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Debt Consolidation and Payoff Advice

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New Member

Debt Consolidation and Payoff Advice

 

 

Hi,

I will try to keep the amount of text to a minimum here.

In short, I have stupidly gotten myself (and my wife, 1 year old child) into a less than stellar financial situation.  However, we are working our way out of it intentionally.  2 paid for cars valued less than 10K each. Food budget. Strict budgeting.  We are in our late 20's.  I undertsand that the natural repsonse may be: "Just budget and knock this out!"  Trust me, we are!

 

See situation below:

  • $75,500 annual household income (pre-tax)
  • Home owner, conservatively $30,000 in home equity
  • 655 FICO score
  • $32,093.81 in consumer debt totaling ~$1200/month in payments

My 4 areas of debt Breakdown, small to large:

  • Bank line of credit
    • $2744.91 balance
    • $3000 limit
    • Paying $150/month on it
  • OneMain Financial unsecured loan
    • $4,376.09 remaining
    • $262.21/month
    • 24.36% interest
  • Bank Credit Card
    • $6932.56 balance
    • $7500 limit
    • Paying $180/month
  • Lending Club unsecured personal loan
    • $18,040.25 balance remaining, 2.5 yrs to maturation
    • $690.61/month
    • 13.65% apr, 11.31% interest

 

The payments on all of these debt items are killing my family financially.  We’re being torn apart by interest. With Childcare, a mortgage, and food/fuel, etc expenses, it’s nearly impossible to make it.  We’ve drained our savings trying to keep up with regular expenses.

 

With only a 655 FICO, I’m wondering if it would make sense to try to get a single $32k loan from an institution- perhaps, secured?  Maybe a 5 year term, to knock the $1200/month in payments nearly in half? This would enable us to survive month to month until we can somehow get our income up.  However, I am not sure where to begin.

Message 1 of 9
8 REPLIES 8
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Community Leader
Super Contributor

Re: Debt Consolidation and Payoff Advice

We need your monthly pay and mortgage amount to figure out your DTI. If it's over 30%, it's gonna be tough to get a loan to consolidate.







Message 2 of 9
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New Member

Re: Debt Consolidation and Payoff Advice

$4342 Takehome

 

$1144 Mortgage

Message 3 of 9
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Community Leader
Super Contributor

Re: Debt Consolidation and Payoff Advice

That puts you at almost 56%. You're really shouldn't touch the equity in your home, but you may not have a choice.







Message 4 of 9
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New Member

Re: Debt Consolidation and Payoff Advice

Yes, I'm pretty mortified when reading about HELOCs, but I am beginning to think it may be my only option, given no income modification.

 

Certainly open to any reccomendations on HELOCS or otherwise.  Part of me feels like I'm fighting debt with more debt here, which can be a terrible idea. However, the interest on the current loans vs a HELOC is the differentiator I think..

Message 5 of 9
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Community Leader
Super Contributor

Re: Debt Consolidation and Payoff Advice

You are fighting debt with debt, but 5% is better than 18%. You may have to take a 2nd mortgage over a HELOC. 







Message 6 of 9
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Super Contributor

Re: Debt Consolidation and Payoff Advice


@WeakSauz1 wrote:

 

 

Hi,

I will try to keep the amount of text to a minimum here.

In short, I have stupidly gotten myself (and my wife, 1 year old child) into a less than stellar financial situation.  However, we are working our way out of it intentionally.  2 paid for cars valued less than 10K each. Food budget. Strict budgeting.  We are in our late 20's.  I undertsand that the natural repsonse may be: "Just budget and knock this out!"  Trust me, we are!

 

See situation below:

  • $75,500 annual household income (pre-tax)
  • Home owner, conservatively $30,000 in home equity
  • 655 FICO score
  • $32,093.81 in consumer debt totaling ~$1200/month in payments

My 4 areas of debt Breakdown, small to large:

  • Bank line of credit
    • $2744.91 balance
    • $3000 limit
    • Paying $150/month on it
  • OneMain Financial unsecured loan
    • $4,376.09 remaining
    • $262.21/month
    • 24.36% interest
  • Bank Credit Card
    • $6932.56 balance
    • $7500 limit
    • Paying $180/month
  • Lending Club unsecured personal loan
    • $18,040.25 balance remaining, 2.5 yrs to maturation
    • $690.61/month
    • 13.65% apr, 11.31% interest

 

The payments on all of these debt items are killing my family financially.  We’re being torn apart by interest. With Childcare, a mortgage, and food/fuel, etc expenses, it’s nearly impossible to make it.  We’ve drained our savings trying to keep up with regular expenses.

 

With only a 655 FICO, I’m wondering if it would make sense to try to get a single $32k loan from an institution- perhaps, secured?  Maybe a 5 year term, to knock the $1200/month in payments nearly in half? This would enable us to survive month to month until we can somehow get our income up.  However, I am not sure where to begin.


For now I wouldn't try to borrow my way out of this. I suggest you join a credit union and maybe a decent borrowing opportunity will present itself. For now I would (a) try to get a second job (b) stop using credit cards and (c) use the snowball method on revolving debt:

1. Stop using cards.
2. Pay off smallest balance first, then next smallest, and so on.
3. On other cards pay minimum + something each month.
As each balance turns to zero, that will free up your remaining monthly cash to apply to the next smallest balance.

 

 


Total revolving limits 648500 (572500 reporting) FICO 8 EQ 728 TU 755 EX 732

Message 7 of 9
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Community Leader
Senior Contributor

Re: Debt Consolidation and Payoff Advice


@SouthJamaica wrote:

@WeakSauz1 wrote:

 

 

Hi,

I will try to keep the amount of text to a minimum here.

In short, I have stupidly gotten myself (and my wife, 1 year old child) into a less than stellar financial situation.  However, we are working our way out of it intentionally.  2 paid for cars valued less than 10K each. Food budget. Strict budgeting.  We are in our late 20's.  I undertsand that the natural repsonse may be: "Just budget and knock this out!"  Trust me, we are!

 

See situation below:

  • $75,500 annual household income (pre-tax)
  • Home owner, conservatively $30,000 in home equity
  • 655 FICO score
  • $32,093.81 in consumer debt totaling ~$1200/month in payments

My 4 areas of debt Breakdown, small to large:

  • Bank line of credit
    • $2744.91 balance
    • $3000 limit
    • Paying $150/month on it
  • OneMain Financial unsecured loan
    • $4,376.09 remaining
    • $262.21/month
    • 24.36% interest
  • Bank Credit Card
    • $6932.56 balance
    • $7500 limit
    • Paying $180/month
  • Lending Club unsecured personal loan
    • $18,040.25 balance remaining, 2.5 yrs to maturation
    • $690.61/month
    • 13.65% apr, 11.31% interest

 

The payments on all of these debt items are killing my family financially.  We’re being torn apart by interest. With Childcare, a mortgage, and food/fuel, etc expenses, it’s nearly impossible to make it.  We’ve drained our savings trying to keep up with regular expenses.

 

With only a 655 FICO, I’m wondering if it would make sense to try to get a single $32k loan from an institution- perhaps, secured?  Maybe a 5 year term, to knock the $1200/month in payments nearly in half? This would enable us to survive month to month until we can somehow get our income up.  However, I am not sure where to begin.


For now I wouldn't try to borrow my way out of this. I suggest you join a credit union and maybe a decent borrowing opportunity will present itself. For now I would (a) try to get a second job (b) stop using credit cards and (c) use the snowball method on revolving debt:

1. Stop using cards.
2. Pay off smallest balance first, then next smallest, and so on.
3. On other cards pay minimum + something each month.
As each balance turns to zero, that will free up your remaining monthly cash to apply to the next smallest balance.

 

 


+1  I have to agree. Look for  part time job, donate plasma . Great suggestion on joining a credit union.

EXP 758 TU 783 EQ 729
Message 8 of 9
Highlighted
Regular Contributor

Re: Debt Consolidation and Payoff Advice

I agree with SJ. Doing the snowball method will have you out of consumer debt in a hair under 2 years. Faster if you can find a part time job.

Your income - mortgage and listed debts = $1,998 left for utilities and food. Let’s say that costs $1k. That leaves $1k for extra debt payments. $32k / $1k = 32 months maximum to being done. But you’ll be snowballing payments as you payoff debts, no need to let a 5 year consolidation loan hang around in this case.

The good news....Without running exact math I’d guess you’re done in about 22 months with the above assumptions. The LOC will be done by month 3, One Main done by month 7, credit card done by month 12, and Lending club by month 22. Stay intense, focused and intentional.

ETA: have you paused any retirement contributions?
Message 9 of 9
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