Getting out of Debt Financial advice

[booster11373]

So long story short I have some credit card debt thats a little higher then Im comfortable with. I have some savings as well as so long and short term incentive packages from work. I bought a house last year and a car the year before that.

Should I tap my savings and incentives to pay off my debt or get some kind of loan?

I'm hesitant to touch my savings and incentives since the incentives have the possibility of increasing in value

I cover my nut each month with no problem but I would like to get this cloud of credit card debt from over my head

Can you get a home equity loan after only owning a home for a year?

Ideally I want something to pay off my CC's and give me some funds to make over my back yard which is a disaster area?

Any help or advice would be great!

[Tenbatsuzen]

So long story short I have some credit card debt thats a little higher then Im comfortable with. I have some savings as well as so long and short term incentive packages from work. I bought a house last year and a car the year before that.

Should I tap my savings and incentives to pay off my debt or get some kind of loan?

I'm hesitant to touch my savings and incentives since the incentives have the possibility of increasing in value

I cover my nut each month with no problem but I would like to get this cloud of credit card debt from over my head

Can you get a home equity loan after only owning a home for a year?

Ideally I want something to pay off my CC's and give me some funds to make over my back yard which is a disaster area?

Any help or advice would be great!

Tapping your savings to pay down credit card debt is stupid. You never know when you'll need that money, "just in case".

Do the following:

1) Call all the credit card companies and ask if you can have your APR lowered. They will usually do this if you are a customer in good standing.

2) Keep your eyes peeled for credit card offers that are offering a balance transfer at a low APR for more than a year. MAKE SURE THERE IS A CAP ON THE TRANSFER FEE. It's usually 3 percent or 100-200 dollars, whichever is lower. Chase is very good about this, so is Bank of America.

3) Transfer all (or at the very least, the highest APR debt) onto the new card. Get as much as you can on the LOW apr card.

Start paying down the low APR.

Now that you have empty debt cards, PUT THEM AWAY BUT DO NOT CANCEL THEM. Why?

When the low APR offer for your card begins to run out, keep your eyes peeled on the OTHER cards for balance transfer deals.

Lather, rinse, repeat. I cut my debt in half doing this.

[Tenbatsuzen]

I realize the above post may be confusing, so I'll elaborate:

I had three credit cards. One with a 20% apr, one with a 17% APR, the other with a 15% APR.

I was offered a credit card with 0% APR balance transfer for 15 months and a high limit.

I took the deal, and transferred the entire balance on the 20% APR card, the entire balance on the 17% APR card, and some of the 15% APR card.

I then paid some on the 15% APR card, but I focused paying down the 0% APR.

In the meanwhile, I worked with my credit card companies to drop the APRs on the higher cards. Over the course of the year, I got the 20% dropped to 14%, and the 17% dropped to 12%.

At the end of the 0% balance transfer offer, I had paid off nearly half my debt.

On the former 20% card, which I lowered to 14%, they offered me a balance transfer deal for 2%. It wasn't as great as 0%, but it was 2% FOR THE LIFE OF THE BALANCE TRANSFER.

So I flipped all the debt again, and continuing to pay that down.

Now, here's the hitch:

The card you flip on to MUST HAVE A ZERO BALANCE. If you don't have a zero balance, the balance with the "regular" APR will not be touched, as credit card companies pay off your low APR first, and then your high APR. You will continue to generate interest on the balance and high APRs, which negates any savings you may be trying to make.

As always: I am not a financial planner, this is just what I did. Your mileage may vary, and I am not responsible for any financial ruin you may have following this plan. It worked for me, it may not work for you.

[booster11373]

Tenbats!

Ive done what you said Ive "bounced" cards with high APR to lower or no interest for the first year.

I'm really interested in wiping the whole thing out in one fell swoop and fixing my backyard at the same time to ambitious?

and on top of all this I have university tuition fees looming in about a year from now I really love to be clean by then

Thing is I have the money to pay it all off now but I'm hesitant like you said to touch savings and the vested things have in creased and have potential to increase more so I'm hesitant to touch them as well

Is this a bite the bullet kind of thing cash it all out and start fresh or is a home equity loan a good idea? is that even possible?

[Tenbatsuzen]

Tenbats!

Ive done what you said Ive "bounced" cards with high APR to lower or no interest for the first year.

I'm really interested in wiping the whole thing out in one fell swoop and fixing my backyard at the same time to ambitious?

and on top of all this I have university tuition fees looming in about a year from now I really love to be clean by then

Thing is I have the money to pay it all off now but I'm hesitant like you said to touch savings and the vested things have in creased and have potential to increase more so I'm hesitant to touch them as well

Is this a bite the bullet kind of thing cash it all out and start fresh or is a home equity loan a good idea? is that even possible?

In these unstable times, getting a home equity loan especially after one year is a bad, bad idea. That's EXACTLY the kind of mindset that lead to the subprime mess.

The first key is consolidation. Then paying it down. Don't believe the hyper about Debt credit services; you can do it yourself. But by consolidating down to one payment on one card, you save yourself other interest fees.

[Marc with a c]

Yes you can get an equity line after being in you home for one year. It is a good tool if you are disciplined enough not to tap into it when you don't need to.

[cougarjake13]

yeh i consolidated all my credit cards on to one

only one finance charge and slowly but surely im almost done

[drjoek]

I would take a different tack then what has been offered of moving debt from one card to another or borrowing money to pay of debt. My suggestion is that you take money out of savings and pay off all of the credit card debt.To me credit card debt is worse than potential value of savings and incentives."If something happened" scenario could be handled with those cleared off cards if you needed to. Pay it off then begin saving again. Paying a card company any money for the right to use the card is throwing your money away. Pay all of your cards off in full every month.
Good Luck

[ahhdurr]

I've been repairing my credit and paying down debt for awhile now. I've made some great headway by doing a lot of the above suggestions.

Some things you'll see over and over in suggestions on this subject... one of which is to stay away from using a home equity loan to pay down debt - which I promptly ignored. I consolidated a few cards and am using the leftover money solely for the purpose of making home improvements that will increase the value of the house. The reasoning behind the admonition against using equity to pay down debt is: if something happens, and you can't pay the home equity loan, you could end up losing the house.


This site, in general, has good information on rates, cards, CD's - you name it... and personal finance tips that I've used effectively.
http://www.bankrate.com
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This link in particular discusses some pitfalls to avoid when transferring balances...
http://www.bankrate.com/brm/news/Financial_Literacy/Feb07_balance_transfer_a1.asp?s=1&caret=9b
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I was pretty sure that I'd never default on my home equity loan and we got a great rate and needed to make home improvements so I said wtf? As was mentioned though... alot of people recently took huge loans v. their homes and now they dont have them :eek:
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If you've developed a budget, you'll soon see the wisdom of dumping your savings into credit card debt. Dr. Joe just mentioned why. When you're tracking your monthly "out" and see how much goes to the card companies (it can easily go upwards of $200 / $300? without you even knowing it) it's simple numbers after that. You subtract the amount of interest you were making on your savings from the amount of interest you used to pay the CC companies -instant money in the bank. IMO though, it's a developed budget that makes this scenario a good one. If you're not really keeping track - then you coud benefit... but who's to say you wouldn't just waste the saved money?
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Keep the paid off cards open. They'll help your credit.
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I can't believe the peace of mind that being in control of finances brings though. Good luck budday.

[SatCam]

I would take a different tack then what has been offered of moving debt from one card to another or borrowing money to pay of debt. My suggestion is that you take money out of savings and pay off all of the credit card debt.To me credit card debt is worse than potential value of savings and incentives."If something happened" scenario could be handled with those cleared off cards if you needed to. Pay it off then begin saving again. Paying a card company any money for the right to use the card is throwing your money away. Pay all of your cards off in full every month.
Good Luck

I definitely agree.. I'd rather have no savings and no debt then have both. CC debt grows a lot faster than savings interest. If a rainy day comes along.......... that's when a credit card comes in handy.
Stop saving, pay off your debt, begin saving again and come up with a budget.

[CousinDave]

I doubt you'll be able to get much of a home equity loan in the current market, unless you put down a really big down payment.

If you're doing well month to month, I would take the savings and pay off the credit card debt, but only if you're disciplined enough not to run the credit cards back up.

Once you've got that debt retired, start investing in mutual funds, annuities, and CDs - so eventually you can make money work for you instead of you working for money.

Sirius XM stock is below $1.00 a share - it will go back up.

[Fez4PrezN2008]

I would take a different tack then what has been offered of moving debt from one card to another or borrowing money to pay of debt. My suggestion is that you take money out of savings and pay off all of the credit card debt.To me credit card debt is worse than potential value of savings and incentives."If something happened" scenario could be handled with those cleared off cards if you needed to. Pay it off then begin saving again. Paying a card company any money for the right to use the card is throwing your money away. Pay all of your cards off in full every month.
Good Luck
I'd have to agree with the good doctor... Your $ in savings is probably only earning 2-6% at best right now. Your debt is costing you 12-17%. You money will work harder for you by paying off the high rate debt.

PS- If you can find anything paying 6% earnings, please tell me, my 401k has sucked wind this year. Market sucks and will likely suck into 2009...

[peacefrog081]

Debt can be a really tough thing to deal with nowadays, and another problem that many people currently face is declining values of stocks, mutual funds, and other equities.

It is definitely a good idea to automatically put money away every month into a savings account or a "peace of mind" account. ING direct has good savings rates, compared to what you would get at a regular Financial Institution.

Additionally one of the best things that you can also do for yourself is start a spare time business, aside from a regular job. There are many opportunities and things to do, but the goal is to build passive income which is money that comes in when you are not working a regular job, you can attain Financial Freedom by having your passive income exceed your expenses.

This method is highly recommended by many Financial Gurus such as Robert Kiyosaki (author of Rich Dad, Poor Dad) Robert Allen, David Bach, and Donald Trump

I would be glad to share more information with anyone interested.

[sailor]

yeah, so what's passive income?

[peacefrog081]

Passive income is income that comes in whether you are working or not. Passive income can come from different sources such as royalties that artists receive from books, cd’s etc, another form of passive income can be obtained through real estate holdings, and renting out houses and apartment buildings.

One other form of passive income is leveraged income, which is generated through your work, and the work of others through team building, and helping others.

Leveraged income through teambuilding, has the lowest financial barrier to entry, and can have one of the greatest return's on investment.

I would be more than happy to answer any additional questions, and provide additional information and internet links.