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Need advice with debt

New Member

Need advice with debt

Ran up some huge credit card debt due to a variety of reasons-  some serious medical conditions from a couple of years ago and of course some bad decisions.  Had a job change and income dropped so what was working a couple of years ago has ballooned to a really bad point.

 

Currently owe $45,000 on one Mastercard (with a $40,000 limit).  13.5% interest rate.  Normally make $1100 payment each month-- that leaves me enough to pay my bills.  I have one other credit card with a $1000 limit that currently has a zero balance.

 

Right now I'm paying about $600 per month in interest on the Mastercard.

 

Home equity loan is not an option. 

 

Will be retiring in 3 years and will draw a decent pension. The plan is to work another job then for a few years.  Would love to have this card paid off by then but if not will use the second job to pay it off.

 

Working on getting a side gig that may give me another $300-500 per month in income to help pay off.

 

My question.... other than making the payments is there anything I can do?  I'd rather keep this card (I have a ton of rewards miles on it that I'd like to be able to use) but if there's a better way I'm certainly open.

 

Goal is to pay it down and restore my credit rating as quickly as possible.

 

NOTE:  I don't have a car payment or house payment currently but I also don't have a big monthly income. My take home pay right now is about $2200 a month, so half is going towards this debt.

 

Message 1 of 17
16 REPLIES
Established Contributor

Re: Need advice with debt

Best goal is to pay it down as quickly as possible but based on what you've said with your income and so forth, it may be worth it to look into another card. Not sure of what your scores are but your UTI is through the roof. Looks like your current UTI is over 100% so it may be tough to get approved. It might be worth it to try though, do you have any military affiliation? If so, might be worth looking into a 0% BT card and possibly move some debt over there. Maybe having another card or two that have BT option at 0% would help since that would bring the interest rate down and impact the balance more.
Message 2 of 17
Established Contributor

Re: Need advice with debt

Is there no way you can cut spending any more? Is $2200 your gross pay or take home pay? Perhaps you can go through your expenses with a fine toothed comb and try to substitute things for cheaper versions. 

 

Taking a side gig like you said would probably help a lot if you can make an extra $300-500 a month. Remember, since $500 of your $1100/mo payment is towards interest, if you can throw another $500 at your debt you'll have effectively almost doubled the speed at which you are paying down your principal. Since any compound interest loan frontloads the interest payments, the rate at which your principal shrinks increases exponentially as you pay it down. 

 

Finally, I don't usually suggest this, but is there anyone you can turn to for help like a trustworthy friend or relative? If it were me, I'd offer them a deal like 6-8% APY interest. That is at least 3-4x what the typicaly high yield savings account is paying. You can put it in writing as a contract and get it notarized or whatever. That way, you are converting some of that money you are paying towards interest towards paying down the principal. Of course, it goes without saying that you should hold up your end of the bargain (not that I'm implying you won't). 

 

Anyway, just a few ideas. 

Message 3 of 17
Valued Member

Re: Need advice with debt

sorry to hear about your hardship.

 

with the profile you have given, I am curious to know which bank gave you such a high credit limit? the first thing I would do is explain the hardship to that bank and see if they could reduce the rate. there is the chance of adverse action due to that (ie balance chase), but likely something was going to happen anyway.

 

it is unlikely you would be able to get another unsecured loan or line of credit. dumping extra money into the payment will help. I am reminded of (but I do not always agree with) a certain radio personality who thinks anyone can make $1500 mo delivering pizzas.

 

in any case, doing some estimating with Excel, here is a table with some payment numbers and how long it will take to pay off $45000.

 

% ratedebtmo intmo pmtmo to payofftotal int
13.545000506.25110056(15898)
13.545000506.25121848(13485)
13.545000506.25152736(9975)
      
12.545000468.75110054(14064)
12.545000468.75119648(12413)
12.545000468.75150536(9195)
      
11.545000431.25110053(12602)
11.545000431.25117448(11352)
11.545000431.25148436(8421)
Message 4 of 17
Regular Contributor

Re: Need advice with debt

Is there a way for you to cash out those rewards points or turn them into gift cards and then sell them. If so that might give you some extra money to pay down the debt. They are not doing you any good right now and that interest your paying for them isn’t worth it.
Message 5 of 17
New Contributor

Re: Need advice with debt

First, and formost you're health is more important than any debt. Its absurd what we are charged in the U.S for healthcare. You're interest rate is remarkable. 13.5% on 45K is not that bad.

 

If you think you are in debt look at how much debt businesses are in?

 

ANYWAY, I must say you need to figure out something as Revolving Debt is typically frowned upon on loan applications. Revolving debt is credit card debt, and stuff that needs to be paid back. Installment debt is "better" even though its still debt. Its a negotiated monthly payment that is met by you're willingness to pay.

 

You're DTI or Debt-TO-Income ratio is pretty high. As the other member mentioned I would see if you have any military benefits, and I would also consult a local credit union. They can get you're debt into a lower payment, or see what they are able to do to help you. BEWARE you must know you're FICO Score 8 before heading into a bank asking for money. Dont waste points on HD if you do not have too.

Message 6 of 17
New Member

Re: Need advice with debt

Thanks all. Yeah they kept pushing the credit limit up and I'd have another surgery and or 6 months of physical therapy and pay for it with the card. 

Have considered cashing in the reward miles but that's not easily done from what I've seen and it's pennies on the dollar. 

 

Not military unfortunately so no benefits there. My $2400 income I mentioned is take-home pay. I've tightened up expenses best I can really. I'm going to work towards getting the side gig going as my schedule eases up in few weeks so I'll hopefully be able to get that rolling. 

 

Thanks again and I'm going to keep plugging along.

Message 7 of 17
Established Contributor

Re: Need advice with debt

Not that I strictly follow Dave Ramsey but as he says, I would say you have an "income problem". You need to bring in as much additional income as possible, from any source. Not sure of your age or physical abilities, but you might want to consider collecting scooters (if that's in your area) or doing Uber/Lyft on the side. Flexible schedule, etc.

 

What is your overall credit score? With a maxed out card like that I'd assume it isn't super high? Depending on the credit score, you could potentially do a balance transfer to a 0% interest card for at least a portion of the balance to avoid the interest on that for a little while and get a boost in paying down. But really, you need more income. Especially going into retirement you don't want that kind of interest happening on your card.

Starting: EQ 498 TU 501 EX 485 (9/23/11)
As of 5/12: EQ 552 TU 591 EX 572
Credit Repair Journey Bump in the Road
As of 10/15: EQ 511 TU 588 EX 601
Discover TU Fico- 12/31/18: 694; CK EQ- 1/16/19: 634
Goal: All 3 above 700

Message 8 of 17
New Member

Re: Need advice with debt

Credit score is around 650-700.  Have thought about doing a balance transfer for a portion-- been reading that may be a decent option as you said. Just not sure the best way to go about it-- I don't want to start applying for cards at random.

 

Yeah this income was ok when I was fairly debt free, and I had to give up a side gig I had several years ago because the demands on my current job ramped up considerably. 

Message 9 of 17
Established Contributor

Re: Need advice with debt


@uncommonlygood wrote:

Credit score is around 650-700.  Have thought about doing a balance transfer for a portion-- been reading that may be a decent option as you said. Just not sure the best way to go about it-- I don't want to start applying for cards at random.

 

Yeah this income was ok when I was fairly debt free, and I had to give up a side gig I had several years ago because the demands on my current job ramped up considerably. 


It seems like your current job isn't necessarily the best thing then if you're only making $2400 a month and have that much drain on your time. Though depends on your cost of living I guess. Unless your current job is what is getting you the pension. Then I guess it's technically worth it.

Starting: EQ 498 TU 501 EX 485 (9/23/11)
As of 5/12: EQ 552 TU 591 EX 572
Credit Repair Journey Bump in the Road
As of 10/15: EQ 511 TU 588 EX 601
Discover TU Fico- 12/31/18: 694; CK EQ- 1/16/19: 634
Goal: All 3 above 700

Message 10 of 17