Need your advice on $ problems

Discussion in 'The Watercooler' started by Steely, May 29, 2008.

  1. Steely

    Steely Active Member

    OK. So. I just need to bounce some ideas off of your heads and see what you think (OK, not literally:sheepish:), but you know what I mean!

    I will try to be as simple as possible:

    Facts

    *I am 31K in credit card debt. With the change of jobs, I have absolutely no money for any amount on these debts, and they have become delinquent by 6 months.

    *I am receiving 20K from my grandmother's estate.

    *I need a new car

    Possible Solutions:

    *With the money I can pay 2/3 of this debt off, but the remainder I would still not be able to pay. The other 11K would still be sitting there mucking up my credit, making me unable to get a car loan.

    *I could probably "settle" all of these debts with this cash - but again this looks really bad on my credit - and make me unable to get a car loan

    *I can buy the car with the cash and worry about the rest of this debt later when I am able to formulate a plan to pay it.

    I know, it is like a flippin logic problem!!!
    Any advice? Any solutions I have not thought of yet? Let it fly!
     
  2. gcvmom

    gcvmom Here we go again!

    What would happen if you kept the car you have and repair whatever needs fixing and keep using that until you get to a better place financially? Even if it needs a lot of work, it's usually cheaper in the long run to limp along with a clunker than to take on a large car payment with loads of interest. You also save on vehicle licensing fees and insurance (at least in my state that's how it plays out).

    If it were me, I'd make-do with the junker I have and focus on paying down the debt as quickly as possible. It's not going to be fun or glamorous, and it's going to be hard, but I think it will be in your best interest long-term.
     
  3. witzend

    witzend Well-Known Member

    Oi! I honestly have no idea. Is there a non-profit consumer credit counseling service in the area that could give you advice?
     
  4. 1905

    1905 Well-Known Member

    I think you should get an inexpensive car. Use the remainder for the debt. Call the credit card company first, and see if they can help you out at all if you pay a lump sum at once. -Alyssa
     
  5. Abbey

    Abbey Spork Queen

    I think right now most creditors are more than willing to work with their clients. They know that it's better to get something than nothing at all.

    I just traded in my 10 year old Hyundai, which was the best car I've ever had for a new one. Probably not the best financial decision, but the repairs it needed were more than what we paid for the car. In 10 years I've never had ONE problem with it.

    I LOVE my new car. Cheap and great warranty.

    Abbey
     
  6. Shari

    Shari IsItFridayYet?

    I wasn't as far in the whole with credit cards when DEX packed his bags, but I was a long darn ways in. I worked with Consumer Credit Counseling. They actually advised me to file bankruptcy and I refused. lol They were able to work out a payment plan and I was able to pay everything off eventually. At the very end, I settled the remaining debt. Wasn't good on my credit, but was no worse than a big ol' chapter 13, either. (Thanks, DEX. I still owe ya for that one...)
    ***
    What kind of car do you currently have and what is wrong with it? Seriously, it is statistically cheaper to maintain an older car than buy a new one. Unless you're talking new engine or tranny, then you're probably better off to fix it (I know, no fun). And even if you're talking engine or tranny, its worth looking at doing it. If you can find a tech program with auto mechanics, lots of times they'll do it for experience for the cost of parts.
    ***
    Could look into bankruptcy. Shoots your credit but can be rebuilt sooner. (personally I don't like that option - tho my friend who filed when I went to CCC has a new house and a brand new camper now...but still not my thing.)
    ***
    I guess the cheater way would be to buy a car on loan before you go to CCC and add them to your creditors to work with...essentially reduce the payment you just took on. I don't reccommend that, tho.
     
  7. LittleDudesMom

    LittleDudesMom Well-Known Member Staff Member

    I'm always for paying off debt first - especially important in light of today's economy. Having said that, before you make any decisions, find a credit counseling (try Witz's idea about a not for profit one in your area) company that can help you work out something with your credit card company. Is this all one card or a variety of them?

    I would pay down your debt as much as possible. Perhaps look into the secondary market for a good used car. They are out there (I got one for easy child). If you have a friend who knows about cars, or a trusted mechanic, have they take a look "under the hood".

    You may be able to pay off 15K in debt and put the remaining in a decent used vehicle. Another option is to consolidate your debt into a line of credit. A credit counseling company can help you with this. The interest rates for a line of credit with a bank are probably a quarter of the interest rate you are paying on your bad credit card debt. I would suggest that you speak with a credit counselor before you make any decisions though.

    Sharon
     
  8. muttmeister

    muttmeister Well-Known Member

    I have a friend with nearly the same problem and she ended up buying a new car. The deals now are incredible and if your car is really a clunker you may end up putting more than the price of a car payment in it every month and still not have anything to drive to work.
    Right now most credit card companies have lots of people in your position and they would rather get something than nothing so they are, in the main, pretty willing to work out a deal as long as you are keeping the lines of communication open. I hope you have been talking to them and not just skipping payments without telling them what is going on. Perhaps if you explaned that you've just started a new job and need a few months to get on your feet they might be willing to work with you. It's worth a try as the worst that can happen is that they will say no and if that is the case you are no worse off.
     
  9. tiredmommy

    tiredmommy Site Moderator

    Don't forget you'll have a tax bill with the 20K.
     
  10. Steely

    Steely Active Member

    It is all so complicated.

    Yes I went to Consumer Credit Counseling and even if Paid 15K of my debt down, I would still pay 400.00 a month for 5 years paying the other 15K. The math works the other way too. Currently I would be paying 800.00 a month for 5 years. Even the guy at CCC told me he that I had cut all the corners he saw possible, and I am still living pay check to paycheck. There is not even 200.00 a month extra to pay debt down.

    My thought was not to get a car loan, but buy a car cash and that way all of my immediate needs are taken care of for 5 years, until I can figure out a way to pay all this down. Because bottom line - no matter what I do - unless I come up with the full amount - my credit is screwed. There is not a solution to this that involves me being able to get a car in (for a very long time) without them declining me the loan. And I feel panicky about that part of it. The whole being single thing, and needing to be independent, but not qualifying for a car loan, so then I would be car-less at some point? So, to prevent that, I would have to be saving money now left and right to buy a car, cash, at some point,

    Ugh. I may be having an anxiety attack now:angry-very:

    I don't know. I am really confused, and stressed about all of this.
     
  11. busywend

    busywend Well-Known Member Staff Member

    Well, for sure you do not want to end up with 2 monthly payments. So, your best bet would be to get a low cost used car for ~$10k and then put about $8k on the credit card. Then you need to get a loan of some sort to pay that off. If you have any interest on the credit card you will NEVER pay it off by just making payments. Get the loan - there is an end date that way. If you have 0% interest - keep it on the credit card account, but pay way more than mimum each month. Only do this while you have the 0% - if you lose that get a loan.

    Keep $2k in your savings account. It is important - especially these days to have some money you can get to quickly. They say to have at least 2 months worth of living in the savings account.

    And as far as I am concerned - buy yourself something special with some of the money. New bedding, new dishes, something you will appreciate and cherish - and think of your grandmother while enjoying it.

    As far as taxed go - this amount is tax free federally, but each state is different so do your homework with that first.
     
  12. muttmeister

    muttmeister Well-Known Member

    I'm not sure about putting $10k in a used car when you can get a new one, under warranty, for about $12. My younger difficult child got a Chevy Cobalt for about $11k several years ago and he has driving the #$% out of it and it still runs great. I'm not advocating any particular brand but I know many brands have a cheap, low end product that runs well and is more reliable than a used one. I guess I haven't had such great luck with used cars. Unless you have a mechanic in the family, you can get burned badly.
     
  13. hearts and roses

    hearts and roses Mind Reader

    I would be inclined to use the cash to buy a small, efficient, economy car by a good solid company that has a nice reputation for making good cars, such as the Toyota Yaris. It averages about 36 mpg and since it's made by Toyota - you know it will last. The base models are roughly $16,000. Then, I would take that $4000 and do one of two things.

    First option: Figure out which one of your credit cards has the highest interest and call them and see if you can work a deal with them to 'settle'. Then contact Consumer Credit again and working with a lower number, you may get a lower monthly payment. However, with my personal experience, when I started with a credit management company almost 5 years ago with only $9000 in debt to pay off, it still took me 4 years!! But, my monthly payment was only $225. I just made my last payment May 16th!! Yippee!

    Second option: Hide the $4000 cash balance following the purchase of the car and then file bankruptcy. I know, I know, the dreaded bankruptcy! BUT! I know several people who have gone that route and within 2 years their credit is restored. One friend of mine bought a 3 bedroom home in a very nice area only 18 months after filing. Another friend of mine received credit card offers after only 6 months! And my brother was able to secure college loans for his daughters BECAUSE of the bankruptcy (beforehand his income to debt ratio made it virtually impossible for him to get college loans for his daughters).

    I am not passing judgement and please hear me out...I have found that there are very different reasons why some people file bankruptcy. There are those smarmy people who rack up debt without a care as to how it will play out in the end or affect others. As is their M-O, without a care they file bankruptcy and then walk away only to rack up debt with some other creditors (again, without a care). They put their families at risk as well as their name. It's bad karma.

    BUT, then there are the people who either fall on hard times or for circumstances beyond their control, such as due to medical needs, a family emergency or tragic event. They rack up credit card debt and find themselves unable to keep up. For that unfortunate group, then I really feel that bankruptcy is there as a viable option that should not be looked upon as shameful or unscrupulous. It is what it is. Figure out which group you fall into and decide what will work best for you in the long run.

    Good luck~
     
  14. Fran

    Fran Former Site Owner

    Don't you have an obligation to pay your debt?
    I'm not passing judgment. I'm just a logical thinker. You have debt, you are responsible for it. I would call and see if you can get a break on the interest and terms of payment. It might work out.
     
  15. susiestar

    susiestar Roll With It

    Steely,

    I STRONGLY suggest you work with a credit counselling service. We worked with Genus Credit Management and had a wonderful experience, as have a number of our friends who we recommended.

    this actually HELPED our credit, and less than a year after we paid things off we were able to purchase a new home.

    Care deals, esp for hybrids are great. There are a LOT of state incentives for buying a new hybrid or electric car. Our state will give you a tax credit of 1/2 the price of the car, or there is another option that helps pay for the car. It i worth checking out.

    With Genus, we made a much lower payment, it was for a set number of months, they were great when we had an unexpected hospitalization and had to choose paying them or eating. they also have LOTS of financial counselling, esp online stuff you can read/do anytime. This helps keep you out of the situation in the future.

    Please don't make a decision with-o consulting some kind of credit counselling agency. And maybe a couple. I know one place told a friend that bankruptcy was the only option, and several others had a number of options for them. We found Genus to be our best choice.

    I am sorry the financial picture stinks. I know how it feels.

    It has been a number of years since we ended with genus, so ask a lot of questions of htem, and of ANY credit counselling place. If they promise to "fix" your credit, or charge a large fee, then they are NOT reputable. We did pay a fee to genus, it was $8 per month and if we couldn't make it we could opt out. It was simply to help cover their costs and we didn't mind paying it. ANDit was totally optional.

    Big HUGS,

    susie

    ps. Be sure to get something for yourself to remind you of Gma, you will regret it if you don't!
     
  16. amazeofgrace

    amazeofgrace New Member

    ebay?

    I am serious, I am in the middle of reading and researching an ebay business, myself. You can do it from home, on the side, at any hour and some people have done really well with it
     
  17. klmno

    klmno Active Member

    Steely, I'm not in your shoes- which always makes a difference! But if it were me, I would spend a few thousand tops getting the car you have in shape and put the rest in savings- partly to start paying the monthly fee on the CC. I know you are still paying interest this way, but it seems that it will not be as bad on your credit. It obviously isn't a permanent solution. So, you need to find a permanent solution- like finding a higher paying job if you can't find a way to reduce monthly living expenses that you have now. Can your son get a job and start paying a little toward living expenses? Is there something you can do from home to earn a little extra money?
     
  18. trinityroyal

    trinityroyal Well-Known Member

    Steely,
    First off, {{{hugs}}}

    Now. On to the credit-card-debt-and-new-car dilemma.

    1) I would find an inexpensive used car in good condition. Something small and fuel efficient. I'm not sure what the used car market is like in your area, but a few years ago I bought a used Suzuki Swift for $2000 cash. I could use an eye-dropper to fill the tank and it was indestructible.

    2) Phone each credit card company. Explain your situation, and find out if you can negotiate terms, such as a lower interest rate, or some sort of lump sum payment. With so many people struggling financially, lenders are very often willing to make a deal with you and get some of their money back, rather than no money.

    Tell them that you want to catch up on your payments, but you just can't manage that financially, and ask what sort of arrangement they are willing to come to.

    If you're several months behind in your payments, you'll want to do this soon. If they start taking any debt collection action, then they will be less willing to work with you on negotiating terms.

    3) See if you qualify for a debt consolidation loan from your bank. Or better still, a Personal Line of Credit. You can borrow enough to pay off the credit cards. At a MUCH lower interest rate. Then you have a fixed monthly payment and a fixed repayment term, both of which would be more manageable than all the outstanding credit cards with the associated fees and penalties.

    4) Rebuilding your credit rating. Yes, your credit may suffer a bit, but there are things you can do to rebuild it. If you negotiate terms and pay off at least some of your debt, you will
    -- lower your interest
    -- lower your monthly payments
    -- catch up on your debt sooner
    -- not be so deep in the hole each month.

    If you can negotiate a small monthly payment each month that you can manage, then you will put your credit back on a good footing sooner.

    (Keep in mind this is from a Canadian perspective, but I get the feeling that the banks are all alike in this regard)

    Hope this helps,
    Trinity
     
  19. donna723

    donna723 Well-Known Member

    I'm a fine one to talk because I've been in the same mess myself starting a few years after my divorce and I'm just now starting to get straightened out. One thing I will never ever do again is to buy a brand new car! You will lose several thousands dollars of it's value the minute you drive it off the lot! And I found out the hard way that the warranty is only as good as the dealership you take it too! Next time I will look for a good used car, something small and very good on gas, one only a year or so old, in good shape and still under warranty for a while. That's what I should have done and didn't!

    With what's left, all the "experts" say you should first pay off the card with the highest interest rate. Once they start adding all those late charges and fees, you'll never get out from under it! On anything else, from what they're saying, the credit card companies are having so many people default on them that they're more willing to work with people and some will even lower your interest rate if you ask them! They would rather do that and have you pay it off at a lower rate than get nothing at all.
     
  20. Steely

    Steely Active Member

    Gosh, all so confusing.

    Fran, yes, you are right. I have to pay these off. However, how is the operative word. I have NO extra money right now, to make any sort of payment to anyone. I am just surviving, with utilities and food, etc. I know - I messed up. Big time.

    20K does not cover it, but it is a start - and maybe I could negotiate the CC companies down to a settlement price. It would look better on my credit if my cards were not "settled", but paid in full - but regardless my credit is permanently altered. I did not ask the counselor about bankruptcy - but since I own a house - I am thinking I do not qualify anyway.

    I guess I should pay what I can on the debt, put a little in savings, and save for another year or two until I can afford to buy cash for a car.
     
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