livinglikenooneelse, and they can really help you.

One of the things that is suggested that, until you're out of debt, to stop contributing to the 401k. So instead of taking a loan from it, if you're contributing right now, stop contributing and use that money to throw at the debt.

And they do say to go lowest to highest *balance*, and ignore the percentage. Reason? To get balances demolished as fast as possible, and have "early wins" to help bolster your confidence that you can do it. It was easy for us, as after we smashed some ancient medical bills, our lowest balance was also the highest interest. Not as easy for others, to watch that interest pile up. But paying stuff fast really makes you feel good.

Good luck!

Bold - I thought that rule only applied if you could pay-off all the debt in a year or less.

 

[JeMarie6]

I just found out recently that if you have a 401k, you can take out a loan from that with no fees and the interest that you pay on it, actually gets put into your 401k. So it's borrowing from yourself and paying yourself back, with interest.

Good luck, I've been there twice and I know what it feels like.

Yep, this is not a good way to go unless it is the only option because you get taxed on the money twice. WHen you take out the loan out, you have to pay it back with after tax money (money that has already been taxed). When you take the money out of the 401k when you retire, you are taxed again. Depending on your tax rate, its not often a good deal even if the intersted you pay is going back to yourself. Also if you lose your job, you have to pay all the money back right away. Big risk in this economy!

 

[Chicago526]

Wrong, wrong, wrong....

You are borrowing pre-tax money and paying it back with after tax money, which will then be taxed again when you withdraw it at retirement. If you lose your job the loan will have to be paid back immediately or you face taxes and penalties.

As well, your 401k/IRA is protected from bankruptcy.

There is never a good reason to touch any of the money in your 401k.

Ditto. Short of life or death (and I truely mean that...someone had better need a new kidney or something), you should never borrow from a 401k. It's a bad deal all the way around.

I read in one of DR's books that people that stick to his program are out of consumer debt on average of about two years. Two years isn't that long at all! Write up a budget, cut out all un-needed spending (including 401k contributions, if you're still making them), and start throwing all available money to ONE of your debts, paying the minimum on the others. It will shrink faster than you think, I promise! Once paid off, you can start up the 401k again and start saving a real emergency fund, so you won't ever have to rely on a CC again!

 

[kissy]

DH and I are currently with consumer credit counseling and while they do charge us $20 per month for thier services for us it is well worth it. They got my intrest rates lowered and it has helped DH and I become more aware of our money. I know someone posted that they don't pay your cards for 2 months while you are in negotiations and I can say that that is not true!! While they were negotiating we were still paying our minimum balance then once the CCCS took over we just paid them so we never missed a monthly payment on our cards. I definetly suggest doing all your research before joining them but for us it was the best way to go to get out of debt!

 

[NYCDiane]

DH and I are currently with consumer credit counseling and while they do charge us $20 per month for thier services for us it is well worth it.

But you're paying them $240/yr for how many years to do something you could have done yourself. Also, had you done it yourself, you would have become much more aware of your money --- simply by doing it yourself rather than have someone else do it for you. There is an old quip called "do the doing" ---- it simply means by doing it everyday, doing it yourself, completely immersing yourself in it, absorbing it into your very being, you understand it truly and wholly and get the deepest awareness of it.

I'm glad you're happy with your credit counseling services and I'm glad they were able to help your family but I would never recommend it to anyone. I like to see people do for themselves so they can have control of their lives/finances rather than have someone else do it for them.

I have a good friend who was going to go that route. I talked to her, explained how she could do it herself, etc. She was petrified, but took my advice and it all worked out perfectly for her. She's very happy/relieved that it worked out and the fact that she did it herself boosted her self confidence and self esteem through the roof.

 

[kim_d]

Just to clarify a point, not all companies require you to pay back a 401(k) immediately if you are terminated or laid off. Many allow for you to continue to make payments...however if you miss payments then it would be considered a distribution and therefore taxable.

 

[AshleyW]

Add me to the list of Dave Ramsey supporters. My DFi and I paid off $13,000 worth of credit card debt in less than a year thanks to him, even with both of us making less than $30k a year and having a mortgage, car payment, etc.

If you want to read a full review of his program, you should visit my fiance's blog, actually.. www.zacfields.com He graduates in October with a finance degree and currently the 2nd newest post on his site is a review of Dave Ramsey's program. He also posted a review of www.mint.com, a budgeting website, which might help you with your credit card debt as well.

 

[Abbysmom327]

But you're paying them $240/yr for how many years to do something you could have done yourself. Also, had you done it yourself, you would have become much more aware of your money --- simply by doing it yourself rather than have someone else do it for you. There is an old quip called "do the doing" ---- it simply means by doing it everyday, doing it yourself, completely immersing yourself in it, absorbing it into your very being, you understand it truly and wholly and get the deepest awareness of it.

I'm glad you're happy with your credit counseling services and I'm glad they were able to help your family but I would never recommend it to anyone. I like to see people do for themselves so they can have control of their lives/finances rather than have someone else do it for them.

I have a good friend who was going to go that route. I talked to her, explained how she could do it herself, etc. She was petrified, but took my advice and it all worked out perfectly for her. She's very happy/relieved that it worked out and the fact that she did it herself boosted her self confidence and self esteem through the roof.

I wanted to also add that it will be marked on your credit that those accounts are being paid by consumer credit counseling and will lower your FICO score as well. I have worked in lending in the past. Stay away from them. Call your cc companies and ask them to lower your interest rates. I always call to have mine lowered and it always works. I had one lowered two months ago from 16% to 5.49%. It doesn't hurt to ask them!

 

[NYCDiane]

I wanted to also add that it will be marked on your credit that those accounts are being paid by consumer credit counseling and will lower your FICO score as well. I have worked in lending in the past. Stay away from them. Call your cc companies and ask them to lower your interest rates. I always call to have mine lowered and it always works. I had one lowered two months ago from 16% to 5.49%. It doesn't hurt to ask them!

Yes! I totally forgot about that part of the equation. It appears on your report as "CCCS" or "In CCCS" and that absolutely lowers your credit score. It shows that you're incapable of handling your debt.

And you're right... it never hurts to ask for a lower APR.... The worst they can say is "no"

 

[denisegold]

No offense, but some of the advice on here is good, some not so good.

You might want to read Suze Orman's 2009 action plan- the whole first section deals with credit card debt and your credit. She only recommends the National Foundation for Credit Counseling. www.nfcc.org

 

[sylvenmaid]

IF you aren't behind on your CC's and can pay the min each month, then why ruin your credit with CCCS? I would get more of the fine print details on a balance transfer before doing it. I would also call your current CC's and ask for a lower APR. It can't hurt to ask. Don't use them anymore. I'm a DR fan and have no credit cards. Our only debt is one car note that will be paid off next year. Stop using your CC's and I could keep one but frozen in a block of ice. I would cut up the other two and just don't use them anymore. I wouldn't close them until after they were paid off. I definitely wouldn't touch a 401K plan. You always think you will pay it back, but you never know what will happen. That's why we aren't touching the equity in our house. It's completely paid for, but I don't want to get in a bind if dh lost his job. I would rather cash flow our expenses, and yes it's harder to have patience and do it slowly.

If I was you, then I would call the CC's for a lower APR. Then I would list them from smallest balance to biggest and pay them off. Yes it would make more sense to pay off the highest APR, but what if it's your largest balance? It will seem like forever to pay it off. I did the snowball method and it feels so much better to see all those little bills go away. Then use all that money to pay off the larger ones. They go away faster and it's definitely gives you a feeling of accomplishment. Good luck!

 

[jpeppers]

Just be aware that they will jack your payment from 2% to 5% so your rate might be low but your payment will be huge. I decided to just bite the bullet and get it payed off but I know alot of people can't afford to so be careful. As far as I'm concerned Chase is a group of crooks and I will never deal with them again once this card is payed off and the rate offers are nothing but a scam.

 

[alicetom]

Credit card debt is said to be higher in industrialized countries, According to my point of view, I think that Credit card debt is a cause of serious concern today as it is rising day by day at a alarming rate.

 

[Virgderon]

IF you aren't behind on your CC's and can pay the min each month, then why ruin your credit with CCCS? I would get more of the fine print details on a balance transfer before doing it. I would also call your current CC's and ask for a lower APR. It can't hurt to ask. Don't use them anymore. I'm a DR fan and have no credit cards. Our only debt is one car note that will be paid off next year. Stop using your CC's and I could keep one but frozen in a block of ice. I would cut up the other two and just don't use them anymore. I wouldn't close them until after they were paid off. I definitely wouldn't touch a 401K plan. You always think you will pay it back, but you never know what will happen.

If I was you, then I would call the CC's for a lower APR. Then I would list them from smallest balance to biggest and pay them off. Yes it would make more sense to pay off the highest APR, but what if it's your largest balance?

No offense , but not sure if you should be offering specific advise about credit cards if you don't have any and have not been through the process.

Agree that OP should not hit up the 401k, but not using a CCS may not be good advice. Negotiating directly with the credit card company may get you a temporary 6 month or 1 year reduction in interest rates. Most of the credit card companies will not offer you a plan that will pay off the debt in 4 or 5 years like a CCS.

The goal is to pay off the debt, so you want the plan that has an end date, not a band aid to help you for a short time.

Each credit card company is different. You can try calling the credit card companies first, and if you don't like what they offer, consider a CCS.

We had one credit card company directly offer us a 5 year plan. The others I had to put in a CCS if I wanted to pay them off.

Make sure you are doing a CCS, not a debt settlement program. Many of those are scams.

Good luck!

 

[vicki_c]

Credit card debt is said to be higher in industrialized countries, According to my point of view, I think that Credit card debt is a cause of serious concern today as it is rising day by day at a alarming rate.

This post appears to be a spammer in the making - just posting (on an ancient thread no less) to get their post count up to 10.

I'm sure the OP has moved forward at this point as well, 13 months after the original thread - it only got bumped because of the spammy thing above.

 

[johnnymo99]

This micheljohnson2k100 spammer has been reported.