Plan to Payoff $191k Worth of Debt by 2024!

[Anonymous]

My wife and I currently have about $191k total debt consisting of $135k spread across 21 different credit cards, $40k on 6 Student Loans, and $16k owed for 3 Personal Loans.

Overall average interest rate on the balances right now is 8.16% rising to 14.06% in the coming months as intro APRs expire. Our average credit card balance interest rate will be 17.36% once the teaser rates go away.

We make around $208k per year in income combined including Salary and Bonuses. Our take home pay after tax is about $12k per month.

Our minimum payments are currently about $5300 per month to service this debt. This will rise to about $6k over the next few months and then drop to about $4k early next year when the personal loans are paid off.

Our Creditors and my Credit profile is shown below.

My Credit:

Experian
638 FICO Score 8
94% Utilization $110,562 / $118,000
100% on time payment history
Oldest Account 12 Years 2 Months
Newest Account 1 Year
AAoA 3 Years 7 Months
27 Accounts, 18 Revolving, 9 Installments
1 Inquiry from the last 12 Months (July 2017)

My Creditors:

BofA
$12200 MasterCard Platinum Plus 17.49%
$5000 Visa Cash Rewards Signature 21.49%

Chase
$3500 Visa Slate 19.49%

Citi
$500 MasterCard Double Cash 23.99%

Discover
$5200 it Card 19.49%

Wells Fargo
$6k Visa Cash Back Signature 23.65%

Amex
$10k Blue Cash Everyday 22.74%

Capital One
$1650 Visa Platinum 21.30%

Citizens Bank
$10k Mastercard Clear Value 14.24%

Barclays
$12,150 MasterCard Ring 14.49%

Sofi
$7026 / $28,717 personal loan 8.125%
Final payment 3/2019

Upstart
$3831 / $20,300 Personal Loan 10.4%
Final payment 1/2019

Prosper
$4449 / $20,000 Personal Loan 11.25%
Final Payment 1/2019

My Great Lakes
$25,819 Student Loans 4.19%-6.55%

Her Creditors:

BECU
$10k Visa 10.15%

Capital One
$4250 Mastercard 20.4%

Chase
$2500 Visa Freedom 24.74%

Consumers Credit Union
$10k Visa 15.2%

BofA
$6k MasterCard Better Balance Rewards 20.49%
$5k Visa Platinum Plus 26.74%

US Bank
$14k Amex 16.24%
$500 Visa 25.74%

Discover
$17400 it Card 16.74%

Citi
$2500 Visa Dividend Select 24.49%
$10,300 MasterCard Diamond Preferred 17.74%

Mohela
$14,594 Student Loans 4.5%-6.55%

My credit was all the way up to 811 early last year but it is super low right mostly because of the extremely high utilization. As a result Barclays, BofA, Discover, and US Bank have reduced some of our credit lines.

We obviously can't qualify for any new accounts right now but I figure as we continue to pay down the balances our credit will age a bit more, the inquiries will drop off and the utilization will decrease to where we may be able to get a lower rate with a personal loan somewhere down the line possibly as early as next year.

Thinking maybe Sofi again since their personal loans go up to $100k and they allow joint accounts now. I thought I got a pretty good rate last time at 8.125% fixed. Hopefully my positive internal credit history with them will help us get approved. My wife does unfortunately have one silly "late payment" from a credit union checking account that accidentally went negative $81 and got charged off, she paid it but it still shows in her Experian report as potentially negative.

Worst case I figure after I payoff the loans early next year and my mininum payments settle out to around $4k per month I will be able to payoff all the debt by 2024 at the current pace with existing accounts. If I can make extra payments and consolidate at lower rates I can accelerate that timeline.

We are looking to continue to build strong relationships with new creditors especially more credit unions going forward since they seem to have the best rates and terms in my experience. By the time we are debt free I hope to have near perfect credit so I can qualify for the best products as I continue to diversify my portfolio among different lenders and increase my overall credit available. I would like to get up to $500k worth of available credit in revolving lines eventually.

Any advice and/or encouragement is appreciated!

[CH-7-Mission-Accomplished]

Yikes!   You are essentially having to put yourself on a self-imposed Chapter 13 for the next six years to get out of debt.   94% utilization for somebody with a 200K income is not a good sign.   I will save you the lecture (I have been there myself, thus the BK7), but unless you turn things around you will be in a real BK 13 soon.   Were those personal loans used to pay off revolving balances and then you ran up new revolving balances?   Also your interest rates are crazy high -- some at 23%.

Rather than trying to develop new debt relationships with new credit unions and refinance current debt with other lenders, you should probably buy Dave Ramsey's book and follow its principles of paying cash and using the snowball method for paying off debt.   

I'm not judging you but you've got big red flashing signs over your head screaming "danger."  I would expect your creditors to continue balance chasing you as you pay down these credit cards so your FICO scores will stay relatively low based on utilization.

Seriously, aside from a home mortgage, student loans and a couple of car loans, you shouldn't have any debt with a 200K income.

Good luck digging out here.   You can do it!

[Anonymous]

The CL reductions played a part in my BK7.  High utilization, reduced available credit = higher utilization, then it cascades into lower scores and that means no intro rates.  Make a payment late and your interest rates cascade.  Its managable until you run into that one month where all the customers pay late or you have to pay for surgery or something crazy happens.

Four years is a long time to bite the bullet, so I'd try to think about things in phases.  Phase 1 - paying off X debt.  A month to breathe, move on to phase 2. 

We went through BK7, and before you know it we were in high utilization land again.    I have a plan to get rid of the debt, and we're ahead of schedule, but only because I'm a nazi about it right now and I was conservative with my planning.

We have revolving debt, car loans, and some big liabilities that followed us through bk7.  I'm working hard to clear the revolving debt and with each card hitting 0 it's like I have new life.  The big liabilities come into play for us later this year (we are currently in a relief period).  I'm trying desperately to get all the revolving debt to 0 before that hits, because if I don't, I'll be paying that interest for 2-3 years.  The car loans I just feel are part of the monthly bills.  I would love to clear them out, but at this point it's not even something we can think about.

You aren't the only one with big debt / big utilization.  It's a trial to get through it, but it can be done.  As you make progress, nurse those FICO scores however you can and plan any consolidation loan applications around the high-score time of month.

Keep plugging away.  Keep your eye on the monthly spend.  Good luck!  Keep us updated so we can keep rooting for you.

[Anonymous]

Yeah I realize it's not a great situation to be in but here I am making all my payments on time every month with a plan to be debt free in 5 years or less.

It's kind of a long personal story how I got into so much debt and I don't want to get into all the details but a lot is thankfully business related losses that I can write off so hopefully I will get some large tax returns back when I am able to sort everything out with my former partner.

Yes, the personal loans were used to payoff revolving balances before which is how I was able to get so many 0% intro APR cards with lower overall rates that I've been using to reduce my interest cost and increase my credit available.

My wife and I are taking the Financial Peace course through our church and we are using the debt snowball method which for us is just about the same as the debt avalanche since the cards with smaller limits tend to have the higher rates.

I disagree with the full on Dave Ramsey approach to the credit score though, for example I don't want a zero credit score and have to do manual underwriting for a mortgage etc. I'm not going to close all my credit cards, I want to maximize my score.

Since I have debt the rational thing for me to do is pay it off as quickly as possible by making large payments and reducing my interest cost wherever I can. As I raise my score strategically just like I have done in the past to get up to 811 I will qualify for a lower rate consolidation loan to save money on interest and reduce or eliminate my revolving balances to improve my score further possibly making myself eligible for even lower rates that I can use to payoff my debt still faster.

I'm not too concerned about the balance chasing, it's looks like it is only certain creditors and I have had experience with this before; it seems like they typically just do it once and as long as you keep making your payments on time every month they leave it alone.

I have noticed that the credit unions are more willing to help, Consumers credit union doubled my wife's line to $10k even though her credit score wasn't good and they offered her a low 1.99% balance transfer deal to boot with no fees!

I want to continue building more relationships like that to keep my interest cost as low as possible in cases where I have to carry a balance I pay off over time.

Bankruptcy is out of the question right now since I have high income and can afford to make my payments. Worst case if my wife or I were to lose our jobs we may need to go that route but hopefully not. That's another reason why it would be great to get everything consolidated with Sofi eventually since their personal loans come with unemployment protection. Thankfully though it seems like right now we are both more likely to continue to get promoted and earn more bonuses every year that we can use payoff the balances quicker.

You are right the APRs are too high on some of the cards but overall the rate is not that bad on the whole debt balance it's only about 14.06% which is manageable and I guarantee that will go down along the way in the coming years as our scores improve. Agree ideally we shouldn't have any debt on a $200k+ income but it's our first year at this level and given the situation we just have to roll with the punches and work our way out of it.

[CH-7-Mission-Accomplished]

It sounds like you understand where you are.  I agree about the modified "Dave Ramsey."   I was only suggesting using the snowball and trying to live on all cash, but when you still have any utilization reporting you should not be closing any revolving accounts.   You should be paying them off, one by one, and then putting that card in the sock drawer aside from a $2 charge every six months to keep it alive.

I will give you some unsolicited advice since you are in what I would call a pre-bankruptcy state.   These are things I wish I had known before I had to file.

Try to owe money to the least number of revolving creditors you can in case you have to file.  The reason is that each and every credit card that is included in bankruptcy is scored as an additional charge-off by FICO.   So some people who have to file a BK, say it was just for one big medical debt, and they didn't owe on credit cards, have a much higher FICO score upon discharge.   It is ridiculous to have a bunch of low balance cards included since each $200 write-off is scored as bad as a $50K write-off.   So try to owe as few revolving cards as possible.

Second, I would pre-select who I was going to burn, or rather who I wasn't going to burn.   I would do this based on what I know now about who is forgiving and will take you back and who won't.   I would make sure I didn't owe money to Chase or AMEX.   They are the two worst about letting you back in.   Citi is not far behind.   People do get back in with Barclay's and Discover, and in most cases you can get back in with Cap 1 within a year if not within the first week of discharge.   If you are actually at filing time, you can't pick and choose who to stiff, but you are at a place now where you can prepare in case this situation happens.  You need to cover your derrier.   In your case I wouldn't worry about owing BECU (I'm in Seattle and use them and love them).   They are a dime a dozen CU.   You don't currently belong to Navy Fed or Penfed or Alliant, but I would not wind up owing them money because they can help you out after a BK and won't ever let you back in if you owed them money and burned them.   But any other credit union is just fine -- and there's like 5500 of them around the country.   Same with Wells Fargo and US Bank and Citizens Bank.  Who cares about them?   They don't have great rewards programs (like great mileage cards) and they are just meh.  Pay them last.

You need to be aware that FICO gives you a big score drop for each card over 90% utilization, so you should first move to get each and every card under 90%.

FICO gives you a huge ding for having "too many" cards with balances.   It's unclear how many this is, but let's say in your case having more than 6 of your 18 cards with balances would be given an additional ding.   So after you pay cards down below 90% on each card, start picking off low balance cards that you can just pay off so the ratio of cards with balances to total cards drops.  This will raise your FICO scores and increase your odds of being able to get loans from Prosper and others to continue consolidating.   

Then I would try to move as much as possible onto these fixed rate installment loans.   If all hell breaks loose I wouldn't lose any sleep about burning any of these creditors.   They are a dime a dozen and there's nothing special about them.

Also if you find you get balance chased a second time by any of these big banks as you are trying to pay them off, switch to just paying them minimum payments and focus on paying off the other creditors.   It is a lose-lose paying off the balance chasers until last.   They do it twice, they will keep doing it to you.  BTW, BofA and Barclay's are notorious for this so expect it in the future.

Good luck.  As the song goes, "I wish...that...I knew what I know now..... when I was younger."   (Or less experienced.)

[Anonymous]

Monthly Update:  Had to spend some money on my truck so just treading water but making all my payments on time as usual increasing my credit age and one month closer to expiring inquiries.  Paid off two cards in full, Wells Fargo Visa and US Bank Visa.  Utilization is at 92.15%.  Goal is to bide my time till next year then apply and see if I can qualify for a SOFI personal loan to consolidate the credit card debt after all my existing personal loans are paid off, inquiries expire, and utilization is decreased further.

[Anonymous]

Keep the community posted on your progress, OP.

[Anonymous]

Monthly Update

I went ahead and paid off all my personal loans even though they were the lowest interest because I had the money on hand to pay them off from bonuses and it was $2220.48 in payments each month that I was making to Sofi, Upstart, and Prosper. This way I can afford to increase my credit card payments each month which I did on most of them I changed it from the minimum to paying a fixed amount of roughly 3% of the total credit line.

My total debt balance is down to below $185k now but for the next 6 months until the employee stock purchase plan shares get released again it will be impossible to survive without using the credit cards for expenses each month.

I will be paying $4622/month in debt payments whereas our regular biweekly paychecks are only about $3k, we get a lump sum of about $14k every six months, and around another $6k every 3 months so the cash flow gets complicated but we manage. Our two biggest bills are rent and nanny which are $5k per month combined.

We're sitting on around $9k now of which at least $6k must be kept in the bank to supplement our income and make all our payments on time for the next 6 months.

We only have about $4k in available credit currently so it's going to be tight for awhile but I think we will be okay my goal is to payoff the debt in 5 years which will be tough but may be doable as long as I can keep making good money.

I also do have some assets I could sell and potentially a large tax return coming when I finally figure everything out from the business dissolution then I should be able to payoff some more debt with the proceeds.

Got some good news this week from my lawyer that I may also be getting a summary judgment against my former business partner which I might be able to use to garnish his wages for the $30k he owes me which would really help me accelerate the debt payoff schedule further by helping me make extra payments on the credit cards each month.

[Anonymous]

Monthly Update

Total debt balance now at $181,292.13. $141,491.24 on credit cards and $39,800.89 in student loans. $6,808.76 in credit available.

Payments are a combined total of $4,540.04 per month. Current average interest rate is 9.41% increasing to 14.97% as introductory rates expire on some cards.

Lawyer says it may take awhile for the court to enter in the summary judgement against my former partner due to backlog in cases.

Need to figure out my taxes by Monday hopefully I will get a nice return I can use to wipe out some of the higher interest cards.

Thinking I probably won't be able to qualify for a consolidation loan anytime soon due to the high overall balance and high utilization ratio. I figure if I can manage to keep making high payments and minimize usage another Sofi consolidation loan at a lower rate could be possible in about 2-3 years to wipe out the card balances and put everything into a fixed term obligation that I will make extra payments on to knock out early.

At that point my credit will be back to perfect and I will look to build more new relationships with credit unions that have lower preferably fixed rates. That way if I ever do have to carry a balance I will have a more affordable interest cost to manage the debt and more credit available to keep my utilization low so my score doesn't go down as much.