Advice needed - personal loan or credit card balance transfer

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

Hello
I am looking for advice on what my best strategy to pay down my debt would be. I'm not sure what information will be helpful so if I'm missing anything definitely let me know. I know I've been irresponsible to put myself into my current financial situation which is why I found bogleheads and why I'm asking for advice.
Currently I have 22% credit utilization and I have 2 different cards - BOA (about $24,000 balance, 14.4% interest) and Amex ($3,300, 0% interest for 10 more months)

My wife and I have a $1500/month personal loan payment (aprox 60,000 left on it) (consolidated a car payment and a few credit card and home improvement payments) and we have a $2100/month mortgage payment.

I am making $500/month payments toward my personal debt but I feel like I'm basically paddling upstream and not making any dent in my credit card. I'm wondering if it would make sense for me to take out a personal loan and pay off all my credit debt, I looked at lending tree and it looks like I could maybe get approved for $28,000 over a 6 year frame at about 6% interest with a payment of about $600 per month.

Our combined income is about $140,000 per year (about $80/$60 each)

So, without shaming me and telling me why I never should have gotten in this financial hole to begin with, what is my best course of action? Suggestions and helpful advice appreciated, thank you
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Do not consolidate. Most with consumer debt end up just running the credit card balances back up and now have the other loans, too. It appears like you've done this exact thing at least once already.

Only way out of debt is to get on a strict budget and pay as much as possible extra on your debt. That's it. Can't borrow your way out.

Highly recommend Dave Ramsey for y'all. When it comes to getting out of debt his program is very effective.

Very important: after debt free come back here to learn about investing. Dave Ramsey's view on investing can be much improved. For debt removal Dave is great.
L82GAME
Posts: 616
Joined: Sat Dec 07, 2019 8:29 am

Re: Advice needed - personal loan or credit card balance transfer

Post by L82GAME »

Kingston73 wrote: Wed Feb 26, 2020 7:49 am Hello
I am looking for advice on what my best strategy to pay down my debt would be. I'm not sure what information will be helpful so if I'm missing anything definitely let me know. I know I've been irresponsible to put myself into my current financial situation which is why I found bogleheads and why I'm asking for advice.
Currently I have 22% credit utilization and I have 2 different cards - BOA (about $24,000 balance, 14.4% interest) and Amex ($3,300, 0% interest for 10 more months)

My wife and I have a $1500/month personal loan payment (aprox 60,000 left on it) (consolidated a car payment and a few credit card and home improvement payments) and we have a $2100/month mortgage payment.

I am making $500/month payments toward my personal debt but I feel like I'm basically paddling upstream and not making any dent in my credit card. I'm wondering if it would make sense for me to take out a personal loan and pay off all my credit debt, I looked at lending tree and it looks like I could maybe get approved for $28,000 over a 6 year frame at about 6% interest with a payment of about $600 per month.

Our combined income is about $140,000 per year (about $80/$60 each)

So, without shaming me and telling me why I never should have gotten in this financial hole to begin with, what is my best course of action? Suggestions and helpful advice appreciated, thank you
Also check out Howard Clark's advice for debt reduction: https://clark.com/personal-finance-cred ... card-debt/

No shame lobbed from here. You realize that you need a hand, and that's the first step toward solving the problem.
"Simplify, simplify, simplify! I say, let your affairs be as two or three, and not a hundred or a thousand…” - Thoreau
NotWhoYouThink
Posts: 3595
Joined: Fri Dec 26, 2014 3:19 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by NotWhoYouThink »

Where is the rest of your money going? You are bringing in $10K per month after taxes, and paying $2K/month on your debt. Where is the rest of it going?

If you are paying into retirement plans, stop doing that for few months until you get your consumer debt paid off. And stop spending on almost everything else, as well. Food at home, medical care, shelter, insurance are necessities. The rest goes to debt.

I agree with the recommendation above to look into Dave Ramsey's method.
SDLinguist
Posts: 202
Joined: Wed Jan 31, 2018 1:39 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by SDLinguist »

Good news and bad news.

Bad news first. You will get shamed on here, and a little shaming is probably good for you. Shame has been proven to be a good motivator, ask any mother who guilt trips their children! You have a consumer debt problem and it is large. It will hurt to solve it but it will hurt less than not solving it. You will need to change your behavior not just for the short term but for life and that is hard to do.

Now, the good news. You have realized you have a problem and that you need to change something. So how do you do that?

Step 1: You obviously can't be trusted with credit cards. Nothing to be ashamed of, most people can't. That is literally the CC Company business strategy, if everybody could be trusted they wouldn't make any money. So, time to get rid of the CCs. That means destroy, make unusable. No more late night Amazon purchases, or quick swipes at the mall.

Step 2: budget and button down. You have 90k of consumer debt on 140k of income. That is a LOT, but if your only priority in life becomes solving that debt mountain you can do it in about 2 years if you throw roughly $4,250 a month at the problem. Big number right?

Step 3: let's do some really quick math. 140k / 12 is ~11,600 gross a month. Assuming a total tax rate of 30% (federal, state, social/Medicare) that leaves you with ~8,100 net a month. Subtract housing, which I am assuming includes all of PITI and not just the PI part, that leaves you with 6,000. Now subtract the 4250 and that leaves $1,750. That is your budget.

Step 4: Life below your means. You have $60 a day. That is for everything. From utilities to gas to food to insurance. That $5 Starbucks? Best gone. Lunch out every day? Nope. Ever decision you make has to keep that number in mind. You spent a good amount of time living outside your means so you now need to live way below them to clean up the mess. Is it going to suck? 1000%. Is it a problem you can solve? Most definitely.
User avatar
Sandtrap
Posts: 19590
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Advice needed - personal loan or credit card balance transfer

Post by Sandtrap »

You mention mortgage payment.
So, assume you have a home.
How much would a HELOC be to payoff all of your debt?
What would the terms be?
If you did consolidate all of your debt this way, would you be able to focus on making double payments or more as you can to pay it off?
If you did this, would you still build up balances on your credit cards again?
If you did this, would you again start to build up new debt?

Actionably:
1
*IF (Huge If) you can consolidate everything and make it work, then do so.
But. . . If you can't resist new debt and spending after a large consolidation, then don't do it.
2
Can you increase your income?

There's an interesting thing that happens when people make their last payment on a car loan. All of a sudden they feel like they have free money to burn.
So what do many do?
Trade in the paid off car for a new car with payments again because they "can afford to".

Debt is like a 80 pound ball and chain around your feet and another 500 pounds on your back.
It's depressing, frustrating, you go nowhere and just shuffle through life.
But, many get used to it until it feels "normal", like painting indoors with the windows closed and getting used to the paint fumes and headaches.

So, don't get used to paint fumes, pay off your debts and don't incur new debts. :confused

j :happy
Last edited by Sandtrap on Wed Feb 26, 2020 9:11 am, edited 1 time in total.
Wiki Bogleheads Wiki: Everything You Need to Know
bloom2708
Posts: 9859
Joined: Wed Apr 02, 2014 2:08 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by bloom2708 »

Stop using both cards. Freeze all of them in a plastic storage container filled with water.

I would stop any/all retirement savings until you get this cleaned up. It is a big hole to dig out of, but doable.

Buy and read The Total Money Makeover by Dave Ramsey. Timeless advice. Stop all spending except the basics. Snowball from smallest to largest.

Another consolidation/personal loan will not work.

You can do this, but it will require a change in your thought process about spending.
User avatar
climber2020
Posts: 2708
Joined: Sun Mar 25, 2012 8:06 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by climber2020 »

Kingston73 wrote: Wed Feb 26, 2020 7:49 am Our combined income is about $140,000 per year (about $80/$60 each)
Kingston73 wrote: Wed Feb 26, 2020 7:49 am I am making $500/month payments toward my personal deb
On $140,000 income, what are you spending your money on that you only have $500 a month available to pay down the debt? That's only $6000 a year. With that income, you should be able to clear everything in 2 years or less.

A detailed list of all your monthly expenses will get you more useful advice.
User avatar
Sandtrap
Posts: 19590
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Advice needed - personal loan or credit card balance transfer

Post by Sandtrap »

climber2020 wrote: Wed Feb 26, 2020 9:11 am
Kingston73 wrote: Wed Feb 26, 2020 7:49 am Our combined income is about $140,000 per year (about $80/$60 each)
Kingston73 wrote: Wed Feb 26, 2020 7:49 am I am making $500/month payments toward my personal deb
On $140,000 income, what are you spending your money on that you only have $500 a month available to pay down the debt? That's only $6000 a year. With that income, you should be able to clear everything in 2 years or less.

A detailed list of all your monthly expenses will get you more useful advice.
+1
OP: can you edit your original post to include this list? (use the pencil icon)

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

Our monthly bills are:
2100 mortgage (home insurance is part of this amount)
1500 loan payment
500 credit
about 500 food/grocery
at least 500 gasoline, this varies month to month as my wife travels a lot but it isn't consistent travel
200 phone
200 internet/tv
200 electric
200 heat
150 auto insurance


The 140,000 per year is not our "in the bank/cash" amount, we both have money going into 403b's and also both contribute to individual retirement accounts so our actual per month "in the bank" amount is probably about $7000. My employer takes out about $240/month for health insurance that covers both of us. Neither of us has an option for the retirement taken out so the only option we both have to change anything is reducing the amount taken out for the 403b. I also pay union dues that I don't have an option on.

So what I'm hearing is that debt consolidation is basically a trap and I should just focus on paying my credit cards. Is it worth it to transfer a balance onto a 0% card? I have 2 credit cards and I could transfer a balance for 0% for a year but would have to pay a fee, or I could transfer for 5% for 15 months without a transfer fee.
Last edited by Kingston73 on Wed Feb 26, 2020 11:12 am, edited 2 times in total.
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by sailaway »

You need to come up with a plan in order to fully evaluate your options. Certain options will be better if you can free up more money to pay down the debt.

The budget you gave doesn't include include any contingencies for oil changes or maintenance, nor any recurring expenses, like insurance. Those omissions always make me wonder what else is missing.

But let's focus on what you have told us.

$200 for phones? Is that for the two of you? Is there phone financing in that number or just service?

Is your wife traveling for business? If so, isn't the mileage reimbursed? If not, if she played any part in accumulating these debts, she needs to make sacrifices to pay them down.

Have you considered getting rid of cable TV? If you miss it, reinstating it can be one of the rewards for paying down the debt.

I know I live in a small place, but $200 for electric that doesn't even include heat seems very high. It is more than twice what we pay for electric + gas for three adults and I am told that utilities are high here.

I find $500 for groceries very reasonable, but you may consider doing a grocery challenge to get it down even further.
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

sailaway wrote: Wed Feb 26, 2020 9:37 am You need to come up with a plan in order to fully evaluate your options. Certain options will be better if you can free up more money to pay down the debt.

The budget you gave doesn't include include any contingencies for oil changes or maintenance, nor any recurring expenses, like insurance. Those omissions always make me wonder what else is missing.

But let's focus on what you have told us.

$200 for phones? Is that for the two of you? Is there phone financing in that number or just service?

Is your wife traveling for business? If so, isn't the mileage reimbursed? If not, if she played any part in accumulating these debts, she needs to make sacrifices to pay them down.

Have you considered getting rid of cable TV? If you miss it, reinstating it can be one of the rewards for paying down the debt.

I know I live in a small place, but $200 for electric that doesn't even include heat seems very high. It is more than twice what we pay for electric + gas for three adults and I am told that utilities are high here.

I find $500 for groceries very reasonable, but you may consider doing a grocery challenge to get it down even further.
Edited post above to include insurance.
$200 is the cost of two phones (0% interest) and the 2 lines.

Wife travels for work (required) but only gets limited reimbursement for mileage.

The $200 for tv/internet is unfortunately one of our only options, in our area internet alone is about $130 and wife needs it when she works at home.

$200 for electric is also part of our heating/cooling. We have propane heat but the 'furnace' also uses electricty (forced hot air). We have conserved as much electricity as possible, we keep the heat very low (about 65 in winter) and high in summer (high 70's).

I agree with you, the credit cards are put away and we obviously need to start budgeting better.
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

I guess I'm slow but I'm trying to understand the aversion to consolidating bills? If we put the credit cards away and put things into 1 single bill wouldn't we be paying less per month in interest?
AverageInvestor1982
Posts: 40
Joined: Mon Sep 16, 2019 9:59 am

Re: Advice needed - personal loan or credit card balance transfer

Post by AverageInvestor1982 »

Hey, kudos to you, for having the guts to get on this board bare your financial soul to a bunch of strangers.

Job #1 is to really think about what you really want. Of course you want to get out of debt, but do you want it bad enough to make the kind of changes it's going to require? To give up how you have been living previously? To be the couple who has older vehicles, turns down requests to "meet us as the bar/restaurant! It's Friday!"

An overall negative change in lifestyle spending has got to be about one of the most difficult things to go through. Loan consolidations, etc, can be a great tool to save money and help you get out of debt, but they can also just be an enabler. They temporarily take some of the pressure off and allow you to go right back to previous behavior.

For me, seeing my net worth increase and getting closer to the day where I only work because I have to is the motivator for me to spend less than I could.

Also, where is your spouse on this? Does she know the full extent of your financial picture including debt? Have you had a conversation with her about how she feels regarding where you are and where you would like to go as a couple? I'm only asking because its critical that you both be on the same page going forward. Having a partner is a great way to keep yourself accountable.

That all being said, some tactical advice:

I just saw your post of expenses. I suggest getting hooked up to a site like Mint.com to help track and categorize all your expenses. heat/electric/internet/tv/phone all seem high. I'd advise really digging into them to see if you have options to lower them.

Have you stopped those expenses from coming in? Vacations, clothing, household supplies, and other entertainment expenses aren't in your budget - but I'm guessing you regularly spend some money on those things. Better to make sure you account for those one way or another.

I don't have personal experience with Dave Ramsey's debt advice, but any advice I've seem from Ramsey has always been pretty solid. We're passionate amateurs on this site and happy to offer advice, but if you really want to get serious, you may want to go "all in" in Ramsey.

Reddit has some personal finance threads you could subscribe to that are a little more geared towards your situation. Lots of people posting success stories about changing their spending habits, climbing out of debt, and a community that pats them on the back and cheers them on. Bogleheads is awesome, but it's definitely a place for people who are pre-disposed to being a net saver and militant about debt. You'll get great advice, but with a side of judgement.

You can absolutely do this. Best of luck
AverageInvestor1982
Posts: 40
Joined: Mon Sep 16, 2019 9:59 am

Re: Advice needed - personal loan or credit card balance transfer

Post by AverageInvestor1982 »

Kingston73 wrote: Wed Feb 26, 2020 10:25 am I guess I'm slow but I'm trying to understand the aversion to consolidating bills? If we put the credit cards away and put things into 1 single bill wouldn't we be paying less per month in interest?
It's a good idea, but I'm guessing the general concern is that it will make it easier for you to fall back into old spending patterns.
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by sailaway »

Kingston73 wrote: Wed Feb 26, 2020 10:25 am I guess I'm slow but I'm trying to understand the aversion to consolidating bills? If we put the credit cards away and put things into 1 single bill wouldn't we be paying less per month in interest?
That depends on the relative interest rates. You definitely should not pay any fees to transfer/consolidate the 0%. You should just make sure it is paid off before the offer expires. Is a lower rate on the personal loan available? If so, is it lower enough to make up for any fees for consolidation? The number of bills is irrelevant.

More importantly, in this case you have already consolidated, then dug deeper in debt. Everyone wants to see you break the pattern and change your long term habits.

Once you add up your personal loan, credit cards and phones, you have about $90k in unsecured debt. That is more than either of you earn. Meanwhile, you claim that you bring home $6k, but spend just over $6k a month - while maintaining that the over 6k is "about $5000." And that is a barebones budget that doesn't allow you to maintain, fix or replace anything. This is not sustainable, no matter how much you shift around the existing debt.

This isn't a matter of shaming you. You are the only one calling yourself names. This is a matter of asking you to face the clear consequences of the facts that you have presented.
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

I amended my post above with some more detailed numbers.

I was looking at things further and maybe this will help me decide whether a consolidation makes sense. I have about $7000 at 14% on my BOA, the balance is zero interest until december. Our previous consolidation is 10% interest.

I know I've made mistakes and I'm trying to correct them without making new mistakes. Wife and I have already agreed to a spending freeze. This is basically 6 years in the making, wife took a pay cut and we continued living without adjusting to the cut.

I completely agree, our previous consolidation did take pressure off us and would have been a good idea if we'd adapted to the pay cut as well.

We will be able to reduce our phone by $50, we will be changing the plan. I can lower my tv/internet by about $75, I just talked to a customer rep. So that's $125 reduced. I know it's not much but that's about as much as we can cut back.

The electric and heating bill can't be changed much at all unless we literally start using flashlights.
Last edited by Kingston73 on Wed Feb 26, 2020 12:29 pm, edited 1 time in total.
JHU ALmuni
Posts: 347
Joined: Tue Jan 20, 2015 11:40 am

Re: Advice needed - personal loan or credit card balance transfer

Post by JHU ALmuni »

OP, two things:
1. Create a budget and stick to it
2. Focus on higher interest debt first or the one that can be paid soon to get it out of the way
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by sailaway »

Kingston73 wrote: Wed Feb 26, 2020 12:05 pm I amended my post above with some more detailed numbers.

I was looking at things further and maybe this will help me decide whether a consolidation makes sense. I have about $7000 at 14% on my BOA, the balance is zero interest until december. Our previous consolidation is 10% interest.

I know I've made mistakes and I'm trying to correct them without making new mistakes. Wife and I have already agreed to a spending freeze. This is basically 6 years in the making, wife took a pay cut and we continued living without adjusting to the cut.
Does your BoA cc have $24k at 14% (original post) or $7k at 0%, as stated here? Or do you have more than one BoA that you are talking about?
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

The BOA has $7000 at 14% and the remainder is zero percent until december because of an introductory balance transfer. So my unsecured debt looks like this:
62,000 at 10% (this was our original consolidation loan that we are paying 1500/month on)
7000 at 14%
23,000 at zero until 12/2020
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by sailaway »

Is there non profit credit counseling available in your area?

Are you eligible for a HELOC?
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Kingston73 wrote: Wed Feb 26, 2020 10:25 am I guess I'm slow but I'm trying to understand the aversion to consolidating bills? If we put the credit cards away and put things into 1 single bill wouldn't we be paying less per month in interest?
Everything we know about your past definitively states you will not follow through with the lifestyle change.

We also know this is true of the extreme majority of folks who have a well documented history of overspending, especially with consumer debt.

Most important: Get on a budget.

Start paying $4000 a month towards debt. After a full year of doing this consistently it *might* make sense to consolidate. But by then you'll only have a year left and should just soldier on kicking butt.

Read Dave Ramsey's book. Go to his class. Listen to his podcast. Get out of debt. Dave emergency fund. Come back here for investing. You will not regret this.
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

I have not considered a home equity loan, we have only been in our house for about 6 years now and have maybe 50-60,000 in equity.

When you ask about a credit counselor, do you mean contacting somebody like the NFCC?

For the last comment, when you say "pay $4000 toward debt" are you including our mortgage in that amount or are you saying pay our basic monthly bills and somehow find another $4000 on top of that?

I know my past history isn't good but wow, you guys here don't really seem like you believe people can change. I guess stats show it's unlikely.
Last edited by Kingston73 on Wed Feb 26, 2020 1:01 pm, edited 1 time in total.
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Something else to consider.

I've counseled plenty of folks one on one on getting out of debt; I've also taught courses similar to Dave's and also Financial Peace.

What we commonly see people in your situation do is simply make poor decision after poor decision. That's why you're in the situation you are.

This consolidation is just another one if your typical approaches to your finances. Time to change your decisions. No shame in this. None of us are perfect.

However, there is shame in being shown the right decision. Have that decision fully explained and then choosing another decision based on poor logic and bad data.

Start listening to the Dave Ramsey podcast. Give it a month. Then make your decision.
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Kingston73 wrote: Wed Feb 26, 2020 12:57 pm I have not considered a home equity loan, we have only been in our house for about 6 years now and have maybe 50-60,000 in equity.

When you ask about a credit counselor, do you mean contacting somebody like the NFCC?
Nor should you.

Horrific advice for one in your situation.
Last edited by gr7070 on Wed Feb 26, 2020 8:04 pm, edited 1 time in total.
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Kingston73 wrote: Wed Feb 26, 2020 12:57 pm
For the last comment, when you say "pay $4000 toward debt" are you including our mortgage in that amount or are you saying pay our basic monthly bills and somehow find another $4000 on top of that?

I know my past history isn't good but wow, you guys here don't really seem like you believe people can change. I guess stats show it's unlikely.
No. 4000 to consumer debt.

Understand this isn't picking on you. It's being very straight forward and to the point.

People can change. However it's very difficult and few do. Yes, the stats bare that out.
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by sailaway »

Kingston73 wrote: Wed Feb 26, 2020 12:57 pm

I know my past history isn't good but wow, you guys here don't really seem like you believe people can change. I guess stats show it's unlikely.
You have said you take home $6000 and spend $6050, with your freezing spend. Your changes up until now haven't been enough to get out of this hole. That has nothing to do with statistics.
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

gr7070 wrote: Wed Feb 26, 2020 1:00 pm Something else to consider.

What we commonly see people in your situation do is simply make poor decision after poor decision. That's why you're in the situation you are.

This consolidation is just another one if your typical approaches to your finances. Time to change your decisions. No shame in this. None of us are perfect.

However, there is shame in being shown the right decision. Have that decision fully explained and then choosing another decision based on poor logic and bad data.

Start listening to the Dave Ramsey podcast. Give it a month. Then make your decision.
You're correct, that's why I'm here asking for advice because I don't want to make another poor decision. I'm not taking it personally, just trying to understand the advice and I'm still confused. You are telling me to put $4000 toward my debt along with paying my mortgage and other bills?
mamboking
Posts: 20
Joined: Wed Dec 05, 2018 1:15 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by mamboking »

I was in a similar position to you a couple of years ago, still got about another year to go to be completely consumer debt free. The thing that really made a difference for us was YNAB (youneedabudget.com). It's $85/yr but it's completely changed the way we handle our money. Now when we spend our money it's a conscious decision to do so. They have a ton of great videos and podcasts. Search for YNAB on youtube and you'll see there's an almost cult following. Check it out. I think there's a 30 day trial.
Kevin
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

$4000 was what another person recommended. With your income it certainly looks doable.

The important part is to budget. Do as you started by removing things or reducing them. FYI I pay $90 total for 3 phones, Cricket.

Seriously start with Dave Ramsey. Get hard core about getting rid of debt.

And do not transfer to a credit card! That is consolidation, too, but the worst kind. Chances are you won't repay in time and then you'll get with 25% interest on it all.
User avatar
PaddyMac
Posts: 1808
Joined: Fri Jul 09, 2010 10:29 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by PaddyMac »

"The $200 for tv/internet is unfortunately one of our only options, in our area internet alone is about $130 and wife needs it when she works at home."

Some great advice above. While you are budgeting, question every single expense. Even a small savings every month adds up.

We switched from DirectTV to YouTubeTV and cut our TV bill in half. Almost all the stations we watch are included, so we didn't miss out. In fact, we like the features better than DTV as we have our own individual wishlists and unlimited DVR.

Also, have you considered ways to add more income? Are there freelance jobs you could do?
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

BTW with your income you should be looking at getting rid of all this debt in about 2 years. If that's not what you budget allows the problem is likely in your budget, not the 2 year goal.

As mentioned above increase income and decrease outgo wherever possible.

Feel free to post here for help and advice. But definitely get involved with Dave Ramsey.
User avatar
Meg77
Posts: 2835
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX

Re: Advice needed - personal loan or credit card balance transfer

Post by Meg77 »

Hey there. Welcome!

I just want to clarify that the reason consolidation loans aren't recommended (here or by Dave Ramsey or in general) is that it makes you feel like you *did* something. I tackled my debt! I'm saving interest! But really all you did was just shuffle the debt from point a to point b. Then you just move on with life and generally keep your spending the same, and all you've done is added another fixed payment to your budget.

People get SO hung up on the interest. But the interest on a $7000 debt at 14% is only $980 a year - and that's if the balance stays the same the whole time. You don't have a $980 problem; you have a $98000 problem (roughly).

That said, interest rates matter. You're unlikely to get 14% on your retirement money consistently. Plus you said you have mandatory pension contributions too. So I would STOP investing in the 403b and redirect that money to the $7000 loan. Put everything extra toward it - the whole $500 you're already doing, plus the 403b money, plus anything else you can scrape together. And that will be gone so fast that the fees/hassle to consolidate won't be worth it, and the interest rate won't make a big difference.
"An investment in knowledge pays the best interest." - Benjamin Franklin
Topic Author
Kingston73
Posts: 18
Joined: Sat Aug 26, 2017 11:54 am

Re: Advice needed - personal loan or credit card balance transfer

Post by Kingston73 »

I have a very dark question, if I were to die does my wife get saddled with my debts? We have some debt together, a personal loan and a mortgage, but would she be held responsible for my personal credit card debt?
User avatar
gr7070
Posts: 1928
Joined: Fri Oct 28, 2011 10:39 am

Re: Advice needed - personal loan or credit card balance transfer

Post by gr7070 »

Personal debt is yours alone.

However, your estate would be saddled with your debt. So half your joint assets (home, half? your 401k etc.) would obligated towards your debt before the rest is passed.

Depending on some potential odd particulars of debt (potential forgiveness etc), I'd just account for personal debt in life insurance needs determination.
Herekittykitty
Posts: 930
Joined: Wed Apr 16, 2014 8:11 pm
Location: Flyover Country

Re: Advice needed - personal loan or credit card balance transfer

Post by Herekittykitty »

Kingston73 wrote: Sun Mar 22, 2020 3:21 pm I have a very dark question, if I were to die does my wife get saddled with my debts? We have some debt together, a personal loan and a mortgage, but would she be held responsible for my personal credit card debt?
Take good care of yourself and she should take good care of herself. Love long and prosper. The prosper part comes once you get on and stay on a budget and get the debt paid off and start saving and investing.

If you aren't on a written budget with every dollar accounted for and if you and your wife aren't having what Dave Ramsey calls a budget meeting once a week (once you and she are doing that regularly it will start going fast, the first few times will be hardest) then start that today.

It wouldn't surprise me if there are budget leaks accounting for much of the problem and that you and your wife don't know about or don't realize are as significant as they are. The suggestions above will shine a light on those and put you and your wife in a powerful position to take charge of them.

(Ex: As part of what could be looked at - I am concerned about the car expense your wife is required to incur for work but isn't reimbursed for. I wouldn't be surprised if that is part of the problem. If so, she might want to consider a different job. But - I'm just making a wild guess here and could easily be wrong on this particular thought.)

Use a spreadsheet or paper or whatever makes sense to you to track the debt going down.

As you get more traction, this will get easier. Within a few years you can be out of debt and as the process moves along, you can change your lives and your futures for the better.

You do not have an insurmountable task ahead. This can be done. Think forward to the day you will be debt free and can start building wealth. That day can come.

Stay healthy, both of you, and get this debt out of your lives.

Best wishes.
I don't know anything.
Monsterflockster
Posts: 980
Joined: Wed Nov 20, 2019 11:03 pm

Re: Advice needed - personal loan or credit card balance transfer

Post by Monsterflockster »

Kingston73 wrote: Wed Feb 26, 2020 9:18 am Our monthly bills are:
2100 mortgage (home insurance is part of this amount)
1500 loan payment
500 credit
about 500 food/grocery
at least 500 gasoline, this varies month to month as my wife travels a lot but it isn't consistent travel
200 phone
200 internet/tv
200 electric
200 heat
150 auto insurance


The 140,000 per year is not our "in the bank/cash" amount, we both have money going into 403b's and also both contribute to individual retirement accounts so our actual per month "in the bank" amount is probably about $7000. My employer takes out about $240/month for health insurance that covers both of us. Neither of us has an option for the retirement taken out so the only option we both have to change anything is reducing the amount taken out for the 403b. I also pay union dues that I don't have an option on.

So what I'm hearing is that debt consolidation is basically a trap and I should just focus on paying my credit cards. Is it worth it to transfer a balance onto a 0% card? I have 2 credit cards and I could transfer a balance for 0% for a year but would have to pay a fee, or I could transfer for 5% for 15 months without a transfer fee.
I haven’t read all the replies so if some of this may be a repeat.

1. The guy who said freeze your cards was spot on. Stop using them. Cut them up if you have to. Pay cash here on out.

2. If you can put your balance on a card with zero percent APR for a year or more.

3. Cut cable. You can stream for $60 a month.

4. Move to a prepaid cell phone service. No way your bill should be $200 a month.

5. Sell a car. Buy a “beater” such as a used civic for $1000-$2000 and drive it til it dies. This will decrease your insurance as well.

6. Contribute to 401k to get your company match. Anything else goes straight to debt.

7. Can you pick up extra hours? Might need to get through this but a second job may be needed to get you out of this.

8. Stop eating out and start eating like you’re poor.

You can do this. It means cutting back and living like you lost everything and are starting over. You are going to need to put away the impulse buying and hunker down.

Come back in a year and let us know how it’s going.
Post Reply