Question: Due to circumstances of my own doing, I have a bad problem with credit card debt.
Sparing the details, the company I worked for went under in 2002, I worked on my own and made little money for three years, and the job I got after that, though promsing, involves a long ramp-up curve; my best earnings are ahead of me.
Right now, here are my circumstances:
- Three bank credit cards with a total indebtedness of roughly $70k, and monthly payments of about $2,200 – A fourth bank card on which I make all of my purchases and pay off in full every month – A 30k personal loan from Capital One with a $500 monthly payment – House fully mortgaged, no equity to tap, interest rate about 6.5%, 18 years left on a 20-year mortgage – car loan of $450 a month
The interest rates on my cards are all high – basically 19-29%.
My wife and I together earn about $10k a month, and I expect this amount will begin to increase late to mid 2008. But I’m just dying under the weight of these cards. I applied to Cap One earlier this month for a balance transfer on one of my cards, hoping to cut the interest rate, but I was turned down because of a combination of my income and the fact that my debt-carrying cards are close to maxed.
What are some good ways that I can cut these monthly payments? Or more accurately, maintain the monthly payments but have more money go to pay down the balance and less money go to interest? My wife and I both have FICO scores in the 700-740 range – not bluest of blue chip for credit, but still very good.
Answer: See if you can get a debt consolidation loan from your bank. Then arange to have the monthly payment directly deducted from your bank account.
What are you spending the 10K per month on? I would love to be making that much. To pay off your credit cards you should be makeing more (much more) than the minimum monthly payment. Is there any way you can free up about $1000.00 more per month and apply it to your debt? 1. Cut up the last credit card, cancel the account, and stop using credit cards until you’re under control.
2. Apply to other places for balance transfers/loan consolidation at less than the current interest. With 700+ FICO scores, you should be able to find 12-15% or less!
3. Pick the highest interest card of the 3 and put ALL your disposable income into paying it off. When that’s done, go to the next one, then the 3rd…
4. Sell the car and get a cheapo. Put the $450/mo into paying off the credit cards.
5. Get help from a credit counseling agency to put together a budget, and stick to it! Where’s the rest of that $10K/month going?!?
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