Please help!

[Anonymous]

Depending on your credit score one thing you may want to look at is a website called Prosper (www.prosper.com).

It is peer to peer banking. Members lend money to other members.

When you create a borrower account Prosper will pull your credit (soft inq - does not go on credit report) and give you a grade. You could get a loan for 7500 to pay off all cards except the $24K).

Prosper assigns credit "grades" depending on your credit.
If you rate an AA you likely could get a 3 year loan @ 9%-10%. A gets you 12%-14%. B or C will be around 16%. If your credit is D or worse then it likely isn't worth it.

How much is your current minimum payments for all debt (except the $24K)?
You said you can afford minimum + $75.

All loans on prosper are 3 years.
$7500 @ 9% for 36mo = $238 mo
$7500 @ 14% for 36mo = $256 mo
$7500 @ 16% for 36mo = $263 mo

[Anonymous]

Thank you -i just read this and already printed out my report. Thanks!

[Anonymous]

Sounds interesting. I will check out the website and see where we fall. Our mim monthly payments on the cc are $415 /25,000 $100/5000 $65/1500 $180/650 (0% interest but 20% of the balance) $10/200 $10/88

[Anonymous]

The way to get out of debt is definately not to get MORE debt.  Avoid getting another loan at all costs.  I ma new to the credit score game, but about 5 years ago I started with the investment game and have amassed an insane amount by some basic principles.  First, if you are not SERIOUS don't go through the headache it will only cause more pain.  I know there are alot of Ramsey haters here and I do many things different than he would to create wealth faster, but you do have to "live like no one else today, so that you can live like no one else tomorrow".  If you are willing to go through step one the second step will scare the s#!t out of ya...take your retirement and pay off you cc's.  I know this causes a lot of raised eyebrows, but look at the penalties for pulling out early and compare them to 13% on 25k and do that for every credit card time the length of time it will take for you to pay them off.  You will see that not only are you coming out ahead in the end, but you will live easier as you do this.  Now reread the disclaimer...YOU MUST BE WILLING TO COMMIT, because it does not stop there.  Take the next few thousand dollars and place it in a savings account or mm for the unexpecteds that life will throw at you.  You must then take every ounce of money you are saving monthly and throw it back at retirement until you are back up to the level you started(taking into account tax laws and benifits).  Then start putting money back into cash and other investments and begin paying cash for things like cars, boats etc.

A couple of other notes...cut up your other cc.  That is what the intital couple of thousand is for.  You don't need the cc, because youhave cash.  Keeping a cc  for emergencies is just another trap you are setting for yourself.  Now I believe in keeping the accounts open, but don't get a replacement card issued until about six or eight months when you new found muscles are tone and you seeing some positive results from you new found habits.

[Anonymous]

ok, i am laughing right now. I am a total Dave Ramsey fan, BUT his belief on the retirement thing. AND if I were willing to do that, my husband would, and has laughed in my face. Do you really think this is a smart thing to do? Have you done it? I just get scared to think we would be putting our retirement on hold. BUT I do think paying off debt faster would only get us back on track faster. Make any sense?? Anyway, thank you for the response and I cant wait to revisit this with my husband.

[Anonymous]

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foundthelight wrote:
ok, i am laughing right now. I am a total Dave Ramsey fan, BUT his belief on the retirement thing. AND if I were willing to do that, my husband would, and has laughed in my face. Do you really think this is a smart thing to do? Have you done it? I just get scared to think we would be putting our retirement on hold. BUT I do think paying off debt faster would only get us back on track faster. Make any sense?? Anyway, thank you for the response and I cant wait to revisit this with my husband.

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I am not sure what amount you have in retirement right now, but you can subtract you debt directly off that amount.  50k in retirement just gets voided by 50k in debt and actually worse because you paying interest on debt.  Yes, I have done exactly what I propose.  It was the scariest thing I have done, but in almost five years, I have a six figure cash/retirement etc. portfolio and own 5 houses...two of which are paid off worth over 100k each along with a valuable piece of raw land on the coast.  I only make 80k a year from my job and have since almost doubled that through investments.  I am lucky to have the support of my wife(who does not work) and 2 kids who all realize the value of what we are trying to accomplish.  The program works, but you can never ever ever deviate or you will be right back into debt.  It is not rocket science and you can pick the level of risk you want to take, but if you don't do it(like most of the US) you will never get where you want to go.  Wherever it is.

[Anonymous]

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@Anonymous wrote:

The way to get out of debt is definately not to get MORE debt. Avoid getting another loan at all costs. I ma new to the credit score game, but about 5 years ago I started with the investment game and have amassed an insane amount by some basic principles. First, if you are not SERIOUS don't go through the headache it will only cause more pain. I know there are alot of Ramsey haters here and I do many things different than he would to create wealth faster, but you do have to "live like no one else today, so that you can live like no one else tomorrow". If you are willing to go through step one the second step will scare the s#!t out of ya...take your retirement and pay off you cc's.

WORST IDEA EVER. You seem to forget the 10% penalty plus the fact that the OP would need to pay interest on the retirement funds which may push them into next tax bracket. Finally depending on their 401K plan they may not be able to contribute an additional $9600 annually to pay it back. If they can't they need to save it back using taxable account further destroying the chance for retirement.

Let's use some simple numbers. Smith family has:
$50,000 in 401K
@$30,000 in CC debt @ 13%
$20,000 net worth today.
Expected return on investments is 10% over long term.
Smiths have $1000 TOTAL to put towards debt & retirement total.

PLAN A = PAY OFF DEBT.
Pay $800/mo towards debt
Invest $200/mo towards retirement.
@After 4 years @ 13% interest debt is paid off ($0 balance).
Investment is worth $50K + $9,600 deposits + $25,245 interest/gains = $84,845.

PLAN B = KILL RETIREMENT AND RE-SAVE.
To pay off $30K in CC debt you would need to take out $40,500. Why? because you will get hit with 25% income tax and 10% penalty. So to end up with $30K to pay off the debt it is doing to "cost" you $40.500. This is a premium you can NEVER recover from.

So debt is now $0 & retirement = $9,500.
Invest full $1000 towards retirement.
After 4 years the investment is worth $9.5K + $48K deposits + $14.6K interest/gains = $72,110.

The "get out of debt quick" plan COST the Smith family $12,735. This is wealth they can NEVER get back. It doesn't matter what interest rate or returns you use unless it is something massive like stock market returns 2% and debt is at 28%.

THE ONE EXCEPTION: Would be if the family had $40.5K+ in a taxable (i.e not IRA or 401K) account and they could take the money without substantial timing penalty (i.e selling stocks that have been punished and are likely to rebound over next 4 years) and the total tax burden for liquidating $40K+ assets is minimal (due to other losses this year or rolled forward). Even in such a situation it would be prudent to talk to a tax professional to ensure no risks are taken due to incomplete understanding.

If the OP doesn't want a loan from prosper that is fine but taking money from a tax-free account to pay taxable debt is just plain stupid!

Message Edited by CreditMizer on 04-24-2008 04:41 PM

[Anonymous]

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foundthelight wrote:
Sounds interesting. I will check out the website and see where we fall. Our mim monthly payments on the cc are $415 /25,000 $100/5000 $65/1500 $180/650 (0% interest but 20% of the balance) $10/200 $10/88

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You don't have to answer, but how much is your car payment? How long is left on it?

Do you have a mortgage payment also?

In my own personal opinion, I have to agree with Dr.Phil money will not solve money issues.

Borrowing money to pay off debt is not the way to go.

Plan A:

Let's say you can get a loan from prosper or anywhere to pay off all your CC but the $24k CC.

That decreases your CC payments to $415 plus the loan payment of about $250.

You didn't learn to rebudget your regular income and make ends meet. You didn't learn to change your spending habits. Let's say you charge your cards up again and now have your original CC payments PLUS the $250 payment.

Now, I am not saying if you were to get a loan for your CC debt that YOU would charge your CC's back up, but many people do because they didn't learn how to handle debt. They learned how to shift it and add more.

Plan B:

You rebudget, figure out how to make your payments and you do without some/all of your "wants" while you are paying down your debt.

When the CC are paid off, you now have around $800 a month that you were paying on CC debt and probably have forgot about all those little "wants" that you really didn't need but bought and ran up your CC debt.

Now you are CC debt free and have an "extra" $800 a month. Wise thing would be to invest/save a good part of it. But you can now treat yourselves once in a while and not feel guilty or have to do without a NEED because of it. You don't have to worry about how you are going to make this payment or that payment because you overspent.

Prosper is a neat concept. However, it does appear on your CR as a Consumer Finance Loan which does hurt your score in the short run, is good for your score in the long run.

Message Edited by sidewinder on 04-24-2008 04:58 PM

Message Edited by sidewinder on 04-24-2008 05:00 PM

[Anonymous]

Our car loan has 7k let on it and we pay 460 a month, so it will be over soon leaving us with a big chunk to put towards other cc. We do have a mortgage payment at 1700/month. unfortunately, we have a car LEASE that is due in August, leaving us with one car (that doesnt fit 3 kids), and the need for another car. We have learned that we do not want to lease again, and we can try to find a used car for cheap.

[Anonymous]

IF you were to get a $10k bonus and paid off all but the highest two CC and your auto, that would save you around $725 a month not counting interest you would save.

An extra $725 per month on your $5k card would get it paid off in about 6 months. Leaving $825 a month that you were paying out.

If you could go for 6 months from the time of your bonus until you got another car, you would be able to put an extra 300-400 on the large CC and make another car payment.