Overwhelmed ... Credit Cards

[Starbrite]

I am so lost and overwhelmed I don't know what to do. I've always been afraid to post here because I'm sure I'll just be belittled for my past financial mistakes, but I need help.

I have serious credit card debt. The cards add up to $22,000, Minimum Monthly Payments = $620/Month

These are old cards. I have not used any of them, at all, in at least a year. I got in a bind during my divorce and stupidly used them for my kids & I to survive. I have been making the payments every month, on time, never missed a payment. As well as my other bills, I can keep my head above water & not miss a payment. But I'm making no progress on the balances. I'm not looking to skip out on my debt, I'm looking for a way to get them paid off faster and not ruin myself financially anymore than I already have.

Here are the options as I see them:

If I call CCCS or some other non-profit agency. They may be able to help me correct? Possibly get my payments lower, but I will still be paying for the next 20 years on this. In addition, that will reflect negatively on my credit report correct? Any reccomendations on this? Any stories on how much your payments were lowered & how long it took to pay off??

Continue making minimum payments and add extra $$$ whenever I can, keep this up for the next 35 years unless we get blessed with a miracle of some sort.

I can take a $15,000 loan from my 401k and pay off some of them - Probably not the smartest financial move for my future, but it would save me appx $150/month, and I could snowball that amount towards the remaining cards. Plus, I would definately have that paid off within 5 years. Is this a horrible idea?

Any suggestions or reccomendations.

 

[HS3kids]

How many different cards? Could you cut expenses elsewhere (couponing, less cable tv channels etc) and put that toward the card with the lowest balance? Then snowball the next lowest, etc
I am not the best person to answer this, hopefully others will have more ideas for you.

 

[ccgirl]

I am so lost and overwhelmed I don't know what to do. I've always been afraid to post here because I'm sure I'll just be belittled for my past financial mistakes, but I need help.

I have serious credit card debt. The cards add up to $22,000, Minimum Monthly Payments = $620/Month

These are old cards. I have not used any of them, at all, in at least a year. I got in a bind during my divorce and stupidly used them for my kids & I to survive. I have been making the payments every month, on time, never missed a payment. As well as my other bills, I can keep my head above water & not miss a payment. But I'm making no progress on the balances. I'm not looking to skip out on my debt, I'm looking for a way to get them paid off faster and not ruin myself financially anymore than I already have.

Here are the options as I see them:

If I call CCCS or some other non-profit agency. They may be able to help me correct? Possibly get my payments lower, but I will still be paying for the next 20 years on this. In addition, that will reflect negatively on my credit report correct? Any reccomendations on this? Any stories on how much your payments were lowered & how long it took to pay off??

Continue making minimum payments and add extra $$$ whenever I can, keep this up for the next 35 years unless we get blessed with a miracle of some sort.

I can take a $15,000 loan from my 401k and pay off some of them - Probably not the smartest financial move for my future, but it would save me appx $150/month, and I could snowball that amount towards the remaining cards. Plus, I would definately have that paid off within 5 years. Is this a horrible idea?

Any suggestions or reccomendations.

No belittling from me. Been there...done that....

I wouldn't touch the 401K.. Especially since it wouldn't even pay off the cards.

Do you own a home and have equity? You could always take out a home equity loan.

How about a personal unsecured loan?

Have you called the credit card companies and asked for a lowered interest rate? Sometimes, especially if you have never been late, they will do this for you.

If the above do not work, I would try the snowball method. Pick the card with the lowest balance. Put every extra dime toward paying it off. When it's paid off, take all the money you were paying on that card towards your next lowest balance and repeat the steps until they are all paid off.

Good luck...I know how overwhelming and suffocating this can be.

 

[Dictator]

Do you own a home and have equity? You could always take out a home equity loan.

Worst advice. NEVER EVER move unsecured debt to secured debt. Ever.

 

[ccgirl]

Worst advice. NEVER EVER move unsecured debt to secured debt. Ever.

I heard the same thing but it worked for me. She was looking for ways to pay down her credit card and I gave her some examples. One worked well for me. I realize it is not for everyone.

 

[richmond282]

Do you have ANY extra $ to put towards a payoff? What about consolidating them? I don't know how many cards you have or what their blaances are. We just combined our cards all on to one, so we only have one payment a month. If you consolidate, it should free up a little extra for snowballing.

 

[Marionnette]

Your interest is calculated based on your daily balance. Make two smaller payments that equal your minimum (or more) during the billing cycle. This will reduce the amount you will pay in interest overall.

You should still look into ways to reduce the interest rates but this can help a lot when you have such a huge amount of debt.

Another thing to keep in mind is that even though your minimum payment goes down because you're paying on the balance, you should not drop your monthly payments down. This will defeat your debt reduction plan.

 

[wvjules]

I would look into CCCS. At this point it won't do any more damage to your credit than you have already done.

Go to www.creditboards.com

They are full of great information.

 

[LuvLuvLuv]

I went through a company called Cambridge. I was set up on a plan for 43 months (DONE IN JULY!!!) paying about half of what I was paying for minimum payments per month--$17,000 total. I pay them one payment which is better than distributing from my plethora of cards and my many many many many (you get it) medical bills. They distribute the money and make the plan. Yeah, there's a little fee per month, but I'm still paying wayyyyyyyyyyyy less than the interest rate when I was doing it on my own.

It feels so freaking amazing to be almost done. ((Especially because my full time job is closing May 1 and I'll be losing one of my jobs ))

It worked for me. I know some said not to do that, some said for me to file bankruptcy... but I didn't want to skip out. I spent the money in hard times, and the medical bills are there--so I did my research--and I'm happy. If you have any questions, I'd be more than happy to help

 

[disneysmiles]

I'm so sorry to hear about your struggles.

It's possible to call the credit card company and ask if they will lower the interest rate. Part of the reason you aren't making headway is that when you make a payment the interest builds up again! What's the worst they can tell you? No. But if they say yes to lowering IR that could really help you out.

Sites like Get Rich Slowly and The Simple Dollar can offer a lot of practical and morale help when trying to get out of debt. Good luck!

 

[JDUCKY]

I would look into CCCS. At this point it won't do any more damage to your credit than you have already done.

Go to www.creditboards.com

They are full of great information.

wait wait wait!!

The OP never said their credit was bad! CCCS could cause great damage to a good credit score. If the OP pays more than the minimum balance (focusing on the higher interest rate cards first), as the credit utilization % drops, the credit score will rise.

As for www.creditboards.com, that's a great place to go.

 

[MyKidsMom1820]

I'm so sorry about what you are going through. My husband and I used Dave Ramseys books and website.
Just know, even a little progress is progress, and don't beat yourself up.

 

[adoptivemomx2]

I second Dave Ramsey!

Go get "The Total Money Makeover" from the library. He talks about baby steps, the first of which is to make the minimum payments on everything while setting up a "Baby Emergency Fund' of $1,000. Then snowball your payments by paying making minimum payments on everything except your lowest balance card...throw every spare dollar on that balance until you get it paid off. Once that first one is paid off, throw that money and every spare dollar to pay of the next loewst balance card. Keep going "snowballing the payments until they are all paid off.

The Grocery Game website has a forum with lots of money saving ideas. If you start to seriously coupon (I used to buy 10 Sunday papers a week), you can knock out the balances quickly because you save so much on groceries.

We were $90, 000 in debt and paid off every penny this way. It seemed impossible on our income but it wasn't. You WILL get there.

 

[danielle79]

I must say I have heard bad stuff about CCCS and ruining good credit. We are using the snowball method on our cards and it is working really well, we have paid off 12,000 in under two years! I have more to go but I just got good news the other day about one of my big cards being able to lower my interest rate!

 

[JDUCKY]

ugh...Dave Ramsey...forget him.

http://www.creditcardchaser.com/dave-ramsey-credit-cards-i-love-ya-dave-but-you-are-dead-wrong/

I think that the Dave Ramsey Debt Snowball approach to paying off credit card debt is a great plan EXCEPT for I certainly take issue with the advice to, “You should pay off the smallest debt first to create the greatest momentum in your debt snowball.” (Source)

The best approach to take is of course to pay off the credit cards in order from the card with the highest interest rate down to the credit card with the lowest interest rate and NOT to pay off the credit cards in order from the card with the lowest balance to the highest balance. Why? This is true because the credit cards with the higher interest rates are costing you more in interest charges every month then the credit cards with the lower interest rates and so you will save money in interest charges by first tackling the payoff of the credit cards with the highest interest rates and then moving on down to the lower interest rate credit cards.

Again, you don’t have to take my word for this because all you have to do to see the numbers for yourself is to use our Credit Card Payoff Calculator to see the sometimes dramatic effect on your monthly payment and interest costs that even a 5% to 10% different in interest rate can have.

http://www.creditcardchaser.com/dave-ramsey-on-debt-negotiation-debt-settlement-wrong-again/

http://badmoneyadvice.com/2009/05/ten-things-dave-ramsey-got-wrong.html

http://www.thetruthaboutcars.com/2011/09/hammer-time-dave-ramsey-bad-math-statistical-quagmires/

 

[eyor44]

yes, it does seem very overwhelming. Change that, it is overwhelming and some days you will feel like you will never get there, but you will. You determination and the desire to get rid of your debt, and you will.

I have one more to go. If you get any bonuses or tax refunds, try to use those towards your debt in the way of extra payments.

 

[cornflake]

How's your credit?

You may be able to get a low interest loan from a peer-to-peer lending site like Lending Club or Prosper. They're like Kiva, but in the U.S. and for general personal loans.

People who need loans but would have a hard time getting them from a bank or the bank would charge exhorbitant interest can request loans, regular people choose to invest by making the loans themselves, in small increments. The borrowers get a lower interest rate and less hassle than a bank, and know the interest goes to actual people - the investors get a higher interest rate than investing at a bank and get to loan money to actual people who could use it. Those sites are both SEC regulated and have been around years.

That way you could pay off the cards and then have one payment with a lower rate and fixed term, same as taking it from the 401k but without touching your 401k (bad idea, do not do), and with paying it back more managably.

Aside from that, yeah, I'd try a counseling service.

 

[MomToOne]

I can take a $15,000 loan from my 401k and pay off some of them - Probably not the smartest financial move for my future, but it would save me appx $150/month, and I could snowball that amount towards the remaining cards. Plus, I would definately have that paid off within 5 years. Is this a horrible idea?

Do not do this. If you lose your job or just want to change jobs before you've paid off the loan, you will have to come up with the balance due almost immediately, or you will be forced to do a cash out to pay back the loan in which case you'll get hit with taxes plus penalties.

 

[JAMIESMITH]

I wouldn't touch your 401K, but you might be able to take out a loan against it (paying yourself interest effectively). You might also be able to go through a credit union (and I stress credit union against bank) to get an unsecured loan at a lower interest rate. I would not take out a home equity line of credit. Your house is too important to risk losing just to pay off another debt.

 

[Starbrite]

OP Here...

Thank you for all the advice, I really appreciate it! Im not trying to get out of paying in any way, this is money I used to feed my family & survive during a really hard time. I plan to repay every cent...just wish I could make some progress!



Just to answer a couple questions:

My credit is not bad - My score was about 700 when last checked. Thats fairly average right? Not awful? So I dont want to do anything that will make it worse.

I do not have any equity in my home.

There are 5 credit cards, and they were all maxed out so there isnt much shuffling I can do with the balances.

The interest rates vary but go up to 18.99% I didnt realize I could just call & ask for a lower rate. I will definately try that - can't hurt!

I dont have much I can cut out of the daily expenses. I will take another look & see what we can do without.


Its just a never-ending battle. I pay & pay every month and the balance never moves! I just want to see some results. I thought by borrowing from the 401k at least I would have an end date - 5 years - a light at the end of the tunnel for the majority of the debt.