Personal Loan?

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Allerian
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Personal Loan?

Post by Allerian » Sat Aug 12, 2017 7:31 pm

I am in married in my mid 30s. My husband is a SAHD with a mental illness and unable to work. I have a decent salary (224-260K) per year. I am a young MD so just started working in the past 3 years or so. My husband accumulated a huge chunk of credit card debt last year (18K) on random stuff. He no longer has access to a credit card and we are using budgeting things such as YNAB. The credit card is only in his name (I was not a user) and is at 11.99%. It seems that I cannot transfer this to a 0% card unless he applies I don't think he would qualify to transfer all of it. Does it make sense to take out a personal loan to pay off the credit card and pay that loan down faster? I qualify for a personal loan at 5.4% for 3 years. We are already paying 35% of my income to student loans between my husband and myself. We have some rural loan repayment for my loans and they are set to be paid off in less than 5 years (currently at 188K around 5%). We do have two car loans- goal is to keep this cars till they croak (13K left on my Car, 40K on my husbands- truck). We have a pretty low mortgage- 163K. I do not have enough in savings to just pay off the credit card- we do have about 8K currently there. My plan was to pay 900 a month towards the credit card and extra if I receive any payouts or bonuses. (Should have it paid off in 15-18 months) We contribute currently about 6% towards retirement (Currently 80K) since we have so much educational debt. I know we are deep in debt- but goal is to be out of educational debt in 5, cars will be paid off as well, will be saving for 6 months of emergency fund and increasing retirement.

Does it make sense to trade the 11.99% credit card interest for a personal loan at 5.4%?

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arcticpineapplecorp.
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Re: Personal Loan?

Post by arcticpineapplecorp. » Sat Aug 12, 2017 7:50 pm

At www.bankrate.com I see a home equity line of credit with a minimum of $10,000 for 4.99% through capital one. That's even better than your personal loan rate. I'm assuming you have equity in the property to draw a home equity line of credit?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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whodidntante
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Re: Personal Loan?

Post by whodidntante » Sat Aug 12, 2017 7:58 pm

I routinely get cash advance checks sent to me that offer 0% for 12-18 months and a cash advance fee of 3%-5%. That's cheaper than other unsecured rates you can find. I miss the days when there was no fee and you could get worthwhile returns on risk-free investments.

Another option is a secured loan. 5 year car loans can be had for approximately 2%. And you could pay it off much faster if desired. Look on the website of every nearby credit union. You could also check lightstream. Yet another option is a loan against taxable stock investments. IB will charge 2.6%, but it's a variable rate. Make sure you understand maintenance margin requirements before you imbibe, but it's a valid option for some people.

Allerian
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Re: Personal Loan?

Post by Allerian » Sat Aug 12, 2017 8:12 pm

We do not yet have enough equity in our current home to get a HELOC and we are working on trying to make some repairs around the home and attempting to pay in cash rather than open a HELOC. Although I have no doubt we would pay it off- makes me a little nervous to use my car as secured collateral.

CppCoder
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Re: Personal Loan?

Post by CppCoder » Sat Aug 12, 2017 8:13 pm

Are you paying any of your other loans faster than the schedule to accelerate your repayment (sounds like it since you are paying off student loans in 5 years). If so, and if those are financed at a lower rate than 11.99% (e.g., your 188k at 5%), I would stop making extra payments and instead pay off the credit card first. Then return to the lower interest loans.

Nate79
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Re: Personal Loan?

Post by Nate79 » Sat Aug 12, 2017 9:01 pm

You are broke but good to hear you are trying to pay off this debt asap. I would back off on student loans to the minimum and pay off the credit cards asap. I would sell the truck as $40k plus student loans plus c.c. debt is ludicrous. Buy a beater used truck if you need a truck.

Allerian
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Re: Personal Loan?

Post by Allerian » Sat Aug 12, 2017 9:08 pm

We are currently making a standard 10 year payment on the loans but have received loan forgiveness with my employer and my state (100K total). We are definitely working on a plan not to finance anything further- everything must be paid with cash.

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arcticpineapplecorp.
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Re: Personal Loan?

Post by arcticpineapplecorp. » Sat Aug 12, 2017 9:23 pm

You say you're contributing 6% to retirement. Does that mean $13,400 (.06 X 224,000) or $15,600 (.06 X $260,000)? If so, maybe you should forego that and put that money onto the credit card. After all, the most you'd make from retirement investments would be...well, let's say less than 11.99%, right? So why invest money to make less than that only to pay more than that in interest. Now if you stop contributing to the retirement assets you'd put that $1120 a month ($13,400 a year) or $1300 ($15,600 a year) and have the credit card paid off quicker. Are you saying you have an extra $900 a month to throw on the credit card IN ADDITION to your retirement investments (i.e., were you planning to keep investing 6% for retirement and can come up with $900/mo. to pay down the CC)? If so then you should be able to put $2020 ($1120 currently towards retirement plus the extra $900) or $2200 (the $1300 currently towards retirement plus the extra $900) entirely towards the credit card each month. If you're able to do that, you should have it paid off between 9-10 months (depending on whether you're throwing $2020 or $2200 a month at the CC) according to bankrate (link below). Let us know if I'm misunderstanding the numbers you're giving.

And have you looked into NAMI (national alliance on Mental Illness)? There are support groups out there for families dealing with loved ones with mental illness. Good luck and welcome to the forum.

http://www.bankrate.com/calculators/cre ... lator.aspx
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Allerian
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Re: Personal Loan?

Post by Allerian » Sat Aug 12, 2017 10:04 pm

Yes we are contributing 6% to retirement to get my 3% match. I didn't want to forgo the retirement contribution given I am in my mid thirties and we only have $80K saved so far since I started working about 3 years ago. I am currently contributing about $498 per paycheck on my retirement per month that would mean I would have about $1800 we could put toward the credit card. My worry is that almost a year of contributions will be significant for me longer term since I am starting late.

TIAX
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Re: Personal Loan?

Post by TIAX » Sat Aug 12, 2017 10:15 pm

Allerian wrote:
Sat Aug 12, 2017 10:04 pm
Yes we are contributing 6% to retirement to get my 3% match. I didn't want to forgo the retirement contribution given I am in my mid thirties and we only have $80K saved so far since I started working about 3 years ago. I am currently contributing about $498 per paycheck on my retirement per month that would mean I would have about $1800 we could put toward the credit card. My worry is that almost a year of contributions will be significant for me longer term since I am starting late.
The 50% match is a much higher rate than any of your loans so continue to max the match.
Allerian wrote:
Sat Aug 12, 2017 7:31 pm
I am in married in my mid 30s. My husband is a SAHD with a mental illness and unable to work.
...
My husband accumulated a huge chunk of credit card debt last year (18K) on random stuff.
...
We do have two car loans- goal is to keep this cars till they croak (13K left on my Car, 40K on my husbands- truck).
So he's able to shop and drive but can't work any job?

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whodidntante
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Re: Personal Loan?

Post by whodidntante » Sat Aug 12, 2017 10:28 pm

The refi would save you a few hundred dollars in interest, which is probably worth the slightly negative temporary impact the new loan would have on your credit. So take that, or any other lower interest loan you are comfortable with.

petulant
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Re: Personal Loan?

Post by petulant » Sat Aug 12, 2017 10:37 pm

And your income is going to be such that your tax-advantaged space will be limited going forward, so making use of it right now is wise.

Paying $900/mo to an $18K debt with 11.99 interest will take roughly 22 months to pay off. It will take roughly 21 months at 5.4 interest. So you save one month, or about $900 by going for the 5.4 percent.

It's less if you add bonuses along the way. Let's say 15 months. Using a loan calculator, an $18,000 loan with 11.99 interest over 15 months will cost $1,472 in interest. At 5.4 percent interest, it will cost $654 in interest.

So overall, refinancing the loan to 5.4 percent will save you $654 to $900 over the next year. As others have said, you might be able to spend time finding an ever better refinancing option. However, given the low additional savings and the time/energy spent searching, combined with your overall life/work situation, I don't think you should worry about it. If the loan application for the 5.4 percent is quick and you're ready to go, I would just go with that one. It's a good idea, but even refinancing is much less important than just keeping up your discipline and growing in your career.

delamer
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Re: Personal Loan?

Post by delamer » Sat Aug 12, 2017 10:39 pm

Consider selling the truck to get, buying a much cheaper vehicle, and using any left over equity to pay down the credit cards.

I am a believer in spouses merging finances and making joint financial decisions. So when one spouse runs up debt without the knowledge/approval of the other, the spouse who created the debt should make the sacrifices to get out from under it.

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Watty
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Re: Personal Loan?

Post by Watty » Sun Aug 13, 2017 12:52 am

Allerian wrote:
Sat Aug 12, 2017 7:31 pm
I have a decent salary (224-260K) per year.
That is a lot more than "decent" especially since you live in an area where housing is affordable. With a monthly gross income of around $20,000 a month then I would guess that after taxes, fixed expenses, retirement savings, and things like food and utilities that you would still have around $10,000 a month in disposable income. Even if it was just $5,000 then you should easily be able to quickly pay off all your consumer debt except for his truck.

I'm not sure what I am missing but I don't see why you have some much of the consumer debt.

maria00200
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Re: Personal Loan?

Post by maria00200 » Sun Aug 13, 2017 5:15 am

TIAX wrote:
Sat Aug 12, 2017 10:15 pm
Allerian wrote:
Sat Aug 12, 2017 10:04 pm
Yes we are contributing 6% to retirement to get my 3% match. I didn't want to forgo the retirement contribution given I am in my mid thirties and we only have $80K saved so far since I started working about 3 years ago. I am currently contributing about $498 per paycheck on my retirement per month that would mean I would have about $1800 we could put toward the credit card. My worry is that almost a year of contributions will be significant for me longer term since I am starting late.
The 50% match is a much higher rate than any of your loans so continue to max the match.
Allerian wrote:
Sat Aug 12, 2017 7:31 pm
I am in married in my mid 30s. My husband is a SAHD with a mental illness and unable to work.
...
My husband accumulated a huge chunk of credit card debt last year (18K) on random stuff.
...
We do have two car loans- goal is to keep this cars till they croak (13K left on my Car, 40K on my husbands- truck).
So he's able to shop and drive but can't work any job?
I was thinking the same thing. He's fine enough to go shopping and drive a $40k truck but can't work? I say sell the truck. That will free up some debt.

basspond
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Re: Personal Loan?

Post by basspond » Sun Aug 13, 2017 6:46 am

It's just a shell game by replacing one debt with another debt. Downsize the truck. Life lessons are hard to swallow but bite the bullet now to ensure a better life in future.

Ostentatious
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Re: Personal Loan?

Post by Ostentatious » Sun Aug 13, 2017 7:07 am

Don't go into more debt trying to pay off another debt. Sell his car and take on extra hours on the weekend, if you can to knock off this demon away. With your current salary you could be out of debt shortly. Good luck.

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arcticpineapplecorp.
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Re: Personal Loan?

Post by arcticpineapplecorp. » Sun Aug 13, 2017 9:55 am

TIAX wrote:
Sat Aug 12, 2017 10:15 pm
Allerian wrote:
Sat Aug 12, 2017 10:04 pm
Yes we are contributing 6% to retirement to get my 3% match. I didn't want to forgo the retirement contribution given I am in my mid thirties and we only have $80K saved so far since I started working about 3 years ago. I am currently contributing about $498 per paycheck on my retirement per month that would mean I would have about $1800 we could put toward the credit card. My worry is that almost a year of contributions will be significant for me longer term since I am starting late.
The 50% match is a much higher rate than any of your loans so continue to max the match.
Ah, see how missing details in the original story can change things? The OP didn't mention any match in her opening. That does change what I said early about not contributing to the 401k. Yes, the 50% match from the 401k does beat paying 11.99% on CC debt. Carry on with that.

Guess if it takes 15-18 months, then that's what it takes (in the absence of extra income/cutting expenses or both). Experiencing some pain from debt is a good thing. It motivates many to avoid it at all costs in the future. At least you have the income to pay it off and it won't take years or lead to bankruptcy as is the case for many others.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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BL
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Re: Personal Loan?

Post by BL » Sun Aug 13, 2017 11:08 am

delamer wrote:
Sat Aug 12, 2017 10:39 pm
Consider selling the truck to get, buying a much cheaper vehicle, and using any left over equity to pay down the credit cards.

I am a believer in spouses merging finances and making joint financial decisions. So when one spouse runs up debt without the knowledge/approval of the other, the spouse who created the debt should make the sacrifices to get out from under it.
+1
Also consider where budget can be cut temporarily: cable, phones, eating out, booze, fitness, vacations, etc. Especially ones that apply to the person who charged this much. Unless you can feel the pinch, what is to prevent it from happening again? My sympathy to you.

Agree that a support group might be valuable for you, and there may be something similar for your spouse. It is hard for others to understand the problems involved with mental illness.

Allerian
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Re: Personal Loan?

Post by Allerian » Sun Aug 13, 2017 12:57 pm

Very good responses. I have never posted here before I realize that I had forgotten some information such as the retirement match. Thank you for the responses regarding NAMI. I do have a group even in our rural area that I have thought about attending. Mental illness is indeed awful. My husband used to work consistently but now has severe panic attacks/OCD. He continues to improve with treatment. His spending on the credit card was somewhat of a self medicating and our relationship was not at a good place. I did have a part to play in letting him continue to spend which will not happen again. For now he contributes to our income by being a SAHD. If he were not at home we would pay 200+ a month for childcare (My daughter is school age). He was discouraged working in the past because in our rural area jobs for him are about $10-11 and in my tax bracket + childcare the take home is small. My husband and I have been talking about some of the options and we may have him add me as an authorized user to his card and transfer the debt. The goal is once the credit card is paid off it is closed. I have multiple credit cards in my name with a $0 monthly balance. He has maid strides over the past few months of actually trying to save things. We get a windfall and he puts money aside for a future purchase he would like in the past month or two. So very happy and some new behaviors. I appreciate the responses here- we will continue to buckle down and pay back and work on living more within our means- we don't have a high monthly budget otherwise (I shop at Aldi, we mostly stream rather than cable, vacations are mostly driving trips and not expensive) so I know we will get there.

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