ro include if you take out a loan...you pay it back...Like a student loan...
Personal Debt Issue...What Can Be Done?
- Thread starter 1blkc5
- Start date
It is a viable option for people who have had medical events, divorces or some other life event which has significantly impacted their debt to earning ratio. For people who just got in trouble by overspending, it never works long term.
If it is floating interest rates, the Fed is going to raise rates again today. I think this is the beginning of a huge wave of people who are in deep financial trouble with inflation at the present levels coupled with the interest rates.
Avoid ALL debt consolidation companies as they are just funnels for you to pour in money you can't spare. Go to the library and borrow The Total Money Makeover by Dave Ramsey. Read it more than once if need be to understand fully. It works. It's tough as it takes sacrifices but it will work if you commit. Good luck.
I'd ignore calls to pay off the biggest debt first. It sounds good but it takes too long. You need to see results for encouragement. Say you have 4 (probably more but 4 for examples) debts, smallest to largest A, B, C, and D. The minimum monthly payments are A $47, B $81, C $108 and D$155.
You cancel cable TV, smartphone, satellite radio, newspapers, stop eating out and all the other things you learn in TTMM. That frees up over $300 a month and you start paying $347 a month on A instead of $47. It's quickly paid off and now you have $347 a month extra to add to B for $428 a month. In a few months it's paid off and within a year you've eliminated half of them. Now you have $536 a month for C, not $108. And on it goes. If you had started with D you'd still be paying on it and nothing would have changed except your austerity measures with no victories to show for it. Work from the bottom up. Winning repeatedly and rapidly is much more desirable and rewarding.
You cancel cable TV, smartphone, satellite radio, newspapers, stop eating out and all the other things you learn in TTMM. That frees up over $300 a month and you start paying $347 a month on A instead of $47. It's quickly paid off and now you have $347 a month extra to add to B for $428 a month. In a few months it's paid off and within a year you've eliminated half of them. Now you have $536 a month for C, not $108. And on it goes. If you had started with D you'd still be paying on it and nothing would have changed except your austerity measures with no victories to show for it. Work from the bottom up. Winning repeatedly and rapidly is much more desirable and rewarding.
Is this a personal debt? or a debt like mortgage? or student loan that you cannot get away from with bankruptcy?
Personal debt:
1) spend less, earn more
2) consolidation by refinancing with a lower interest rate loan
3) negotiate with the debt collectors
4) bankruptcy
Mortgage or other collateral based loan:
1) rent the place out to a roommate if possible
2) sell it and just cut the loss
3) foreclosure, repo, turn in the key, etc
Student loan:
1) switch career to make more
2) paying minimum for the rest of your life
3) leave the country and never come back (if you are just going to leave anyways like marrying someone else)
Most importantly try to figure out why you are in such debt, is it excessive spending, reckless investment, placing the wrong bet in career planning, medical emergency, divorce, etc? Learn from it and try not to repeat it.
Personal debt:
1) spend less, earn more
2) consolidation by refinancing with a lower interest rate loan
3) negotiate with the debt collectors
4) bankruptcy
Mortgage or other collateral based loan:
1) rent the place out to a roommate if possible
2) sell it and just cut the loss
3) foreclosure, repo, turn in the key, etc
Student loan:
1) switch career to make more
2) paying minimum for the rest of your life
3) leave the country and never come back (if you are just going to leave anyways like marrying someone else)
Most importantly try to figure out why you are in such debt, is it excessive spending, reckless investment, placing the wrong bet in career planning, medical emergency, divorce, etc? Learn from it and try not to repeat it.
The psychology is crux, as I understand it, of Dave Ramsey's debt snowball.
Also, I've noticed a lot of people who get deep into a hole may have multiple credit cards with $300-700 credit limits. A minimum payment is typically going to be $25-40 per card. For a person with 5 cards like that(not an uncommon thing I've heard of people having if they're to the point of getting cards with that credit limit) that's $150-200 a month that you're paying on say $2500 of debt, and you're paying that amount to maybe see $100 of movement in the balance every month. Seriously, yes, it's that bad with cards like that-of a $35 payment on a 30% card with a balance of $500 you're paying about $11 in interest every month. To make it even worse, a lot of the junk, predatory credit cards may auto-enroll you in "card protection" or some other such that's nearly impossible to get out of and will add-on another $10-15 a month. Add that up and $35 a month only knocks down the balance by $10-15. That a long time to pay off $300...
Knock out a $300 card in your first month or two and now you have an extra $35 or so a month to pay toward other debts. Knock out your next $500 and it continues from there.
Employers can’t see credit score. They can review report and see troublesome history with credit (irresponsibility). If you don’t use credit then you are responsible as person who uses it and pays on time.
