Huge CC debt...HELOC denied

[planbe09]

I've been debt-free (besides managable mortgage) for years. Last year I charged $15,000 to my CC for a WDW/DCL vacation and had a down-to-the-penny budget plan to pay it off in a year, with 0% interest since I used my Disney Visa.

Since then, I had three unexpected major expenses that I put on other CCs in order no not touch my savings. Again, I had it budgeted to pay down in a reasonable time.

All of a sudden, my CC companies have greatly raised my interest rates, AND lowered my credit limits when I already was at the limit, causing me to pay overage charges. I'm a widow with three teen daughters who all have part-time jobs to pay their fun expenses, I have a good job, and equity in my home

I went for a $50,000 HELOC to consolidate the $40,000 debt, and was denied due to the "banking crisis" as they said.

I don't know what to do; I can barely make minimum payments. I've already cut down on everything I could...cable, lawn guy, etc, and getting a second job is out of the question due to the long hours I already work.

Can anyone offer me some advice? If I could consolidate my CC debt to a lower interest, I'd be ok, but I don't know where to turn.

When it rains, it pours, and now I'm trying to stay afloat. I never expected the banking crisis/recession to affect me, and I could never have predicted the emergencies which caused me to go into $40,000 debt. When I charged our vacation last year, all was well, and now I feel so guilty.

Can anyone help?

 

[d1sneyf4n]

I am sorry that you are going through this. Do you have anything that you can sell that would bring in a good amount of money or really any amount of money is great now days. Do you have a 401k? I do not know a lot about them or if it is a good idea to take money out of them but it is always an option. I wish I could be of more help. I hope you find a solution soon to help.

 

[Kay1]

Well, you used the cards to protect your savings and I'd say now is the time to dip into the savings and pay off the debt. Or, you could keep shopping for a HELOC, or - if you're sure you have home equity - sell the house.

It's great that you still have a good job and it doesn't sound like the recession has really hurt you (unless you were thinking of a HELOC when you took the vacation). I could be worse, in other words.

You just need to pay it off quickly and stop paying those high rates.

Best of luck to you.

 

[Kriii]

Use the savings! The HELOC denial was a blessing in disguise. It's never a good idea to exchange unsecured debt for secured debt.

 

[mrsklamc]

can you open new credit cards with promotional rates and transfer some of the balances?

 

[planbe09]

Use the savings! The HELOC denial was a blessing in disguise. It's never a good idea to exchange unsecured debt for secured debt.

I have a little over $25,000 in savings, and I think yes, I have no choice but to use it. I'm very afraid to touch my retirement IRSs, since my husband passed away with no life insurance, so I'm totally on my own as far as retirement, which I'd say is 15 years away.

When I charged the vacation, I absolutely didn't consider HELOC, since at the time I could afford the CC payments. I hate the idea of a HELOC, because I have no plans on ever remarrying, so my home is my extra insurance to sell for a decent profit to get me through my retirement life in the future, a modest life I might add, nothing fancy.

I've started looking for things to sell, although it won't make me much money, but if I can at least use it to pay for a bill or two, I'd be grateful.

Thank you for responding. I will try to tell myself the HELOC denial is a blessing in disguise, although it sure doesn't feel like it.

 

[planbe09]

can you open new credit cards with promotional rates and transfer some of the balances?

Thank you. I'm looking at CC websites right now.

 

[dvcgirl]

Nobody will give you a Heloc. They're tough to get even if you have a very low debt to income ratio and lots of equity. Once they see that you've maxed out your cards and charged up 40K to cards in a year....well, it just won't happen.

I would first call the CC companies and beg/plead for them to lower your limits. Tell them that you're a bankruptcy waiting to happen.....they may not be the case now, but it won't be far off if they don't lower the interest rates.

And I'm so not picking on you, but we get some many posters here who talk about charging the vacation first and paying it off "within a year at zero interest". "Why would I lay out the money up front if I don't have to..." "Life is too short"....."The kids are only little for so long..." on and on like that. Many of us suggest that saving up for the vacation first and then paying cash for the vacation is the safer and more prudent option. But I'm sure it falls on deaf ears for the most part.

Well, folks....*this* is the reason why you don't do that.

I sincerely hope you find a way out of your situation.

 

[dvcgirl]

Thank you for responding. I will try to tell myself the HELOC denial is a blessing in disguise, although it sure doesn't feel like it.

The Heloc denial is absolutely a blessing in disguise. I'd use the savings you have and try and negotiate the interest rates down on those those cards. Never use the cards again and then begin to rebuild your savings. It'll take awhile, but I don't think you'll find that you have many other options in the current environment.

 

[Kay1]

$40,000 less $25,000 is only $15,000 which is a lot more manageable. Personally, I would still take the other $15,000 and pay it all off. You could then start saving like a madwoman. Keep up the changes you've already made, learn from your mistakes, and move on.

 

[WillowBelle]

Have you suggested opting-out of the credit cards? Dh and I had a Disney Visa that more than doubled my interest rate JUST BECAUSE!!!!! This was several years ago, before the banking crash that we're living through now. I called them FURIOUS because I was making my payments in a timely manner, was not over (or near) the limit and I didn't see how that was good business. I was a Day 1 - Charter member of that card.

I opted out and my interest rate dropped down to 2%. You may even get lucky and get transfered to someone who will be willing to 'help' you and reduce the rate for awhile rather than having you opt out. They will do everything they can to keep you as a charging customer rather than do what we did which was cut up the card, pay them off and never give them another dime.

 

[caligirl stuck in va]

Call the credit card companies and ask them to put you back at your old interest rate and tell them you will no longer be using your CC. They "close" your account, or I guess a better word is "freeze" your account, you get to pay off your balance at the old rate. If you do make a purchase on that card, they jack it up to the higher rate. Worth a try!

 

[daisy2jae]

not much help but what about cleaning out closets and selling on ebay to make a little or a rummage sale? We just did to finish paying off our last cc.

 

[WillowBelle]

Call the credit card companies and ask them to put you back at your old interest rate and tell them you will no longer be using your CC. They "close" your account, or I guess a better word is "freeze" your account, you get to pay off your balance at the old rate. If you do make a purchase on that card, they jack it up to the higher rate. Worth a try!

This is what I was talking about - this is 'opting-out'. I think they will typically put you at an extremely low rate because the account is basically closed.

 

[OctMtnWoods]

Is the $25,000 in savings or in IRAs? If its savings, use it to pay down the debt & reapply for a HELOC for the balance. If its in IRAs, I wouldn't touch it.

Never put a vacation on a credit card. You'll be paying compounded interest. Interest on top of interest. A HELOC charges simple interest. BUT if you end up in trouble and can't pay the HELOC, you could lose the house.

HELOCs aren't for vacations in my book either. We pay cash for vacations.

 

[xmlguy]

Order the credit cards from highest to lowest interest rate.
Pay them down to zero in that order, using your savings.
As each is paid off, cut it up, then close the account.

I suggest you sit down with your daughters, explain what expenses you placed on your cards, how the companies have jacked up the rates, and that you've had to use all your savings to bring the debt down to $15,000. But you all, as a family, need to get rid of the debt because it's costing you so much money. You would like them all to pitch in half their paychecks for a while so that the family can get out from under the debt, and that you will be matching every dollar they contribute (or more) because it's a family effort.

Make a monthly chart. Show the total remaining debt, then update it each month. Then at the end, have a family party celebrating the achievement.

Then you can work on getting rid of your mortage. Even though the payments are manageable, no payments at all are much more manageable. Accelerating the loan by paying extra will save a lot of money. 30 year mortgages end up costing you 2-3 times the original price of the home, basically making you buy your house 3 times, but only getting one to live in. Mortgages are designed to maximize the amount of money the bank gets from you, not maximize your equity. The interest rate deduction "benefit" is a farce, it is no benefit to deduct a portion of your full interest payment. $1,000 interest payment is $1,000 out of your pocket, whether you deduct it on your taxes or not. You still have to earn about $1,300 gross to make that payment, due to payroll taxes.

Until you retire the mortgage, you don't really own the house. The bank is the landlord and you're the tenant, except you pay all the bills and take the equity risk.

You need a HELOC like you need a hole in the head.

 

[hentob]

All of a sudden, my CC companies have greatly raised my interest rates, AND lowered my credit limits when I already was at the limit, causing me to pay overage charges.

I didn't think they were allowed to do this anymore I thought if they lowered your limit BELOW what you had already charged, they weren't allowed to charge you an overlimit fee. It is fraud.

I would call on that one.

Good luck to you

 

[JoanneNC]

order the credit cards from highest to lowest interest rate.
Pay them down to zero in that order, using your savings.
As each is paid off, cut it up, then close the account.

I suggest you sit down with your daughters, explain what expenses you placed on your cards, how the companies have jacked up the rates, and that you've had to use all your savings to bring the debt down to $15,000. But you all, as a family, need to get rid of the debt because it's costing you so much money. You would like them all to pitch in half their paychecks for a while so that the family can get out from under the debt, and that you will be matching every dollar they contribute (or more) because it's a family effort.

Make a monthly chart. Show the total remaining debt, then update it each month. Then at the end, have a family party celebrating the achievement.

Then you can work on getting rid of your mortage. Even though the payments are manageable, no payments at all are much more manageable. Accelerating the loan by paying extra will save a lot of money. 30 year mortgages end up costing you 2-3 times the original price of the home, basically making you buy your house 3 times, but only getting one to live in. Mortgages are designed to maximize the amount of money the bank gets from you, not maximize your equity. The interest rate deduction "benefit" is a farce, it is no benefit to deduct a portion of your full interest payment. $1,000 interest payment is $1,000 out of your pocket, whether you deduct it on your taxes or not. You still have to earn about $1,300 gross to make that payment, due to payroll taxes.

Until you retire the mortgage, you don't really own the house. The bank is the landlord and you're the tenant, except you pay all the bills and take the equity risk.

You need a heloc like you need a hole in the head.

great advice

 

[bumbershoot]

I am nowhere close to being perfect financially. I am not coming from that sort of "place", LOL.

But even I know that the savings you have is needed to cover this debt, or part of it, that you have. Even if you just draw from the savings each month to supplement the payments you can manage from your paycheck, that's what the savings is for, isn't it? Especially since you're being charged extra...there's just no reason to have that money sitting in an account, likely earning nowhere near the interest that you're being charged, when it could be used.

IMO.

 

[loonytoony]

I would contact Clark Howard, Dave Ramsey, or a financial advisor. You need more help than the general Disney public can offer.