Best course of action in paying down multiple large balances

[IWOL]

---

@Callandra wrote:

@ IWOL - I'm so sorry to hear of your hardships. 

Docs being subcontracted out is pretty typical in hospitals; the one I used to work in pretty much contracted all the doctors out. The radiology techs were all hospital employees though. However, with the way they do billing, they break it all down and bill separately for each and every little thing so you wind up paying a lot of money. Then each doctor you used (radiologist, surgeon, ER doc) will all also bill you separately. It's ridiculous! At least you were able to negotiate some of it down. Have you talked to the hospital's billing department about a payment plan? -Most- people can't just fork over $20k right away. 

---

I was able to get a payment plan with the hospital but not the surgeon, radiologist etc. . I have been paying the plan on a credit card every month. Since my current livng expenses were leaving me with a small deficit every month I obviosuly didnt have any disposable income to put towards that debt and all I did essentially was transfer the hospital debt to my credit cards.

The $6K amount I was able to negotiate came from Blue Shield. I got them to pay $6k more than they originally agreed to . The hospital refused to negotiate the debt.

The msot infuriating thing is that, had my insurance covered the $26K amount, they woudl have probbaly only paid the hospital around $12K bsed on their "negotiated rates" but since im respisible for that portion I have to pay 100%. The hospital obviously overbill knowing they will only collect 50% but do not offe rthe same courtesy when its billed directly to the patient.

[IWOL]

---

@Anonymous wrote:
I would let that 20k go to collection. No way I would pay them.

---

I considered that option for a minute but I just spent 2 years fixing my credit and building a strong portfolio. That couild potentially bring it all down and that would be worse.

[Anonymous]

I would try to get a low APR personal loan before touching your 401k, and consolidate all of your cards (except for the 0% APR cards) into one. If that's not an option for you, then I would take the 20k and pay off 2-3 of the largest amount and highest APR cards first (obviously paying at least a little over the minium on everything else). After that, I would focus on the next highest APR card, pay as much as you can towards that each month until you knock it out. Then repeat and rinse with the next card.

Consolidating would be the best option, so that you just have one (or 2-3) payments each month as opposed to 8 payments due. If you can't/don't want to get a personal loan, perhaps a few 0% APR balance transfer cards could help consolidate those interest bearing cards?

[Dw4250]

---

@Creditaddict wrote:

Don't do the 401K!!!! Just don't do it!!!~

Have you checked with Sofi.com

You can get your rate and amount you qualify to borrow with just a sp... My partner was able to a $50k personal loan out at 6% basically... BY FAR cheaper than any other personal loan I have ever found... They offer up to $100k but when he did the pre-qual it came back with max of $50k and that's what he applied for... it did take a few weeks for it to be completed and send a couple other docs but in the end it went through and cash deposited into checking account.

401k are just doing too well right now to pull from and paying taxes twice on that money just means that everything gained by paying off that little bit of debt has been lost 10 fold in other ways.  If the payments are manageable i would not take the loan from 401k period... take a couple personal loans or continue to move the debt around on 0%

but I would also suggest paying more cards off than smaller cards to larger cards... consolidate down more so more debt is in 1 place even if that makes util. on a couple cards 100%

---

IWOL sorry to hear about your troubles.  

As much as I love Creditaddict, I have to respectfully disagree with him on using the 401K/IRA.  IMHO $50K in credit card debt is a financial emergency.  When the house is burning down, you should not worry about putting in a new gourmet kitchen with granite countertops 20 years from now.  

If IWOL was in his/her 50's and retirement was around the corner, yes definitely not a good idea to start dipping into the 401K.  But he/she is young enough to recoop most/all of the loses. And once this debt is gone, given his/her income level, IWOL should be able to put a lot away in savings and IRA (instead of paying interest on debt).

I would take $20K (or more) to pay this debt off quickly. You will get slammed by the tax bill at the end of the year. But I think that's better than getting slowly eaten alive with interest payments.  That being said, I would definitely look to see if you can qualify for a low interest personal loan (doubtful given the level of CC debt).  But it's worth a shot.

IWOL if you havent done so already, I would definitely get out a spreadsheet and figure out the true costs, both of paying this debt down with and without use of the 401K.  

Good luck, my friend!

[NRB525]

---

@IWOL wrote:

I have 20K cash that Im taking out of my 401K to pay  toward these balances right away. Im only 40 and I have a good amount in my 401K, so not too concerened about this. I also just got a hefty increase in my salary that will cover the deficit in my monthly living expnses and allow me to pay these down at $2500 a month.

---

Please clarify this statement.

Are you taking a $20k withdrawal from your 401k? If so I agree 110% with creditaddict: Bad move.

Are you taking a loan of $20k from your 401k? If so, this gets kudos. The interest payments go back to your retirement fund, much better than any money market portion of your 401k plan.

[Anonymous]

I would keep your money.  Use BT's or open another card with 0% for 21 months and BT to that, pay it off, rinse & repeat.  Might take a while but, you can do it if you stay focused.  Keep your money.  Always a good idea imo.  

[kdm31091]

The "open a new card to BT" seldom works out well because when you need credit, it's very hard to get it. With OP's high util, they aren't gonna get a large, useful limit on a BT card.

I don't think taking money from your 401k is an awful plan. As someone else said, can't worry about granite countertops when the house is burning down. Your first priority is paying the debt. Once your debt is gone, you can rebuild your retirement savings with your new, higher income. But the debt will eat away at everything until then.

[IWOL]

Yes, the money from the 401k would be a loan, not a withdrawal. I've already factored the loan payment amount against my income which leaves me the $2500 to pay towards the cards.

[NRB525]

---

@IWOL wrote:
Yes, the money from the 401k would be a loan, not a withdrawal. I've already factored the loan payment amount against my income which leaves me the $2500 to pay towards the cards.

---

Have you already taken the loan? Is that the max loan amount you can get from the 401k?

[ddemari]

Ive always been told not to do the 401k withdrawl. Isnt there a penalty u have to pay or lose on? Unless its the most practical for u, is try to make the largest payments u can on cards. When i start to rack up some bills, i only use a card with 0 balance and charge what i can pay realistically ( wish i could just follow that logic all the time)