Okay, I’m trying to come up with a plan to ease my troubles. I’m recently out of college and struggling with a car payment, credit card debt (a few cards), and student loans to pay off. I really want the minimum amount of payments necessary.
I have a job, and a steady income but of course it’s not yet enough to pay off everything.
I’m taking the smart steps not and not spending friviliously, only putting necessities on credit cards, but I don’t want to apply for a credit card to pay off others.
What should I do to help ease this burden? Consolidate my loans? like i said, I’m just out of college and looking for the best route.
Please help me out. What’s worked for you in the past? Any recommendations of companies?
If you got your student loans through the government (Stafford Loans) you can ask them to base your monthly payments on your income. They initially had me paying over $100 a month but after I asked them to base it on my income it dropped down to $12 a month. Sure it’s going to take a lifetime to pay off at that rate but it’s good for when you’re really struggling to make ends meet.
Of course! They don’t really make this option very obvious. It took me quite a while to discover it! I’m thinking you can do it over the phone but not sure. I always did it via the net.
First go to the website:
Log onto your account. If you’ve never done this before you’re going to need to request a PIN. It’s basically an extra step of security. If I remember correctly though, they have to mail it to you initially.
Once logged in look to the options on the left and click “Change Repayment Plan”
To see your options click the link under your loans that says:
“To view estimates of your monthly payment amount under each of the Repayment plans, go to the Repayment Estimator.”
It will list what your payment will be under each different plan as well as how much interest you’d be paying in the end if you did that plan for the entirety of the loan.
Once you’ve decided which one you’re going to do, push the Back button on your browser. Then use the drop down menu under your loans to select your new method Submit Change and you’re all set. I think it takes a week or so to kick in. Good luck!
Oh and also, depending on how much credit card debt you have and what the interest rates look like, you may want to look into Debt Management groups. A couple years back I was drowning under about $2000 in credit card debt with interest rates averaging 28%. It was killing me. I was late because I couldn’t afford my min. payments and when I COULD pay, I was barely covering the interest and not making any difference on the principle balance.
I used a company called Profina (now called InCharge Debt Solutions) and I loved it. They usually require you to have a certain amount of debt (I think it was $1500 at the time) and won’t let you include Student Loans in that figure. What they do is arrange it so all your payments for your cards are sent to them and they dispurse them to your creditors. So you basically only have one payment. The best part however is they can get you a lower interest rate and thus a lower min. payment. I had one card that was a min. payment of $150 a month with a 28% interest rate. After a month or so with Profina, it was down to $80 a month with a 23% interest rate. Because of them I was finally able to get myself out of debt. They do charge a small fee every month, I think like $15 an account or something. But in the end it was worth it for me It might be something you want to look into.
I’m kidding. I’m mooching off of the parents until I have a grasp on the debt. I’m only buying necessities. Believe me, the spending has really just been to pay off the debt and for gas in the tank.
That’s all I got XD Short of selling a kidney I don’t know what else to offer other than I can guarantee you that the human body can survive for two weeks on nothing but fishsticks and dry ramen.
While you may have had a good experience, it’s important to note that the vast majority of groups that promise to do things like this are scams or otherwise predatory and tricky. There are countless stories about companies like this doing things like not sending your payment to the CC companies on time, damaging your credit.
Get rid of your car. If you’re this financially fresh-out-of-the-box you shouldn’t bother with a car that’s nice enough to be making payments on-- you should be with a paid-in-full $1500 beater or a fine $350 commuting bike. New cars and nice used cars will kill you. So sayeth the bleeding-heart tree-hugging non-driver. You’re young and able.
I second doing the income-contingent student debt plan, or what I’m doing which is the ‘graduated plan’ where they rightly assume whatever job I have now is crap but that it will improve over time.
Pay off the CC debt first-- prioritize according to interest rate (this is obvious but a lot of people don’t think about it).
I need a car or else I won’t have a job. I had a beater that was worth about $1,500. But then the winter came and apparently it decided it didn’t feel like running anymore.
I’m paying around $150 per month on this car. It’s certainly not a hummer but I didn’t have the money to pay in full. I believe I had about a 5% interest rate on the loan and for goodness sake, it’s an oldsmobile. I bought it used. It was logical… so getting rid of the car and commuting to downtown chicago everyday on a huffy wasn’t really the top option.
I’m working my way out of a similar situation, and I have to ask the following questions:
–Why do you have multiple credit cards? You should have only one, for emergencies only.
–Why are you charging “necessities” on credit cards? Don’t buy anything you can’t pay cash for.
The way to get your credit card paid off is to stop using it. I haven’t charged anything on mine in four years. I pretend I don’t even have it (though I keep it for emergencies). Then I got a Visa check card from my bank. I pay for everything with it. Whatever I buy, it comes straight out of my bank account. It’s like spending cash. It will keep you on the necessary short leash.
An orderly repayment of debt plan like Aunt Flow is describing will ruin your credit rating for seven years after it is paid out, and it is the last step before bankruptcy, and you are nowhere near needing a bankruptcy at this point. What you do need is low interest rates, consolidated debts, and a firm commitment to make no more debts and pay off the ones you do have as quickly as humanly possible.
How large is your student loan? How much do you owe on each credit card? What are the interest rates on the loan and the cards? How much money do you take home each month? What are your irreducible expenses each month? How much can you pay off on your debts each paycheque? These are the things you need to sit down and figure out for yourself. I used to do a budget for each month, down to the dollar, and every extra dollar I had I used to pay down my debt. I paid $14,000 in student loans off in about two years, working two jobs. If you would like to hash this all out, I’d be more than willing to work it out with you - my email is in my profile.
Defer the student loans until you’re in a better place if you can’t get a lower payment.
Call each credit card company and ask them to lower your interest rates or help you to pay off your balances before you call a debt consolidation company.
I started with an american express card for students. It was the lowest APR for students at the time. I soon saw that not everyplace I needed the card at took Am. express. So, I applied for a mastercard. The APR was a bit higher so I did some research and looked at my finances and saw that most of my money was going into gas money. I found a Visa drivers card with benefits for gas purchases, a lower APR and protection. So I got that. In the meantime, I had never closed the other cards nor had I paid them off.
-Necessities is perhaps not a good word. Let me change that to “things that I need which I don’t have money for.” like gas. If I don’t have the cash on me and need a fillup, I avoid the 2-3$ finance charge and put it on my drivers card.
You have to realize, I’m just out of college, and getting my start in the real world. I did some excessive spending in the past and acknowledge it. Basically I’ve recognized the mistake and I’m correcting it.
My spending habits have completely changed.
Echoing others: get rid of that credit card balance. It’s your #1 hurdle. Your car and student loan payments are amortized to be paid off in 5 or 10 years. Credit card debt can hang around for decades.
Stop using the cards. Unless there’s an emergency (car breaks down, need bail money, etc), don’t charge anything to a credit card until the balance is paid off, and then pay off the balance every month. Most cards have a grace period of one month, so doing this gives you essentially a 1-month interest free loan (but double check your customer agreement with your card), along with whatever “perks” the card has (money back, gas savings, etc). This can be handy as a “buffer” if things get tight, or to simplify auto-payment of bills, but keep that balance zeroed. Necessities (rent, utilities, food, gas) should be getting paid with money you have, not borrowing more. Pay with cash, check, and (if your bank offers it) debit/check card.
Pay the credit card bills promptly every month. If you miss a payment (even by a day or two) the bank will likely bump your interest rate, along with a late payment fee.
If you’ve been following #2 for a while, call the credit card’s customer service line and see if you can get the interest reduced. If the rate was increased due to late payments in the past, but you’ve been making the payments regularly since then, they may drop it back down. It’s not guaranteed to work, but it doesn’t hurt to ask.
To really eat into the credit card balance, you must make more than the minimum payment. Even without making any new charges, minimum payments won’t pay off the credit card for something like 15 years. When I was in your situation, I tried to pay 10% of the remaining balance (rounded up to the next $50). If you’ve got multiple cards, start with the one with the highest interest rate. If they’re equal, start with the one with the lowest balance. Once one is paid off, add the money that you were sending to that to the payments on the next card.
Take a good look at your monthly budget. How much do you take home? What must be paid (rent, utilities, food, loan min payments)? How much does that leave you with? Are there any non-essentials that you can cancel or switch to a cheaper alternative (cable TV, cell phone, land line, internet) to make room in your budget for debt reduction? You don’t have to live like a monk, but you may feel that getting rid of debt is more important than (say) cable TV.
One other option is to get a new card with a low transfer interest rate, and use that to pay off all your other card balances. HOWEVER, that low interest rate is only good for a particular term (I think one year is the norm), and if the transfered balance is not paid off before that time, you get charged all the back interest at their full rate. And any new charges are put at the “end” of the payment line (they get paid off last) and are at the full interest rate. If you are sure your can pay off your existing balance in under a year, and will resist charging anything to that credit card, this may be an option to save on interest charges. But consider the risk carefully.
With all due respect to Aunt Flow, from my understanding good debt consulting firms basically do the above for you (well, probably not #6), and charge for it. However, they can also act as a “willpower backup”, since I think they do things like force you to cut up credit cards, and do regular checks for new charges. The bad ones will charge you, and not really do anything for your situation.
Once the credit cards are taken out of the picture, you can look at your other debts to see where you can make extra payments. And you’ll have more money to do so, now that you’re not paying the credit cards down. The car loan would probably be the best place to put extra money, since it’s the shortest term loan, and student loan interest is tax deductible. After the car’s paid off, if you’ve got multiple student loans, pay extra money into the one with the lowest balance to pay it off faster. Then, take the payment that was going to that loan, and pay into the next lowest loan.
When I graduated college in 1998, I had around $3000 in credit card debt, around $25k in student loans, and about $10k in a car loan. I was able to get debt free in five years. The important thing is live within your income, and that at the end of every month your debt balances are lower than the month before.
Ummm no it won’t. It didn’t adversely affect my credit as far as I can tell. Hell it probably helped it in the long run by making it where I wasn’t having late payments every month! And anyone with debt so bad that they’re THINKING of what I suggested is not going to be able to get a loan with a good interest rate. I was not able to get anything short of 26% when I first started looking for a solution. I even tried consolidated my debt with a loan through my bank which I had been with for six years. They refused to extend me the loan because I had too many bills :smack: That’s the point of me consolidating them Mr. Bank!
Submit Change and you’re all set. I think it takes a week or so to kick in. Good luck!
It might be something you want to look into.