r3mix3r

Hey guys,

This may not be the correct section for this, but I figured it's a pretty common topic, and not really just for the money/finance experts. Luckily myself I have $0 debt at all...Although my sister has some CC and store CC debts she needs to pay off.

She has a pretty hefty amount she owes, but she stays on time and makes the minimum payments. She has 2 cards that are in "payment plans" with reduced interest, and it's designed to have the card paid off within 5 years. The CC companies closed/stopped the card from being used, but supposedly it's still on "good" terms. She also has a Best Buy and Dell Credit Card that have low $x,xxx balances that she is paying the minimums on. The minimum payment for the BB card is over $100, and about $75 for the Dell card. I believe she is paying $450/month on the 5-year plan with the CC's that she has set a plan with. There's also a few other random ones that shes paying the minimum payments on at $25-50/month, but it all adds up significantly.

She's working a full time job and has no problem maintaining the current payments that are due, but it seems like she is getting nowhere. She's definitely making progress on the cards that have the payment plans, as the interest is dropped to 7-10% instead of 20 something percent, but on the cards paying minimum's they aren't going anywhere. Not to mention the $700+ paid to keep the cards in a "ok" status, could be saved, or used for other expenses.

I'm not an expert on this, but is there anywhere she can go to discuss this with someone? I see all kinds of junk out there, and want her to talk to someone legit. I always see Debt Consolidation, and other shady types of businesses, that most likely ruin your credit. Believe it or not even with the massive debt and tons of cards she has maxed out, she still has a pretty good credit score due to no cards in a negative status.

She has every means in paying it back, but just wondering if there's better options out there, that won't tank her credit or put a negative on her history.

Anyone ever talk to anyone? Counselors? Advisors?

Thanks!

MWalsh9152

is her credit damaged, or still in good standing? One option could be to open a new credit card, and use it solely for a credit transfer at a low interest rate, anywhere from 0-3.9% I usually see. Then make more than the minimum payment. OR she needs to stop just making the minimum payments, all those do is make the lender more $$$

The only way she is going to climb out from under that debt is to throw more money at it. If it means sacrificing some luxuries, then so be it.

justnspace

iTrader: (1)

minimum payments are going to get you no where.
throw some extra payments in there!

subinf

Debt consolidation is an absolute joke. It is a waste of money and will most likely result in the lenders simply filing suit. Minimum payments aren't going to do much for her - she either needs to try and settle the accounts or drastically change her budget to allow for greater repayment.

1StGenCL

If they closed the accounts and made some sort of deal with her,her credit dropped I'm sure but can rebound pretty easily. She can try and settle like mentioned above for a much lesser amount but she has already made a deal and is in "good" standing with the card so they have no motivation to deal and if she does settle, her credit score is going to take a major hit.

Basically, the chances of her getting a good settlement means she needs to have a lump sum to pay it off and has to go delinquent before they will even discuss a decent deal. If she is going that route, she should stop paying them all at once and make sure she can save a lump sum to settle them all with the first 90 days or so. She would also need to negioate how it is going to be reported on her credit and ideally would be looking for a pay for delete option.

Many problems here though, PFD is harder to get these days and the original creditor is going to want a hefty settlement at once. It sounds like she is going to have a hard time getting the lump sum that quickly not to mention even if they do delete the whole trade line (probably wont happen) her credit is going to take a hit short term.

Best bet, keep paying on time and throw as much money as possible at it.

subinf

Settling won't hurt your credit if you also control what is reported.

badazzTL

Sounds like she could use a Total Money Makeover. Maybe you can recommend that she sign up for Financial Peace University or something

achenator

Snowball it. Pay all the minimums. After that pay extra to the card with the lowest balance. After that pay the next biggest one with the savings now that the first payment is gone and on and on. It makes more sense to pay the ones with the highest interest first but it's hard to see any progress like that sometimes and it's easy to get discouraged. Your sister may get into trouble if she gets consolidates everything to one card and pays all the others off. Temptation to run the cards back up may be too strong.

doopstr

+1

CarbonGray Earl

^^right on. Its the most psychologically gratifying.

She can start reading that Dave Ramsey stuff if it helps motivate and keep her eyes on the prize. Not that I would agree with everything Dave says, but at least it seems like a plan and by listening to Dave (or whatever financial guru she chooses) it keeps people focused.

1StGenCL

That is a big if. Her creditors have no reason to work with her because in their minds they already have and she is current from what we know. Doing mortgages I saw a ton of credit reports and helped steer people in the right direction to boost their scores and for the most part, companies don't work with you unless they see you are a good 30 days behind. Even if the OC deletes the whole trade line, his sister will still see a short term drop because she is deleting her credit history and depleting her available credit.

Other problem is, in order to get the best settlement and terms, you have to default on all cards at the same time because they will see your current accounts and think you can pay. This is not only stressful but is a big risk because some companies are harder to work with then others. Who holds the two major cards?

fuzzy02CLS

iTrader: (2)

That's what I recommend to anyone with large debt. Large debt is going to REQUIRE drastic life changes or it will not go away. Minimums will never cut it.

MWalsh9152

I got myself into trouble about 7 years ago, I used to get a commission of anywhere from $300-1500 a week in cash on top of my salary. I used to spend that like a rock star.....the problem was when they started going in my check, and then died out because the economy took a shit. I kept spending like a retard.

I ended up with about 23-25k in debt between my two cards I started attempting to pay them down, finally I got it to the point where almost all the debt would fit onto one card, then transferred one to the other, then ALL onto the other at 1.9% for 18 months. Im currently at about 50% payed off, with a fico over 750....and a huge life lesson learned.

I did have to dump my TL to roll those payment funds into the debt though

subinf

Given what OP has said with her credit, a short term drop won't be a huge deal. Especially with the cash saved. And no, you don't have to default on the CCs to work on a settlement. Even if you do enter that realm, once the trade line is deleted it wont matter.

wackjum

The minimum payments are calculated to take 20-30 years to pay off. That's why it doesn't seem like they are going anywhere.

Mr. Maker

iTrader: (4)

Pics?

Bearcat94

Exactly.


Can she get a Sugar Daddy?

te3point5

don't know if this is an option, but borrow money from parents (or debt free brother), pay off all her debt, repay parents/you interest free (you can help her manage her budget since it's technically your and your parents money she owes) and...

TEAR UP ALL CREDIT CARDS

Since it'll be your/parents money, you can use that as an excuse to "guide" her financial decisions and teach her a couple of things about personal finances.

Mizouse

i never understood people who make minimum payments to their CCs

Eggplant-EX

cause that is all they can afford to pay as they always spend...

I made the mistake of lending someone close to me a chunk of money as this person had a huge credit card debt + high interest that was going to kick in. I knew this person had equity in a house, so I lent out the money. Big mistake!!! What was a 3 month loan (no interest) took me nearly 2 yrs to recover and I had to settle for less. I spoke with a close friend about this and was chastise for doing this. My friend asked me why I would lend money to a person who could not handle her own personal finances. Man, when said it like that, it made sense.

1Louder

This is exactly what I would have suggested as well. You have to be careful looking for "help" - no one offers free help, thos deals are always in the best interest of the lender. She's not solving her problem, she's just moving it around.

The best move is doing the above and throw in all the extra she can. It's just going to take some discipline and some time.

Gfaze

Years ago, I got myself into credit card debt on several cards. I ended up paying the minimums on all of them to keep my credit score up. I was sent a credit card offer with a 1.9% rate on transfers for the life of the loan. Needless to say I jumped on that offer and transferred all of my debt on to the one card and paid off the debt in 3+ years.

The key is to not use credit cards at all. Only spend money you actually have so tighten up the budget by cutting out unnecessary crap. You can get out of debt but you have to discipline yourself. I didn't have to cut up my cards, I just had to learn how to use them correctly. As far as I'm concerned, they're a 30 day loan.

Mizouse

I pay mine off in full every month.

MWalsh9152

I currently do the same with my and my wife's cards that we use for day to day things.

sonnyboyacura

It's taken me 4+ years to pay off the money I racked up in my early 20's... Thankfully my credit is/was in terrfic standing through it all, but it's been a huge PITA. This weekend, I will pay off the remaining balance on my card and I'll be done with this BS.

parasitius

Look into credit card consolidation loans? Once my mom just got a $50k loan to pay all her cards off in one fell swoop. MUCH easier to have 1 fat payment (of which a MUCH smaller portion is interest) than all those separate ones.

I screwed myself this past year. Maxed out a Discover with 18 months interest free, thinking I'll get another 18 month deal to bind me over until I'm in the salary big leagues one day. Well, ... I start applying... thought my mid-700 credit score (before the TL) would be fine. NO ONE, NO ONE will give me any more freaking cards!

New plan: (and my suggestion for your sis) do it HARDCORE so you don't get depressed. Instead of thinking "get this card down in a year" you have to think "Okay I am going to MURDER this card whatever it takes. 3 months max it is paid off, if I have to start cooking at home then so be it, this sucker is getting $1500/month payments". Once card 1 is murdered, rest a few months and make an attack plan for card #2. etc.

TzarChasm

Good for you, and if your job takes a big fat dump on you, then what?

TeknoKing

I never carry a balance. Edge into your head that a credit card is not there to buy you things that you can't afford, instead it is only a convenience of not carrying cash.

I'd not touch any consolidated loans or firms, ever. All they do is call on your behalf and ask for a lower rate and then add their % on top of it. So call up the credit card yourself, they possibly do have an option of helping you out, by freezing you card but allowing lower quick payments. There is something in the law now that credit card must help you get out of debt, not keep you in it. This is why right now on every credit card statement you see a statistic of how long it would take you to pay your balance if paid only in minimum.

What you can do is get a new credit card, with a low (max 3%) balance transfer and zero APR for year or more. Transfer it all, put all other cards away, and pay this credit card off asap. Or you can be a nicer bro, and help her with her debt and she make the payments to you, I did that for my sister.... oy.. nevermind, you'll never see the money I've learned.

TeknoKing

Your bank account is empty? You do not save $$$? You live paycheck to paycheck? You purchase things you can't afford?

I've expected a better answer from a 40 year old.

Moose Muscles

College put the burden on me and my dad. I went to a school I couldn't afford through the easy loan process. Then once there my single parent father couldn't give me much for living expenses so I worked about 50 hrs a week and used credit cards for normal life.

At 26 I am now cc free but the loans are still a heavy burden. I typically pay all my monthly bills using a cc to get the "points" and then pay it off each month. Student loans though are atrocious. They schools really need to provide better information to the students accepting these loans.

Going through school I would get letters from the loan company saying my minimum payment (estimated) would be approximately $81. 6months after I graduated I got that first bill, it was $485. I almost shit myself. Only making 22k a year, that was way too much to handle. Luckily I got a good job offer and turned things around.

I wish your sister luck, I can definitely sympathize with her.

Tell her to drain the water from the ramen and add butter and grill mates montreal chicken flavor. Makes first class ramen all the time. Sometimes you have to sacrifice now to live it up later.

Mizouse

This.

TzarChasm

Right, because nobody spends more than a couple of months finding a new job.

Do you know how to read a newspaper?

TzarChasm

I'm sure you get loads of laughs pointing out the fools who get cancer and other serious illnesses.

TeknoKing

There is no reason to feel scorned. Not everyone understands how to manage their finances with 'rainy days/months' in mind. And this is not even the topic; the topic is how to get out of debt, not a reason to be in one.

on a side note, carrying over a balance does not hurt your credit score if the balance is 30% or less of your total spending limit.

TzarChasm

The point is, there are a lot of reasons people carry a balance from month to month. Amazingly enough, it's not always their fault. Even if it is their fault, pointing out that you (in the general sense) would never do such a thing, and look down on anyone who does, is not exactly helpful now is it?

justnspace

iTrader: (1)

OP specifically said that his sister was irresponsible.

TeknoKing

^ You're right. I'm not purposely trying to put anyone down. My sister still cannot learn, and is continually in debt based on her choosing and life style. My parents and I have bailed her our numerous times. She lives for today. I think it's wrong. Carrying a balance because you have too vs because you think it's ok are different things, especially if that balance is due to groceries shopping vs brand new 3D TV.

TzarChasm

Fair enough, maybe I am a little sensitive to the issue because my GF's father recently slipped in a hotel in Mexico and cracked his head open, it cost him $15,000 cash up front (which he put on a credit card) in order to save his life for long enough to get him to a hospital in the US.

He was not someone used to carrying a balance either, so Miz making a comment about how he can always afford to pay his off, rubbed me the wrong way, because he is lucky, and may not always be so lucky.

Mizouse

Wtf does this have to do with anything?

I'm just saying that I pay mine off every month and that I set aside some every pay check for savings.

I understand if shit happens but I don't feel sorry for people who carry a balance buying shit they can't afford or are beyond their mean which is what the OPs sister is doing.

Oh and a FYI my dad died of cancer so no I dont find it funny.

aznboi2424

iTrader: (10)

I pay off my balance in full every month as well. I get hundereds back in cash back rewards every year on cards with no annual fees. That's a lot better then paying with cash or a debit card. At least for people that can responsibly manage what they buy with what they currently have in their bank accounts.

Traveler's insurance?

I disagree Gabe, I encourage the use of credit cards. They are safer then caring around cash and more convenient. Couple that with up to 5% cash back rewards on certain purchases, it's a win-win. The catch is that you need to watch out how you spend and what you spend it on.
Just because you put it on a CC doesn't mean you don't have to deal with it later on.