HELP!I'm pouring my heart out here, need advice!*Updated 6/12/07*

[Mom to Will and Finn]

I am coming really late to this post, so forgive me if I'm repeating or missing something important, as I haven't read the other responses.

My advice:

1. Watch "Designing to Sell" on HGTV and get some tips on how to make your home more appealing to buyers.

2. Cut up your credit cards, except for one. Give that one to dh.

3. I know this is more of a bandaid and not a fix, but it helps me (I also shop to lift my spirits)..."shop" online. Put as much as you want into your cart. Then look at the total and close the page. I find that it's the picking out that is most fun and not the bringing the stuff home.

I don't know where you live, but your salary would be considered high here. We get by on much, much less. Honestly, for how much you bring in, your mortgage doesn't seem that high, either, so if you can get control of your spending, I think you'll be able to cut down your debt fairly quickly.

 

[dvcgirl]

We have a 30 yr. fixed rate mortgage.
Let me clear up the DVC comment. I did mean that I was goign to go out and purchase DVC as soon as a saw light at the end of the tunnel. OF COURSE we will do our monthly contributions to our retirement and we will MOST ASSUREDLY set up money for our children's college education. My kids come first-always. DVC is a long term goal, not something soon as this poster stated.. Once everything is settled, debt free, saving and everything is on track, then we will look into it, and ONLY if we can pay for it out right. I want to be debt free more than anything. I want to help or pay for my kids college if at all possible. DVC is just a perk. But, what is the problem with using it as a goal to work towards?

There's nothing wrong with having that kind of goal, as long as you are realistic. Realistically, you are many, many years away from being able to buy DVC outright. You have to understand, people only get from you here what you are telling them. You are someone who is barely paying her bills and yet went out and actually placed a bid on a 7 acre plot of land when you had absolutely no way of paying for it. And so, I don't think it's a stretch for people to think that you may buy DVC before saving for retirement or your childrens' education. I'm glad to hear that you realize that DVC isn't in your immediate plans.

 

[MickeyMacks]

I think it's probably time for you both to tell your family members what your financial picture is. Perhaps they can chip in and help out even more with daycare. But they certainly should understand that you guys are in no way, shape or form able to go to Walt Disney World to spend more money. And they should also know that you're not in any position to be buying them christmas gifts.


Try calling someone at the National Foundations for Credit Counseling. This is the group that Clark Howard (fiscal conservative/consumer watchdog/radio guy) recommends. www.nfcc.org.

You want to avoid Debt Settlement companies because that will negatively affect your credit for many, many years.

This is very good advice. Let your family know what's going on, deal with the flak. Yes they'll be shocked and disappointed, but they're your family and they'll get through that to the point that they'll see that you need their help. If you let them know you can't buy them Christmas gifts this year, they may look after buying for your kids. I know in my case, what my son's grandparents and aunts/uncles buy for him each year would be plenty, a kid usually has 2-3 favorite Christmas toys and all the other stuff kind of fades into the background, be it 1 other thing or 20. Save yourself the time, money and hassle!

Don't feel guilty if you don't Christmas shop this year. Stay out of the stores and malls and take a Christmas lights drive instead, watch your Xmas movies on DVD or tape, read your Christmas books, spend the time you would have spent wrapping gifts on making cookies instead (just one kind, sugar cookies or gingerbread, to save $ on ingredients or use what you already have in the house).

DVCgirl had great advice about the credit counselling organization as well - good luck with that. I went through the experience of my (now ex-) husband's bankruptcy 8 years ago when I found out, when our son was 4 months old, that he had a gambling problem and had embezzled and gambled more money in 8 months than he would have made in a year! Big wake-up call for me. Credit counselling was eye-opening. My family was disappointed that I had been so blind and ignorant about my finances but were surprisingly supportive in helping me with childcare while I started out on my own again with nothing. I have finally gotten to the position that I can finally afford to go to Disney World this December.

You will come out on the other side of this - be truthful to your husband, your family and above all, to yourself. Good will come of telling the truth, HAVE FAITH!

 

[crisi]

You can use DVC as a goal. I wouldn't. And I wouldn't because I don't think its reachable for you in a timeframe that is going to keep you from feeling it isn't acheivable.

Its going to take several years to dig yourself from under that debt. That's your #1 goal.

Your #2 goal is to start saving for your kids college (apparently). That's a big expense, and by the time you get #1 done, you'll be fairly short term before the oldest needs tuition. You may want to check out a college calculator to see what you are going to need to save. Trust me, time will move fast on this one.

You have a #3 goal to move into a larger home. If that is indeed a goal for you - it will be done simultaneously with the college savings. That's going to make college savings go slower.

I think you have a #4 goal to live comfortably while all this happens. You'd like to travel. You'd like to spend some money. You don't want to have the heat turned down to nothing, have "fine dining" involve pepperoni, or buy your shoes at garage sales. And I don't blame you one bit. I'd give up DVC in a second if affording it meant thinking pizza and a movie was a big splurge.

A lot of things can happen to make goals 1,2 & 3 achievable faster than it looks currently (like an increase in your income). But a lot of things can happen (like medical bills) to make it so you are still paying tuition 19 years from now when your youngest is in school. Personally, I'd find it frustrating to have a ten year goal of owning DVC and fifteen years from now still have it out of my reach. Perhaps you are more fond of stretch goals and will find it inspiring.

This is where getting professional help can really help - but you can do the same thing with some library books on financial goal setting (Smart Couples Finish Rich is a good one for goal setting).

 

[tlbwriter]

Your #2 goal is to start saving for your kids college (apparently).

I'm going to respectfully disagree on this one. Your #2 goal should be your own retirement. Your children can find other ways of funding their education if necessary, but options for funding your own retirement are very limited, and they become more limited the longer you wait. If you wait until you've covered your childrens' education, it will be too late. I know you've already got a start with the 401(k), and that's great. You can (and probably should) reduce your contributions to this in order to get out of debt. But don't reduce it in order to save for college.

 

[MickeyMacks]

As others have said...cable is not a necessity. High speed internet is not a necessity. Get rid of both. Today. That's $100 every monnth that goes to debt reduction.

In terms of the "help" you asked about...I think the best thing you can do is educate yourself.

I agree, Entertainment is waaaaay down the list of priorities. I have been living cable-free for 2 years and don't miss it. I use my tv to watch movies on (I rent the $1-2 ones from the older releases section, but some libraries have videos you can borrow for free). If there's something on tv I really want to see, I just ask someone to tape it for me, then I watch it later and return the tape to them for next time.

I have high-speed Internet only because I use it for my work. Check with your local library to see if they offer Internet access, or see if there are computer access centres in your area (they're cheap if not free). At the library you can also read the newspaper for free and find some if not all of the books on financial management that are mentioned here. Please don't buy any books, ask to borrow them from someone who already has them. Same with magazine subscriptions - cancel 'em all and read 'em for free at the library.

If you family asks you what you need for birthday or Christmas, ask them to pay for a hair appointment for you (simple color & cut), pay for car maintenance or buy your kids' new sneakers or coat this year. Or if they really want to be generous, buy you a tank of gas My family has done all of these things for me when times were tough, and they were the best gifts. One year I even got 2 new tires for Christmas!

Gather your collectibles, non-essential furniture and excess clothes and ask someone you trust (a friend or family member) to sell it for you on Ebay or whatever. Don't try to sell it yourself! Just don't go there. Say bye to the stuff, collect the money a few weeks later and put it all toward cc debt.

Good for you for hanging in there on this very long and sometimes difficult thread. You asked for advice and you're getting it. It seems you are addicted to indulgence (you're certainly not alone) and maybe the best gift you can give your kids is to not pass this habit on to them, but to help them learn financial responsibility, make healthy choices and find affordable and creative entertainment.

 

[MAGICX2]

I spoke with someone from Christian Debt Services this morning. This is what she gave me:
They contact my creditors to reduce and/or eliminate our APR. Then they negotiate a payment plan. We make the payment to CDS then they distribute the payment accordingly. We can make extra payments, a larger payment, or a bulk amount to be dispersed as we wish. There is no penalty for early pay off. We still receive monthly statements from creditors and we get a quarterly statement from CDS. The accounts are frozen and cannot be used during the pay back period. We figured in all our cc's and the signature loan and she gave me a quote of $770 for 59 months. She said this includes a $49 administrative fee monthly that is figured into the $770 figure already. I asked her how this will affect me credit score and she said that it should not affect the FICO score directly, however there will be a notation on my credit report that states we are in a debt consolidation program for 59 months beginning xx/xx/xxx. Once the contract is fulfilled (accounts are paid in full) then that notation is removed. She said it is automatically deducted from checking account either, 1,2, or 4 times a month.
This sounded like it would be a good thing for us. I would opt for the four times a month. It would be $192.50 every Fri. What do you all think?

 

[LauraR]

I don't know if someone has already posted this, as I haven't read the whole thread, but I just read an article that said the U.S. government has just listed 26 companies approved to do consumer credit counseling. Other agencies will be listed after they have been approved. You can access the list at www.usdoj.gov/ust

Good luck with your efforts! You are moving in the right direction, just keep at it.

 

[d-man's mom]

I spoke with someone from Christian Debt Services this morning. This is what she gave me:
They contact my creditors to reduce and/or eliminate our APR. Then they negotiate a payment plan. We make the payment to CDS then they distribute the payment accordingly. We can make extra payments, a larger payment, or a bulk amount to be dispersed as we wish. There is no penalty for early pay off. We still receive monthly statements from creditors and we get a quarterly statement from CDS. The accounts are frozen and cannot be used during the pay back period. We figured in all our cc's and the signature loan and she gave me a quote of $770 for 59 months. She said this includes a $49 administrative fee monthly that is figured into the $770 figure already. I asked her how this will affect me credit score and she said that it should not affect the FICO score directly, however there will be a notation on my credit report that states we are in a debt consolidation program for 59 months beginning xx/xx/xxx. Once the contract is fulfilled (accounts are paid in full) then that notation is removed. She said it is automatically deducted from checking account either, 1,2, or 4 times a month.
This sounded like it would be a good thing for us. I would opt for the four times a month. It would be $192.50 every Fri. What do you all think?

I checked out something like this years ago, and got all of the same basic info that you did. Then I asked a few more questions and found out that they could only negotiate on my behalf if I was behind on my payments. I was current at the time and would have needed to intentionally have a series of late payments on every credit line I wanted negotiated. My main goal at that time was to get a handle on my debt AND fix my credit, so I decided to not go with the program. I'm happy that I didn't because a year later I needed a car and I doubt I would have been able to get financing if I had messed up my credit and was locked into a consolidation program.

It's just something to find out about- if you are already behind on payments then this is irrelevant, but it was a deal breaker for me. Also, what happens if for some reason their payment to the creditor doesn't arrive on time? Are you still socked with a late fee and or higher interest rate pentalty?

 

[binny]

we did this years ago.

Consumer Credit Counseling charged us $30. or so a month to do this. ( butt hat was several years ago)

It DID affect our credit for a long time, they told us it wouldnt but it did. I spoke with a financial advisor afterwards who said it was not as bad as a bankruptsy but it still showed we couldnt pay off our bills.

If there is any way of negotiating with your own creditors at this point, I would do that first.


Is there a financial planner that you trust to help you? It may be worth your while to look into it.

 

[crisi]

I'm not sure how they can tell you what your payment will be and how long when they haven't yet negotiated your APRs with your creditors. I haven't dealt with this, but it smells fishy to me. I do think it will affect your credit for a long time - I don't see how it would be fair that it wouldn't.

 

[tlbwriter]

Everything I've read says any kind of debt reduction program that reduces the amount you have to pay - either by forgiving part of the principal or the interest - WILL adversely affect your credit rating. Do not go this route if you can keep up with the payments on your own.

 

[DisFlan]

Magicx2 - this looks like a debt consolidation program, not credit counseling. And you'll be paying them almost $2900 over the 59 months!! They'll be makin' money off your troubles, Hon.

And it WILL be noted as a "Negative" on your credit report. Those stick for a LONG time.

I'd check out some other options - like a real credit counselor. But that's up to you.

Are you aware that you can call your card companies directly and request an interest rate decrease on your own? It can't hurt to try, and it won't hurt your credit rating.

DisFlan

 

[EthansMom]

I spoke with someone from Christian Debt Services this morning.

I've never had to go through one of these services before, but I have heard from others that it does leave a bad mark on your credit report. Plus, this outfit is asking you to pay them almost $3000 to handle your payments -- that's a lot of money that could be going toward your debts.

By doing the legwork yourself, you could (1) save yourself the black mark on your credit cards and (2) save yourself the $3000 in administrative fees and still have the debt paid off.

First, call each credit card and ask about having your rate lowered. At first, the cc representative may be hesitant to do so, but they do have the ability to change the rate. If you are told it is something that they can't handle, ask to speak to someone who can lower your rate. Start with your higher interest rate ccs and threaten to transfer the balance to a cc with a lower rate. Some of your cc companies will lower your rate and some may not. If possible, transfer the balance on higher interest rate ccs to lower interest rate ccs.

Once you have the interest rates lowered, start working on paying off your debt using the Snowball Method. Here is an explanation of the Snowball Method that I had written up for a past post:

With the Snowball Method, you make extra payments towards particular debts and as those debts are paid off, you allocate all of the money you were paying to the paid-off debts to pay off the debts that are still left. Here's how you do it:

First, stop using credit cards or buying anything with debt. If you can't pay in full, you don't buy it.

Second, pay the minimum required each month on each debt.

Third, pay extra each month towards either your highest interest debt or your lowest balance debt. When that debt is paid in full, you take all of the money you were paying towards that debt each month and use it to pay extra towards either the next highest interest debt or the next lowest balance debt.

Say you have 3 debts, as follows:
$3000 @15%, min. $50
$5000 @10%, min. $200
$1000 @ 18%, min. $100
and you have an extra $100 you scrounge to help pay off your debt early.

You pay $200 toward the 18% debt each month, $50 toward the 15% debt, and $200 toward the 10% debt. The 18% debt would be paid in full in 6 months. You then pay $250 ($50+$200) toward the 15% debt and $200 toward the 10% debt each month. The 15% debt would be paid in full in another 12 months. Then you pay $450 ($200+$50+$200) each month toward the 10% debt. That debt would be paid in full in another 5 months. In less than two years you could pay off this $9000 of debt by only paying $100 more than your minimums (and not adding any additional debt).

My husband and I have paid off tens of thousands of dollars in debt in the last 5 years, using this method. In another year, we'll have paid off all of our debts except the mortgage.

MAGICX2, using the Snowball Method, you and your DH could pay off your credit card debts in 6 years completely on your own! You just have to stick with your commitment to not use credit and to pay off your debts.

 

[tlbwriter]

First, call each credit card and ask about having your rate lowered. At first, the cc representative may be hesitant to do so, but they do have the ability to change the rate. If you are told it is something that they can't handle, ask to speak to someone who can lower your rate. Start with your higher interest rate ccs and threaten to transfer the balance to a cc with a lower rate. Some of your cc companies will lower your rate and some may not.

You know, you are a very good customer as far as the CC companies are concerned. You spend quite a bit and you don't pay off your balance every month, and yet you make your payments on time (we can assume). They should be willing to bend quite a bit in order to keep you as a customer. Don't tell them you're having problems. Tell them you've received offers for cards with lower interest rates, and you're considering switching, but of course you'd rather avoid the hassle and stay with your current cards if they're willing to give you a better rate.

 

[crisi]

Just as an aside, I'm always extra suspcious of anyone using "Christian" in their name or their advertising. Debt consolidation and counseling is the same if you are Christian or Buddhist. If I were going to run a scam, targeting Christians by "being a good Christian" would be my choice of scams. So many really good people, but very trusting people, that I know will trust someone without reservation because they go to the same church.

Perhaps that is a disservice to these people, or perhaps I am too jaded.

 

[Lyn5]

-----

 

[nowellsl]

I've read this whole thread (interesting) and I would advise you to check this company out very carefully. It seems crazy to me to pay them so much to do something you can do yourselves.

What was the interest rate for the loan you were pre-approved for?(for the land) Was it less than your credit card interest rates? Was it secured or unsecured? Could you possibly use that to consolidate all your debt at a lower interest rate?

I wouldn't recommend consolidating credit cards unless you absolutely quit charging. Don't close your accounts, but absolutely quit using the cards! You have to make your mind up to not incure anymore debt. That's the only way to get out of the situation you're in! I made up my mind to do this about a year ago and I can finally see the light at the end of the tunnel. I only have one cc that has a balance and it's at 3.99%. It's been so satisfying to see the balance drop every month and the interest charge get smaller and smaller!
It's a great feeling!

 

[dvcgirl]

I spoke with someone from Christian Debt Services this morning. This is what she gave me:
They contact my creditors to reduce and/or eliminate our APR. Then they negotiate a payment plan. We make the payment to CDS then they distribute the payment accordingly. We can make extra payments, a larger payment, or a bulk amount to be dispersed as we wish. There is no penalty for early pay off. We still receive monthly statements from creditors and we get a quarterly statement from CDS. The accounts are frozen and cannot be used during the pay back period. We figured in all our cc's and the signature loan and she gave me a quote of $770 for 59 months. She said this includes a $49 administrative fee monthly that is figured into the $770 figure already. I asked her how this will affect me credit score and she said that it should not affect the FICO score directly, however there will be a notation on my credit report that states we are in a debt consolidation program for 59 months beginning xx/xx/xxx. Once the contract is fulfilled (accounts are paid in full) then that notation is removed. She said it is automatically deducted from checking account either, 1,2, or 4 times a month.
This sounded like it would be a good thing for us. I would opt for the four times a month. It would be $192.50 every Fri. What do you all think?

How much debt are you talking about here. Just your CC? CC and the Signature loan? CC, Signature loan and car loan? You're talking about paying them $45,000 here. I think if you got dedicated and serious to the cause, you can do this for less.


Is this Debt Consolidation or Debt Settlement? Either way, your credit scores will be affected. Not that this is necessarily a bad thing for you guys right now because it will keep you from getting more loans, but still....I'd be very wary.

 

[dvcgirl]

I've read this whole thread (interesting) and I would advise you to check this company out very carefully. It seems crazy to me to pay them so much to do something you can do yourselves.

What was the interest rate for the loan you were pre-approved for?(for the land) Was it less than your credit card interest rates? Was it secured or unsecured? Could you possibly use that to consolidate all your debt at a lower interest rate?

I wouldn't recommend consolidating credit cards unless you absolutely quit charging. Don't close your accounts, but absolutely quit using the cards! You have to make your mind up to not incure anymore debt. That's the only way to get out of the situation you're in! I made up my mind to do this about a year ago and I can finally see the light at the end of the tunnel. I only have one cc that has a balance and it's at 3.99%. It's been so satisfying to see the balance drop every month and the interest charge get smaller and smaller!
It's a great feeling!

This is the other thing. I'm not so sure consolidation of any kind is a good idea for you....not until you learn to live on your income and not above your means. You have the means to pay the cards off....one by one.