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Consolidation Loan with 100% utilization


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I have a well paying job ($160k/year), but after getting out of lawschool, I was saddled with: $40,000 in credit card debts and around $55,000 in student loans. I never consolidated my student loans. I have a Penfed CC at around $19k (and around 5.99-10.99 fixed APR), a horrible MBNA CC with $14k on it at 28%, an Elan CC at around 22% with 4k on it, and an Amex card at 19% with 2k on it. My utilization is basically 100%. I stupidly got an expensive apartment, which costs $1700 per month, and I own a vacant house that needs around $3k of work done on it to get it into condition to rent out (the house is worth $120k, I have a 1st mortgage of $90k and a 2nd of $10k on it). (Car of $164/mo, Cell phone of $100/mo, and a ton of other expenses) I just can't seem to save any money at all.

 

Monthly Cash Flow:

 

Income: $7.2k per month (friggen government takes almost 50% of my paycheck away)

 

Expenses:

Rent $1,700

1st mortgage $780

2nd mortgage $105

Student loans $600

Penfed $500

MBNA $500

Elan $200

Amex $100

Food $300

Car $164

Cell $100

I should have $2151 left over each month, but it always disappears

 

I want to at least consolidate my CC debt, but both Penfed and Patelco rejected me for an increase to balance transfer or a new consolidation.

 

I don't really want a new second mortgage, since the closing costs will outweigh the value and I intend on selling the place in around two years.

 

Is there anywhere I can get a consolidation loan for my Credit Cards? Maybe I should refinance my 2nd mortgage, consolidate debt, take out a little cash to fix up the place, and get it rented out asap, but I have 0 time free.

 

As of 3/20:

 

Transunion: 731

Equifax: 693

 

No Missed payments

 

Any suggestions?

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Your income will be a plus so I would get with a good LOCAL credit union (where you can walk in and form a relationship with the staff) and maybe they will be able to help you. Tell them you want to move all your business with them. That's multiple accounts so they'll be excited (cos your credit is okay). Your credit cards are the ones that are killing you. You're other bills seem okay.

 

You will have to be transparent with your finances and situation with them but I dont think that'll be a problem for you.

 

Then you will have to do some soul searching and look at your finances.

You have worked hard to get where you are and may think its time to start reeping the rewards and living the high life.

But, now is the time to be more responsible but not necessarily frugal like Clark Howard.

 

Do This:

Apply for a Hardship Forebearance with your student loan servicer for 1 year. You'll qualify.

Opt to pay only the interest during that time. This will free up $300-400 a month. Use that to pay off your higher rate debts or as breathing room while you look for a consolidation loan.

Reason is... your SLs have a very low rate. Probably 6% or so. Makes no sense to be paying it at the same time as your trying to get rid of cards at 20 something percent. The lowest rate loans should get only the minimum payments while the highest rate ones should be getting every extra dollar to pay it off ASAP.

 

Good Luck

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I should have $2151 left over each month, but it always disappears

 

That's scary.

 

If you should have that much left over but it "disappears", you need to find it. Go thru your past 3-4 months of bank statements and catagorize every line. Everything. That's a SIZEABLE chunk of change. Think that if you used even HALF of that, you'd be dropping an additional grand on your higher credit card every month. Adding that additional money to your current payment of $500 a month has you paying $1500 a month. $14k on MBNA? Done in 10 months!!!!! Ok, maybe 11 months because of interest. Regardless, you see where I'm going here. We all have money that slips thru the cracks, but your job now is to find that money and reduce where you can.

 

I had the same problem until I put together a budget. I try to keep it up to date at least 3 months in advance, usually quite a bit more. Break things down into your paycheck periods. I get paid every week, so every week I show my incoming balance plus my paycheck, gives me my starting point. Then I remove money for fuel, food, and misc. Then remove any bills that are due that pay period. Then I remove some that goes into savings, and I'm left with a balance that gets pushed to the next week. Excel makes this pretty darn easy. Do you like to go out to eat? Put it in the budget. Do you like to go out to the bars? Put it in the budget.

 

Seeing everything in print laid out can make a huge difference in your attitude and well being. It gives you back control. You'll see where you can trim things down to save.

 

Lastly, don't carry cash around. That's where most people lose their "untraceable" money. Carry a little bit (budgeted!!), and use your debit or a PIF card for everything else. One exception to this would be when you go shopping. Set yourself a budget of how much you want to spend, carry that in with cash and nothing else. You can't go over budget then. Kinda like going into a casino!

 

Good luck!

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First off, don't consider a consolidation loan. You are not paying down debt if you just swap one debt for another. People who do consolidation loans very often turn back to using credit cards and ultimately end up making their situation worse.

 

As the above posters have suggested, you are going to have to start taking a more responsible role with your finances.

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First off, don't consider a consolidation loan. You are not paying down debt if you just swap one debt for another. People who do consolidation loans very often turn back to using credit cards and ultimately end up making their situation worse.

 

As the above posters have suggested, you are going to have to start taking a more responsible role with your finances.

 

Consolidation loans only work where your interest is reduced and you refuse to charge anything else on the cards that were paid off. Otherwise you will end up charging them back up while justifying it to yourself that you'll "pay it off next month". You have to be able to take a long hard look at yourself in the mirror and BE HONEST.

 

If you have over $2,000 "slipping thru the cracks" every month, will it be worse if you have an open card that you could use too?

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If there should be over $2,000/month left over, I'd be looking for where it "disappears" to before incurring any new debt. Start with the first rule of budgeting - write down every single thing you buy for at least 2 weeks (a month would be ideal) or sign up for a program like Yodlee or Mint so you can see exactly where your money is going. I'd bet a good chunk of it goes toward eating out or going out; you also don't account for your hobbies or stuff like insurance. Figure out where that money is going and you'll be a good way along the path of figuring out what you need to do next.

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First off, don't consider a consolidation loan. You are not paying down debt if you just swap one debt for another. People who do consolidation loans very often turn back to using credit cards and ultimately end up making their situation worse.

 

As the above posters have suggested, you are going to have to start taking a more responsible role with your finances.

 

Consolidation loans only work where your interest is reduced and you refuse to charge anything else on the cards that were paid off. Otherwise you will end up charging them back up while justifying it to yourself that you'll "pay it off next month". You have to be able to take a long hard look at yourself in the mirror and BE HONEST.

+1. He'll be hard pressed to find a consolidation loan with a favorable interest rate while he is carrying around so much debt. More often than not, a consolidation loan ends up being poison to one's financial health because, as you stated, it is so easy to run those credit card balances back up.

 

I'm glad to see that this gentleman has looked at his situation and realized there is a problem. Some good money management skills should solve it for him.

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I should have $2151 left over each month, but it always disappears

 

That's scary.

 

If you should have that much left over but it "disappears", you need to find it. Go thru your past 3-4 months of bank statements and catagorize every line. Everything. That's a SIZEABLE chunk of change. Think that if you used even HALF of that, you'd be dropping an additional grand on your higher credit card every month. Adding that additional money to your current payment of $500 a month has you paying $1500 a month. $14k on MBNA? Done in 10 months!!!!! Ok, maybe 11 months because of interest. Regardless, you see where I'm going here. We all have money that slips thru the cracks, but your job now is to find that money and reduce where you can.

 

I had the same problem until I put together a budget. I try to keep it up to date at least 3 months in advance, usually quite a bit more. Break things down into your paycheck periods. I get paid every week, so every week I show my incoming balance plus my paycheck, gives me my starting point. Then I remove money for fuel, food, and misc. Then remove any bills that are due that pay period. Then I remove some that goes into savings, and I'm left with a balance that gets pushed to the next week. Excel makes this pretty darn easy. Do you like to go out to eat? Put it in the budget. Do you like to go out to the bars? Put it in the budget.

 

Seeing everything in print laid out can make a huge difference in your attitude and well being. It gives you back control. You'll see where you can trim things down to save.

 

Lastly, don't carry cash around. That's where most people lose their "untraceable" money. Carry a little bit (budgeted!!), and use your debit or a PIF card for everything else. One exception to this would be when you go shopping. Set yourself a budget of how much you want to spend, carry that in with cash and nothing else. You can't go over budget then. Kinda like going into a casino!

 

Good luck!

 

I can tell you where it goes - that budget doesn't include putting gas in his/her car!

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First off, don't consider a consolidation loan. You are not paying down debt if you just swap one debt for another. People who do consolidation loans very often turn back to using credit cards and ultimately end up making their situation worse.

 

As the above posters have suggested, you are going to have to start taking a more responsible role with your finances.

 

Consolidation loans only work where your interest is reduced and you refuse to charge anything else on the cards that were paid off. Otherwise you will end up charging them back up while justifying it to yourself that you'll "pay it off next month". You have to be able to take a long hard look at yourself in the mirror and BE HONEST.

 

If you have over $2,000 "slipping thru the cracks" every month, will it be worse if you have an open card that you could use too?

 

Well, if the loan reduces interest and reduces outgoing payments considerably, you CAN be successful by sockdrawering CC's and planning a budget. Consolidation is not the solution but can be a part of it.

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Any suggestions?

No consolidation needed. Change your spending behavior and lifestyle

 

Ditch the apartment

Move into the home, it has to be livable or you would not have gotten the mortgage(s)

Track all of your spending

Spend less than you make

Kill those credit card balances ASAP with surplus cash

Edited by sarg
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You can figure out where your money goes very quickly if you use Quicken (Mac/Windows) or KMyMoney (Linux) or Mint.com (WWW).

 

 

Go download all of your 2008 banking transactions and import them into the software and start categorizing. Then, go look at the reports. Your spending habits will be spelled out quite clearly.

 

A lot of HENRYs (High Earner, Not Rich Yet) people have tons of disposeable income that they simply dispose down the drain. They also have to pay a lot higher taxes so they feel pinched. Just because you're at a high income doesn't mean you can stop looking for deals and avoiding unecessary expenses.

 

In fact, you have to be just-as if not more dilligent than folks who live off cash and have low incomes. HENRYs usually have more assets with costs attached to them.

 

 

 

Money holes people often discover:

 

- CC interest, bank and CC fees. Plenty of advice here on CB how to lower that.

 

- Too many ATM transactions [normal ATM visits are 2x a month... some people visit the ATM so often they pay fees that amount to as much as a whole ATM withdrawal every two months! There are no-surcharge ATMs out there, you have to just seek them out. Your bank is not really going to be motivated to tell you where they are. Ask around. Here in Philadelphia, every Wawa conveinence store has a free ATM through PNC Bank, and it's open to any ATM user -- not just PNC customers. Saves me a tidy bundle every year to walk an extra block to a Wawa store vs. using the ATMs a few feet from my house and where I work.

 

- Taxes on your utilities, phone and mobile. Can you live without a landline? Could switching to Vonage save you money if you need the phone for faxing, LD, etc? Or would Skype save you even more?

 

- Too many vehicles! I can't understand why some people see a need for 4+ vehicles. Think it's bad enough dealing with your nasty neighborhood association complaining that your house looks like you're having a permanent party inside? Try the amount in hidden costs you pay to maintain that many vechiles. A family of five doesn't have a need for more than two cars, period. I wouldn't give my kid a car unless it was a used one and my kid was in co-op, meaning the kid also works full-time/part-time and has their own income they can use to pay for fuel, fluid changes, brake tags, and some money for the repairs. I would be nice and pay their insurance. :) Your kid is going to be a LOT more careful with his/her vehicle when they're putting their own money into the car. If your kid can't hack it and it incourageable---then don't bother... sell the car when it's at its end of life. If your kid wants the vehicle, you'll be more than happy to sell it to them on eBay or for cash up front. :blink:

 

- Eating out way too much; not buying enough groceries and taking advantage of bargains. The markup on simple stuff like deli sandwhiches can be more than double what it costs to make them yourself at home and pack your lunch when you go to work. A plate at Saladworks for lunch with a small fountain drink is $10 here. I can bring my own homemade salad that cost about $1 in ingredients and a 1 litre diet soda for $1.50.

 

- Cyclical fees for all sorts of crap you may not even use all the time. Subscriptions to magazines, websites, domain hosting. Do you really need all of that? I cleared my plate of all that stuff a couple years ago and discovered about $400/yr worth of savings right there. I don't subscribe to any magazines unless they're trial subscriptions, and then I throw the subscription bills in the shredder when the subscription ends. If I really like the rag, I'll take another trial offer... they're always out there.

 

- Spending way too much on fluid and filter changes for the car. You'll be surprised how the parts and labor for a routine expense like this can vary from garage to garage. There's a garage right by me that suckers people into > $190 for a full service change [filter, transmission fluid, brake fluid, differential, coolant]. They make people feel like they're getting something by tossing in cheap windshield wiper replacements and cleaning your windows, but it's still a ripoff. You can get full fluid changes at other garages for less than $130 and get quality wipers for your car that last longer at any discount auto parts store. Overinflate the tires in summer [to boost mileage], underinflate them in winter if you live in northern climates [to increase traction]. Know WHEN you need to change the tires; don't let the service techs at NTB or wherever you go for tire changes tell you when you need a tire change. Learn how to examine your tires yourself (Google is your friend).

 

- Empty out the contents of all your vehicles. Only keep the minimum amount of stuff in there that is necessary: spare tire, flares, first aid emergency kit and in the dead of winter, a fleece thermal blanket in case you get stranded and have to wait for a tow. Keeping extra junk in your car reduces your mileage since your engine has to work harder to move all that crap around everywhere you go. You'd be breaking a pretty hard sweat if you had a fully loaded refrigerator attached to your bicycle. That's what your engine feels like when you have a bike rack you don't use and junk in the truck and backseats of the car. Take off the Chinese-made American flag off your car that reduces your MPG and opt for a US-made bumper sticker with a picture of a flag, if you must.

 

- Weatherize your house now that it's springtime. Whether you own or rent, it pays to seal those windows and close ducts and heat exchangers to rooms you do not use. Set your water heater thermostat to the lowest comfortable setting. Too many people set their gas boilers and electric heaters to scalding-hot and pay tons of extra dough to keep a huge tank of scalding hot water they barely use because they have to run a lot of cold water to get the temperature comfy. Don't put appliances, candles or objects anywhere near your house/apartment thermostat because it can influence when your HVAC will kick on.

 

- Washing habits. Detergents are good enough now that you can happily use cold water for most all washes. I can get drive chain grease out of my jeans with just a cold water wash. Use the scalding hot water only for really grimy stuff that requires a soaking in the washer to break loose or needs a pretty-intense bleach. Bright colors will last longer in cold washes anyway. If the weather is nice, hang your clothes outside and forego the dryer. There are some pretty high-tech looking outdoor clothestands you can get these days. Or if you're in a very old neighborhood like I am, we still use the old clotheslines that hang in between rows of houses here when the weather is nice outside. I've noticed over the last year and a half more people here are going back to clotheslines to save on the electric bill. You can also save money on clothes drying by switching to a gas dryer instead of an electric. There's still an electric motor in there but the energy cost to use gas vs. inefficient electric heading elements is fairly significant.

 

- Kids now have all these subscriptions to play games and what-not. WoW, XBOX360, etc. Don't use your credit card for this stuff, make them pay for it out of their allowance. You can get your kids a Visa BUXX card they can use for stuff like WoW or XBOX and let them manage their allowance as they see fit. It saves yourself the aggravation later when a surprise charge comes in. You can buy XBOX points for cash from any video game store anyway. Keep the kids away from your plastic.

 

 

It might not be you that's the money pit... it could be the spouse or SO. If you're dual income you could get a seperate checking account and make allowance deposits into the joint account so you can leave the spouse to his/her own devices while you take more control over your own spending.

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