Need advice...

[Nrvsbride]

Ok I need advice and input. FI has horrible credit and way too much debt with high interest rates. Currently his credit card is maxed out at $10,000 and he has an interest rate of 24.99%. He's been sending the minimum b/c he just can't afford to send more b/c of other bills and it is like $300 a month. Well it turns out $200 of that goes to interest alone per month! Yikes! So basically it would take him about 10 years to pay off this one credit card and he would have paid $24,000 in interest. (more or less).

 

I've been paying his bills to make sure that he doesn't mess up his finances anymore than he already has (and I took his credit card away a long time ago) but I am becoming overwhelmed.

 

I wanted to know what everyone's opinion was on those companies that consolidate all your debt into one payment and lower your interest. Do you think its a good idea? Bad idea? Why? Any and all input is greatly appreciated.

[A10CalGal]

I would recommend exploring other options first...like can your FI obtain a card at a lower interest rate to consolidate to? Or is his history just so bad that he can't do any better than 24.9%?

 

There is something called the Snowball method that applies a methodology to paying down debt. You first attack the debt with the highest interest rate while you pay the minimum on all the others. By focusing on the biggest nastiest one, you will pay it down quickly & then set your sights on the medium nasty one and so on. Here is a link that explains the method in detail Debt-snowball method - Wikipedia, the free encyclopedia

 

I believe debt consolidators charge a fee, that is why I encourage exploring the above idea first.

[Hartyt509]

Try and avoid debt consolidation if you can, they charge a fortune and it goes really bad on your credit history, unless of course he can get a loan with the bank for a fixed fee every month and less interest.

 

I'd look online for a credit card with a really low balance transfer fixed rate, thats what I've done with FI's debts. Why can't blokes keep track of their own money!!!

[Nrvsbride]

He cannot get another card with a lower interest (trust me we have tried pretty much everything). Yeah I know about the snowball mehtod but unfortunately we can't do that b/c he only has one credit card (the one with the 24.99% interest) His other debts are car payments and car insurance, as well as a student loan. Its not like he can skip out on the other payments. So he's basically up shits creek right now. I just don't know what to do anymore.

[Hartyt509]

Always a way out of everything, sometimes it just takes a long time to find it.

 

You might not want to do this but how about getting a contract made up between you, you said you were a lawyer, then you get a low card and get the money straight out of his pay and you hold the purse strings until its gone.

[jajajaja]

You've tried getting a lower interest rate loan through a bank? We had to do that because when Steve got divorced he paid his ex-wife off for items he wanted to keep- like his boat with his credit card. He totally got screwed in the deal.

 

Anyways, my dad set up a bank loan as co-signer for him. Granted Steve's interest rate was only like 12% at the time (not 24%) and the bank locked in a loan at 8%. The little bit helped.

 

Also- if I were him, I would pay the lowest amount possible towards student loans. From what I've read, that type of debt isn't as bad as credit card debt.

[boscobel]

I joined a debt consolidation program a few years ago that was suggested thru my bank and I am done in January. I had almost $20k built up cuz I was young and stupid. They charge a $25 monthly processing fee, but they got my one credit card down to 10% interest and the other was a loan that I opened at 13% and it went up to 23% and then it went up to 30something% and that is when I decided it was RIDIC! They got that interest rate down to 4%, which is incredible. We will probaly pay the rest off after we get some money this summer, but I think it was one of hte best things I ever did.

[A10CalGal]

Eeek, that sucks Glenda. Here are my other suggestions:

1. Get rid of the car payment. Sell the car, payoff the loan & buy a beater that he doesn't have to make payments on. I imagine that would free up a decent amount of cash every month.

 

2. transfer the debt to a credit card in your name (I'm assuming you can get a low rate). I don't know how you feel about assuming his debt, but it would be an opportunity to pay a much lower interest rate.

[Jacqueline]

I did this years ago and wish I hadn't. They def have hidden fees. And recently we went to get approved for a mortgage and my credit (first time i ever had it checked) was terrible ( He said that was why. ??

[happygilmore]

Sometimes if you call and get persistant about them lowering the interest rate, they'll eventually crack. I have a capitol one card and they gave me the run around but after 6 months I was able to drop my interest from 19% to 9%. I would just call the company and get really annoying ask to talk to someon else if you get a no, ask to speak with a manager...eventually they should be able to lower it.

 

Also, I am not sure if you can do this with a credit card but it is worth asking..even if you guys could pay $315 a month could you ask that the extra $15 do directly to principal and not interest?