Help - best way to handle large credit card debt paydown ?!?!

[Anonymous]

I'm a firm believer that any plan that gets too complicated really isn't going to help solve anything.

I would focus more on budgeting, going into poverty spending mode, seeing what you can do to raise some extra $$, and hammer at these balances where they sit for the time being. Once the utilization is in check, some *good* options for consolidation will open up to you. By this point, you will have done the work you need to on your budget to have the proper habits established to deal with the rest.

A 21.99% loan helps in no way shape or form.

[SouthJamaica]

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@raine22wrote:

I repaired my credit several years ago with the help of these forums.  Same story as everyone, DH had a bad work year and we turned to credit cards to make it.  Now I have a large amount of credit card debt I need to get out from under and be debt free other than our mortgage.  I do not trust myself as to make the best decision on how to handle the scenario and need the help of the financial gods in this forum once again.  Also, limited options due to high utilization bringing down my credit scores.  Here are the numbers and not sure which would be the best option - i.e. am I thinking it through before making a mistake!

Current Fico scores:  712, 690 & 693

Total credit card:  11

Cards with balances:  7

Total CC debt:  $55,188 

Creditor - Interest Rate - CC Limit - Balance - % utilization - Min. Monthly Pmt.

Chase Slate  10th	15.99%	7,000.00	4,832.24	0.69	122.00
US Bank	17.99%	7,400.00	6,798.31	0.92	165.00
L.L. Bean 4th	18.24%	9,550.00	7,842.49	0.82	200.49
Discover It 7th	24.24%	8,300.00	7,969.07	0.96	162.00
Amex 18th	21.99%	7,500.00	7,167.26	0.96	212.00
Lowe's 8th	26.99%	10,000.00	8,825.01	0.88	282.00
Discover 19th	19.24%	12,100.00	11,754.44	0.97	240.00

@Option 1 ) Yesterday, I thought I would apply for a debt consolidation loan through Discover Card Services.  I was approved for $35,000 @ 21.99% rate 60 months @ $966.46/mo.  This doesn't quite cover everything so I could pay off both Discover Cards, Lowe's & Amex leaving me to still pay monthly payments towards the remaining cards - LL Bean, US Bank, Chase Slate.  Also, rate is high just makes it simple having less payments to keep track of (not a big deal really)

Option 2) Debt Snowball - using $2,000 a month (this may not always be an option if DH is laid off durning winter months) payoff in 2021 total paid back 76,888 (21,787 in interest).

The only other thing I can think of possibly doing is to keep paying down and possibly take out a home equity loan at better interest rate but not sure it's possible to do that until some of this is paid off and my scores are up.

I know there is no simple answer and it takes dedication and hard work to pay it off.  I'm just not sure if I should just continue debt snowball or do the discover loan and at least combine a few even if it isn't really saving that much in interest!   Just looking for thoughts, advice or possibly a suggestion I'm not thinking of - 

Thank you!

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In my opinion you should

(a) stop using the cards

(b) concentrate payment on account with lowest balance (snowball method)

(c) pay minimum + $5 towards each of the others

(d) avoid "debt consolidation" temptations unless you can get a LOW INTEREST loan from a CREDIT UNION

[arkane]

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@Anonymouswrote:

I'm a firm believer that any plan that gets too complicated really isn't going to help solve anything.

I would focus more on budgeting, going into poverty spending mode, seeing what you can do to raise some extra $$, and hammer at these balances where they sit for the time being. Once the utilization is in check, some *good* options for consolidation will open up to you. By this point, you will have done the work you need to on your budget to have the proper habits established to deal with the rest.

A 21.99% loan helps in no way shape or form.

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+1

Don't use new debt to settle old debts, it won't work unless you're the US Government.

[Anonymous]

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@Anonymouswrote:

I'm a firm believer that any plan that gets too complicated really isn't going to help solve anything.

I would focus more on budgeting, going into poverty spending mode, seeing what you can do to raise some extra $$, and hammer at these balances where they sit for the time being. Once the utilization is in check, some *good* options for consolidation will open up to you. By this point, you will have done the work you need to on your budget to have the proper habits established to deal with the rest.

A 21.99% loan helps in no way shape or form.

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A 21.99% loan absolutely does help in the case of any APR that is higher, and it doesn't hurt if the APR is equal. That is basic math. Furthermore, it takes revolving debt and slides it over into an installment account. Not only does it save money in interest, it consolidates payments with a very clear amount and timeline. Future 'better' options can definitely arise, but getting interest under control as much as possible now is what matters.

[raine22]

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@Anonymous

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A 21.99% loan absolutely does help in the case of any APR that is higher, and it doesn't hurt if the APR is equal. That is basic math. Furthermore, it takes revolving debt and slides it over into an installment account. Not only does it save money in interest, it consolidates payments with a very clear amount and timeline. Future 'better' options can definitely arise, but getting interest under control as much as possible now is what matters.

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This was actually great advice.  I clearly did not think about only paying off the cards with the equal/higher interest!  These forums are wonderful with knowledge and sometimes just opening our eyes to another way of looking at something in a different light. 

This also gets my credit card ratio between all my accounts down to 38% across the board which will help my score improve in time so that I can seek a better option in the future while being able to manage the interest rates at hand.  Also, allow me to focus on paying the four remaining cards off which was overwhelming with the high interest each month.  I now feel I can see the light at the end of the tunnel!  

Thank you so much dyn086!!

[Gregory1776]

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@DeeBee78wrote:

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wrote:
That rate kinda sucks, most of your cards have lower rates. I know balance transfers can be a bit playing with fire, but you could consider product changing your Chase slate to a freedom, then opening another slate for the 0% interest, no balance transfer fee offer. If you still have more, the bank of America americard has a similar offer with 0% interest and intro no fees on balance transfers. Each of these offers 15 months at 0%.

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OP is going to have a hard time getting another card at this point, due to utilization on those 7 cards. 

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Not sure how it was even recommend....

[Anonymous]

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@raine22wrote:

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@Anonymous

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A 21.99% loan absolutely does help in the case of any APR that is higher, and it doesn't hurt if the APR is equal. That is basic math. Furthermore, it takes revolving debt and slides it over into an installment account. Not only does it save money in interest, it consolidates payments with a very clear amount and timeline. Future 'better' options can definitely arise, but getting interest under control as much as possible now is what matters.

---

This was actually great advice.  I clearly did not think about only paying off the cards with the equal/higher interest!  These forums are wonderful with knowledge and sometimes just opening our eyes to another way of looking at something in a different light. 

This also gets my credit card ratio between all my accounts down to 38% across the board which will help my score improve in time so that I can seek a better option in the future while being able to manage the interest rates at hand.  Also, allow me to focus on paying the four remaining cards off which was overwhelming with the high interest each month.  I now feel I can see the light at the end of the tunnel!  

Thank you so much dyn086!!

---

Get those high rate cards into a one payment installment loan. Make sure they stay at $0 balance, destroy them. Let all the accounts age as it will lower your util. In about 6-12 months, you will be able to refinance that loan into a much better rate and likely a larger amount for the rest of the cards. Make sure to keep the term the same from the time it is refi (do not keep extending it). After the refi, your cards need to stay at the 1-3% util and you will be able to refi that loan one last time at an excellent rate. Keep making the payments and putting every little cent extra towards those cards in the mean time.

Sometimes you have to pay into the higher rates to make the smarter choices. The most important factor is to not use those cards at all anymore and do cash/debit only. Even if you think the rewards justify the use, don't.

I know others are saying that rate is too high but ultimately that loan is going to do more for you with your score to help secure better rates much faster then it would for you to make payments on the cards by themselves. This is only because your total amount, current rates (pretty high already), and your util combined.

Edit: My opinion is only going to work if you can control the one common denominator, you. Obviously you got yourself in this situation and before you go forward you need to make sure you understanding exactly what you want to do, how to get there, and what you need to do to get there. This is not a journey for the weak, nor is it a journey that will be accomplished over night. You will not see immediate results, but you can make the journey easier on yourself by making smart choices. DO NOT take my advice if you feel you cannot do this because if you take a loan and then use the cards again for ANY reason, you will be putting yourself in a situation you will not be able to get out of. At that point, I would take what a few others have said and do the snowball effect by keeping the cards only and making large payments when possible. Same approach but no loan.

[raine22]

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@Anonymouswrote:

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@raine22wrote:

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@Anonymous

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A 21.99% loan absolutely does help in the case of any APR that is higher, and it doesn't hurt if the APR is equal. That is basic math. Furthermore, it takes revolving debt and slides it over into an installment account. Not only does it save money in interest, it consolidates payments with a very clear amount and timeline. Future 'better' options can definitely arise, but getting interest under control as much as possible now is what matters.

---

This was actually great advice.  I clearly did not think about only paying off the cards with the equal/higher interest!  These forums are wonderful with knowledge and sometimes just opening our eyes to another way of looking at something in a different light. 

This also gets my credit card ratio between all my accounts down to 38% across the board which will help my score improve in time so that I can seek a better option in the future while being able to manage the interest rates at hand.  Also, allow me to focus on paying the four remaining cards off which was overwhelming with the high interest each month.  I now feel I can see the light at the end of the tunnel!  

Thank you so much dyn086!!

---

Get those high rate cards into a one payment installment loan. Make sure they stay at $0 balance, destroy them. Let all the accounts age as it will lower your util. In about 6-12 months, you will be able to refinance that loan into a much better rate and likely a larger amount for the rest of the cards. Make sure to keep the term the same from the time it is refi (do not keep extending it). After the refi, your cards need to stay at the 1-3% util and you will be able to refi that loan one last time at an excellent rate. Keep making the payments and putting every little cent extra towards those cards in the mean time.

Sometimes you have to pay into the higher rates to make the smarter choices. The most important factor is to not use those cards at all anymore and do cash/debit only. Even if you think the rewards justify the use, don't.

I know others are saying that rate is too high but ultimately that loan is going to do more for you with your score to help secure better rates much faster then it would for you to make payments on the cards by themselves. This is only because your total amount, current rates (pretty high already), and your util combined.

Edit: My opinion is only going to work if you can control the one common denominator, you. Obviously you got yourself in this situation and before you go forward you need to make sure you understanding exactly what you want to do, how to get there, and what you need to do to get there. This is not a journey for the weak, nor is it a journey that will be accomplished over night. You will not see immediate results, but you can make the journey easier on yourself by making smart choices. DO NOT take my advice if you feel you cannot do this because if you take a loan and then use the cards again for ANY reason, you will be putting yourself in a situation you will not be able to get out of. At that point, I would take what a few others have said and do the snowball effect by keeping the cards only and making large payments when possible. Same approach but no loan.

These cards will be going into a sock drawer.  I will be putting all bonus cash (paid quarterly) and any other xtras coming our way.  We are also living as DH is still "laid off" for our monthly expenses.  I've developed a budget on YNAB as well as have an emergency fund put back for any suprise expenses.  I've recieved the funds, paid off the cards and I'm using the snowball method for the remaining cards.  I've got a plan in place now and feel 100% dedicated to the task at hand and I will get there and I'm so thankful for a site such as this to come and get great advice! 

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[Anonymous]

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@raine22wrote:

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@Anonymouswrote:

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@raine22wrote:

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@Anonymous

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A 21.99% loan absolutely does help in the case of any APR that is higher, and it doesn't hurt if the APR is equal. That is basic math. Furthermore, it takes revolving debt and slides it over into an installment account. Not only does it save money in interest, it consolidates payments with a very clear amount and timeline. Future 'better' options can definitely arise, but getting interest under control as much as possible now is what matters.

---

This was actually great advice.  I clearly did not think about only paying off the cards with the equal/higher interest!  These forums are wonderful with knowledge and sometimes just opening our eyes to another way of looking at something in a different light. 

This also gets my credit card ratio between all my accounts down to 38% across the board which will help my score improve in time so that I can seek a better option in the future while being able to manage the interest rates at hand.  Also, allow me to focus on paying the four remaining cards off which was overwhelming with the high interest each month.  I now feel I can see the light at the end of the tunnel!  

Thank you so much dyn086!!

---

Get those high rate cards into a one payment installment loan. Make sure they stay at $0 balance, destroy them. Let all the accounts age as it will lower your util. In about 6-12 months, you will be able to refinance that loan into a much better rate and likely a larger amount for the rest of the cards. Make sure to keep the term the same from the time it is refi (do not keep extending it). After the refi, your cards need to stay at the 1-3% util and you will be able to refi that loan one last time at an excellent rate. Keep making the payments and putting every little cent extra towards those cards in the mean time.

Sometimes you have to pay into the higher rates to make the smarter choices. The most important factor is to not use those cards at all anymore and do cash/debit only. Even if you think the rewards justify the use, don't.

I know others are saying that rate is too high but ultimately that loan is going to do more for you with your score to help secure better rates much faster then it would for you to make payments on the cards by themselves. This is only because your total amount, current rates (pretty high already), and your util combined.

Edit: My opinion is only going to work if you can control the one common denominator, you. Obviously you got yourself in this situation and before you go forward you need to make sure you understanding exactly what you want to do, how to get there, and what you need to do to get there. This is not a journey for the weak, nor is it a journey that will be accomplished over night. You will not see immediate results, but you can make the journey easier on yourself by making smart choices. DO NOT take my advice if you feel you cannot do this because if you take a loan and then use the cards again for ANY reason, you will be putting yourself in a situation you will not be able to get out of. At that point, I would take what a few others have said and do the snowball effect by keeping the cards only and making large payments when possible. Same approach but no loan.

These cards will be going into a sock drawer.  I will be putting all bonus cash (paid quarterly) and any other xtras coming our way.  We are also living as DH is still "laid off" for our monthly expenses.  I've developed a budget on YNAB as well as have an emergency fund put back for any suprise expenses.  I've recieved the funds, paid off the cards and I'm using the snowball method for the remaining cards.  I've got a plan in place now and feel 100% dedicated to the task at hand and I will get there and I'm so thankful for a site such as this to come and get great advice! 

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Sounds like you are taking a great first step. Persistence is incredibly important. Never let up with your end goal. I am sure everyone on here can agree the most important factor is going to be yourself. Control that and your plan will pay off in the years to come.

Make sure to give us an update from time to time, especially when it comes time to refi (make sure to post before applying). A couple months before, you will want to make your credit profile look as strong as possible which can be the difference of several hundred dollars (if not thousands) a year in interest. 

A big factor to above is how successful you are with the remaining cards and the snowball method.

[arkane]

Don't waste money with YNAB or any other "fancy financial software" when an Excel spreadsheet will do you just fine for budgeting. I've been using the same basic spreadsheet for close to 10 years now and it's never failed me.