Hey guys. I have a large amount of credit card debt I want to pay off. It's 2 credit cards and the interest rates are 9.9 and 15.9. That's the only debt I have.
I've consolidated in the past on one of those cards but just ran it back up. i think my mistake was consolidating to a card versus a personal loan. Checked with my credit union (also a holder of one of those cards) and it seems i can consolidate both in a personal loan for far less and a 9.49 rate.
I'm wondering if anyone has had that experience and learned from it. Any thoughts?
My plan is to ice my cards til all debt is paid. Auto pay my bills from my checking acct and live off of the rest using the envelope system.
If you can consolidate them to the smaller interest rate that's probably a good idea. However, most of the time there's a "catch". Don't borrow from your 401k, home equity loan, or anything fancy like that. Those situations are risky and can go very bad if you have the slightest hiccup in your life (e.g. lose your job, family illness, etc.). Remember, there is no such thing as a free lunch!
At the end of the day your going to have to pay it off anyway. Why not focus your efforts on paying it off as fast as possible. The faster you pay it off, the less interest rates matter. So, I'd consider some more serious measures in getting out of debt. For example, I took a part-time seasonal job last year and worked like 14+ hours a day. It sucked and it was hard on our family, but it helped a TON. Maybe move into a cheaper place, or trade in your car for a beater car--it's all temporary.
I'd also get plugged into Dave Ramsey. He has a daily radio show--which is also a podcast. It's very inspiring and you'll learn a lot.
I would check with a loan consolidation calculator to make sure you're actually saving money, if you haven't already. 15.9% might be better than 9.49% with triple or quadruple the principal.
You might also want to consider what will help motivate you. Dave Ramsey recommends doing the "snowball" method where you pay minimum payments on everything but your smallest loan until you've knocked it out, then move that extra money to the next biggest loan. As someone in the middle of knocking out student loans, I know that the momentum from actually paying something off gives me a huge boost in motivation to keep at it, whereas a big looming loan can feel defeating. You might spend more money on paper, but if it gives you the boost you need to actually knock the debt out, it might ultimately save you money.
Whichever way you choose, the key is to stop digging the hole deeper. You have to stop using credit and figure out how to live on your income. When people get in trouble after consolidating is usually because they succumb to the temptation to charge something rather than figure out how to pay it without incurring more debt. Seems to be human nature. So what is your plan to prevent this?
We were in credit sink (not even paying down balances) when I took over the budget. I realized that we needed a consolidation loan, which we got at 2.95%. 6 year loan, paid off in 3.5 years thanks to YNAB. Now debt free, using credit cards for the points/percentage back, but always paying early and completely.
I just did it and knocked my interest rates down from 19% to 6.49%. Credit score jumped, I felt like I had a monkey off my back, and I'm no longer giving money to the CC companies. My only advice is to MAKE SURE you have a handle on the budget. You don't want the personal loan, and then start building up CC debt again. Cut the cards!