State of the Wallet

Slow and steady wins the race. It's an old cliche but I like it :-)

You can do it. You might also want to check on debt consolidation options, etc. There is help for people like you, if youre willing to ask for it. Good luck, sweetie. Its not going to be fun, but you can do it, and you have friends who will support you. Me, included. In spite of the "internet" thing. =)

bankruptcy

you're a prime candidate; interest-coverage ratio (inverse of debt-income) floating at or beneath the 0.5 range. only caveat is your student loan(s) won't wash under current statutes. try for chapter 13 first, if you feel you can keep to some controllable 36-60 month partial payment plan; otherwise punt on the whole thing and file chapter 7.

you're not getting any younger, noah. get a fresh(er) start while you can. thomas jefferson himself filed not once, but multiple times.

-- sven

Re: bankruptcy

The problem is, I don't want the big black mark of Bankruptcy on my credit record, when I think I can keep it under control other ways. This holds especially true, when I'm looking at what's basically the biggest credit step an individual can make.

I've been trying to look into Debt Consolidation, but in that arena it seems like EVERYTHING looks like a scam. However, doing some quick, super sketchy math says consildating everything into a single lump at, say 10% (estimating it's high interest but federally subsidized, or some other such crap to pull a number from nowhere) Pays off at about $1000 per month for 3 years (again, really sketchy math. I just did straight division for an upper bound, instead of some amortization table). That includes my car, and all the personal loans.

I really need to think hard about this. If I can, by some miracle, get a mortgage broker that will help me out, that seems like the best course of action. On the other hand, pursuing the debt consolidation route for a year will likely be much more attractive on my credit report.

Re: bankruptcy

Go bankrupt now before the Republicans pass the bill that won't let you do it.

Re: bankruptcy / credit counseling

i can personally vouce for debt consolidation of credit card debt. it works! Consumer Credit Counseling Service of Southern New England is what i use and they are awesome. (http://www.creditcounseling.org/AboutCCCS/Default.asp). the downside of that is that they can't help you with car loans or student loans. But after being with them for two months, they had repaired my credit report enough that i was able to refinance my car loan at a lower rate, saving another chunk of money on monthly payments. Also: Instead of dividing all your debt over 3 years or whatever, they set the payments at an amount works with your personal finances and extend the payments for as long as it takes. mine was a 5 year plans... started 3 years ago. i can give you more details about the whole thing if you want.

also... bankruptcy isn't the black mark that it used to be. if you go have a meeting with the counselors, they will tell you which option is more feasible for you.

Re: bankruptcy / credit counseling

I went the credit counseling route as well, and just finished the program last month. I started on a 5 year plan, because it was all I could afford at the time. After a moving to lower rent and getting my finances in order I was able to pay well ahead of schedule.

It's a more palatable option than bankruptcy, slightly less scam ridden than debt consolidation.

Re: bankruptcy

A loan calculator makes a big difference. A 53,300 loan at 10% for 3 years is a payment of 1719.84.

Calculator here. 5 years gets it to 1132.47.

Like mikecap says, there is a law going through congress now that will make bankruptcy harder if it goes through. Research if that's a good route for you now, as the option may not be open to you in the future.

Other things to consider:

Is your car worth more than the loan? Can you sell it and buy a cheaper car?

What is your interest rate on your auto loan? DCU's rates are 5-6% for a 5 year auto loan.

It may not be a good idea to refinance your student loans - the interest rates on those are usually pretty low, and may be deductible on your taxes.

For your credit cards, one possible route is to take advantage of introductory offers for balance transfers. Transfer your balance(s) to a card with no or low interest for their introductory period, then repeat until its paid off. Close old cards after the introductory period (I would do this mainly so I wouldn't be tempted to use them).

Unfortunately, it looks like reputable banks have high interest rates for personal or debt consolidation loans - here's DCU's rates.

Re: bankruptcy

Heh... My numbers actually didn't include the 28,000 in student loans. Forgot to mention that.

Re: bankruptcy

Oh, and my car loan is at about 14%...

Re: bankruptcy

Do you have AAA? They tend to have good financing deals, maybe refi deals too. I've had luck paying off some credit card debts by getting a low interest personal loan from my credit union. I heart my credit union.

hmm... (sven crunches some numbers)

calculations (including a few wild fermi estimates) are as follows.

28,000 ... student loan
13,000 ... auto loan
12,000 ... misc consumer debt

dreamy not-entirely-realistic scenario --

student loan at 4% over 15 yrs = $208 monthly
auto loan at 7% over 6 yrs = $222 monthly
consumer debt at 19% over 6 yrs = $280 monthly

middle-of-the-road scenario --

the whole 53K consolidated to 9.75% over 6 yrs = $975 monthly

throwing around imaginary numbers like 40K salary (31K takehome post-refund?), a monthly debt-burn ranging between $710 and $975 leaves roughly $19K annually -- this is just above the Massachusetts family-of-two poverty line (whose composition assumes parents commuting to work via bus, buying generic-brand groceries, concessions of that nature). barring significant fluctuations in employment and/or inheritance, you will be living this lifestyle into your mid-to-late thirties.

mortgage lenders will typically decline a total debt-to-gross-income ratio in excess of 41.0%. if you consolidate using the aforementioned figures ($710 to $975 monthly burn) you will qualify for a $600-ish monthly mortgage payment (at 8.0%), translating to a property valued at approximately $82,000 USD. roommates/renters could conceivably help with this figure somewhat.

so. cooking the books, i see that the situation is not impossible... only implausible. your resolve to get out from under is commendable, noah, and i salute your attempt(s) to do so -- but you need to take a blunt and factual look at the numbers and sacrifices involved before committing to a course of action that could/will potentially screw you for far longer than a bankruptcy filing's seven-to-ten-year shadow ever could.

-- sven

EDIT -- as i examine seth's situation and the course(s) of action he pursued, i wonder if variable-rate consolidation is not a valid alternative (it's long and painful, but the month-to-month payments are more palatable in the short term).

these guys are indeed scumbags, but i can recommend the answer company or student loan solutions or whatever-they're-calling-themselves-this-week -- company is owned/run by old acquaintances of mine, and they're slimy, but a known quantity of slimy, if that makes any sense. 800-256-5105.

You CAN do it. I know you can. I've seen you be disciplined (albeit, not about $$) in the past.

My huge scheme for getting out of $20k worth of debt was this:

1. STOP using credit cards.
2. pay all the minimums, without fail. you don't want to get socked with late fees or interest rate increases.
3. pay all the extra you've got every month towards the debt with the highest interest rate.
4. when the highest rate debt is paid off, then attack the 2nd highest. etc. etc. etc.

until it's all gone. I got rid of $10k of that debt within a year of working, and I'm still working on the student loan. The interest rate on that is lower than I'm earning on my investments, so I've decided to pay it off according to their schedule and profit.

Good luck, m'dear. I know you can do it.

-k

Also, I read recently that since credit card interest is charged daily, you can save quite a bit of money by sending them, like, $25 a week rather than $100 a month.

I've also got some books on this if you want to borrow any of them.