Getting out of debt

Discussion in 'Community Discussion' started by souldawg, Jun 21, 2008.

  1. souldawg macrumors member

    Jun 13, 2008
    Are there any good strategies you have used to get out of debt?

    Backstory: I put myself through undergrad and graduate school basically on loans and credit cards. I have student loans and two credit cards left to pay off with what I consider high balances. I have paid off two credit cards completely already.

    I want to buy a MB, and am waiting until the announcement so that I may buy a refurb at a slightly cheaper price. My iBook is great, but I just need a bit more. However, I find myself wanting to apply for a new credit card to pay for it, and that sends up red flags. I need to get out of debt first.

    Any strategies that work? I currently pay only the interest on the student loans and try to pay a bit more than the minimum payments on each credit card each month.
  2. juanster macrumors 68020


    Mar 2, 2007
    happened to me before what i did was, since i wasnt late on any cc payments for my 2 credit cards, i got a line of credit to cover both of them and paid them full, tahtw ay i am paying only line of credit interest instea dof cc interest whihs is so much higher..and then always tried to make payments for as much as i possibly could until paid off, and then, whenver i need to purchase somethign "big" i always put it in my cc and then at the end of the month pay it all off with my credit line,, so all i do is trasnfer money from one side to the other, someone told me it builds good credit i dont knwo if it's true but it can t do any damage anyways so i do it....
  3. j26 macrumors 65832


    Mar 30, 2005
    There are 2 basic ways to get out of debt

    1. earn more

    2. spend less

    Ideally a bit of both works well

    Around that you can do things like reduce the interest you are paying, but unless you can reduce spending and put the money you save towards reducing your debt, I don't think you should be looking at a Macbook yet.

    Keep track what you spend - you'll notice all sorts of things that can be reduced, and shop about for your utilities etc. If you trim off some of the fat, you can get the debt down pretty quickly.

    Look to see if any credit cards have introductory interest free offers. If they do, transfer over to them and put whatever money you can into a savings account to earn a bit of interest and the day before your interest free period expires, dump everything in that account into the credit card.

    Could you consolidate all of the debt into one loan at a lower rate of interest than you're currently paying? Shop around and see.
  4. glocke12 macrumors 6502a


    Jan 7, 2008
    I just got out of some rather large credit card debt, but had to have help from my mother to do it, which in return has required me to be her caretaker for a couple of years. Ive still go about 30k in student loans I will have for a long time.

    If you want a new MB, my advice is to not use a credit card unless you are 100% sure you can pay it off quickly (2-3 months). Can you sell something, or are you patient enough to save for it ?
  5. Rodimus Prime macrumors G4

    Rodimus Prime

    Oct 9, 2006
    lets up that to do not get a MB until you can pay it off in full. But I would hold off on the new mac book until you have paid down your credit cards.

    As for the credit cards take the one that has the highest interested rate and pay that one down as quickly as possible. The other one pay only the minumium balance until the one with the highest interested rate is paid down. After you paid off the first one dirvert all the money that was going to pay it off to the 2nd card and pay it down.

    While doing that above DO NOT USE YOU CREDIT CARDS. do not add any more lines of credit. By the sound of how you got your self in debt never use you credit cards to buy required things like food gas or things that have a monthly cost to them because those will only keep coming.

    For example do not do what I do. I divert everything I can to my credit card like bills, food, gas ect but I also pay the card off in full every month hence no interest.
  6. souldawg thread starter macrumors member

    Jun 13, 2008

    Thank you everyone for the advice. I don't use my credit cards now, I just am trying to pay them off. It just feels like a mountain! I like the strategy of targeting one - make a dent and push through it. As far as the MB, I'm holding off for as long as I can. I wasn't planning on buying new, just a refurb because what I have now and what I need it for are two different things. I've also held off on going on any vacations for five years or buying new appliances, and even not buying new clothes.

    I'm also going to look into the credit transfer idea. I've consolidated my student loans, but if I could do the same for the credit cards, that might help.
  7. juanster macrumors 68020


    Mar 2, 2007
    yeah you shoudl be able to consolidate your cc too..i think you should have doen this together with your school...but it doenst matter now, try to see if you can do thats omewher for a lower int. rate..
  8. The Doctor macrumors member

    The Doctor

    Jun 19, 2008
    Chestnut Ridge, NY
    how do you consolidate cc debt... i looked into it, but everything i found and everyone i spoke to led me to believe that you have to be missing payments and stuff like that to get your cc debt consolidated... i really would like to just combine them all so i end up paying less per month.
  9. swiftaw macrumors 603


    Jan 31, 2005
    Omaha, NE, USA
    Two common ways:

    1) Get a loan and use the loan to pay off the CCs. The interest rate on the loan should be less than the rate on the CCs

    2) Get a new CC that has an introductory offer of 0% interest on balance transfers for 12/18/24 months. Transfer the balance of your existing CCs over to your new CC and pay it off during the 0% introductory period.
  10. sushi Moderator emeritus


    Jul 19, 2002
    Consider talking to the credit card companies (bank) directly. Speak to someone like a supervisor/manager who can actually change the interest rate. If you are successful, many times you can lower the interest rate on your current credit card while you are on the phone.
  11. yeroen macrumors 6502a


    Mar 8, 2007
    Cambridge, MA
    That used to be true, but it is getting much, much harder to do nowadays as I found out recently when the APR on one of my cards jumped 5% for no reason (my credit score hasn't changed). You can bet banks are looking to gouge as much as they can from credit cards to cover their losses in the subprime mess.

    And that's assuming you can even get anyone on the line. Capital One's automated service system no longer gives you the option of speaking to a customer service rep. Typically you'd dial zero when on the line to speak to a a human, but that no longer works.
  12. gmecca2 macrumors regular

    Jan 17, 2008
    CC companies are not as lenient as they used to be with lowering the interest rate on your cards. If you have ever missed a payment, or if they run your credit to get an update and it looks like you're starting to get strapped you can forget about it. Banks do not want you to pay off your cards they just want to make sure some form of payment comes in monthly. Also, with the ways the bankruptcy laws have changed credit card companies don't negotiate as much because they know chapter 7 (total liquidation) is very hard to file compared to chapter 11 (restructuring of debt) in which you are required to pay them a court determined amount for 5 years.

    DO NOT ENTER IN A CREDIT PROGRAM WHERE THEY NEGOTIATE PAYMENTS WITH YOUR LENDER. ANYONE WHO HAS EVER WORKED IN THE LENDING BUSINESS KNOWS WHAT YOUR CREDIT REPORT LOOKS LIKE AFTER AGREEING TO SUCH A PROGRAM. Essentially the collect your monthly payments until you have the predetermined amount of fees charged by the negotiating company, so say its $1500 and you agreed to pay your lenders $250 a month, it will be 6 months before they see a payment, complete credit destruction. Most of these cases just lead to bankruptcy after consumers find out what has happened.

    Recommended Reading: Any book by Dave Ramsey

    You must monitor your spending and form/keep a budget. Sacrifices now will lead to financial freedom. It doesn't matter how much money you make a month if you can't stop spending you will always be in debt.
  13. iShater macrumors 604


    Aug 13, 2002
    I think most of it has already been said, but budget ... budget ... budget!

    Right after school I had CC, student loans (not too big here), and an expensive (10%) car loan. I had roommates, and really tightened the belt and put as much as I could towards the credit cards then the car. It took a couple of years, but when it did finally happen a HUGE burden lifted off my shoulders.

    I think you should NOT get a new computer if your current one works. Nothing wrong with having and old system, it worked for you yesterday, and if you continue using it the same way, it will work for you today and tomorrow.

    Use cash to pay for your normal items, and put the credit cards in the freezer (in a glad-ware container filled with water), that way if you are ever tempted to use it, you actually have to wait for it to thaw.

    Do look around for a credit card that offers you a good transfer rate, and move your balances from the highest costing CC to it. Be careful with the 0% cards cause their rates after the initial period expires might be more than your current cards.
  14. 63dot macrumors 603


    Jun 12, 2006
    i totally agree but put far more emphasis on spending less

    people who make more or come into a nice lump sum, almost magically spend more on nicer stuff, even those with the strongest will power

    it's much easier to cut things out instead of somehow make more and try not and buy new things of better quality and/or more quantity

    to date, at age 44, i have never met someone who made more, or who came into a huge landfall of cash, and kept their life exactly the same

    use what money you save by spending less, however little that may be, and use it to pay off debt

    in the long run, you will be amazed at how much you can pay off
  15. souldawg thread starter macrumors member

    Jun 13, 2008

    Spending isn't my issue really. My biggest expenses are rent and now groceries. I think the issue has been for me, I have had so much for so long that I never really targeted down. I don't go on vacations, haven't upgraded my iBook (even though I desperately want to) and don't lavishly go out and buy clothes except for necessity at work.

    That said, I do have the occasional expense like with my taking off half my cornea and having come into a new set of doctor bills. This was not something I planned on but will have to pay for out of pocket.
  16. BlakTornado Guest


    Apr 24, 2007
    Washington, OH
    Only buy the bare essentials and the cheapest type of those essentails. (so no new Macbooks, etc. or big-brand stuffs. Buy the cheaper things if you can. Look for bargains, etc.)

    Anything other money you have, spend it on paying off the debt.

    Of course, don't starve yourself or whatever because of it. But don't use credit cards, and don't take out loans to pay for things.

    Just spend what you actually have. Even if you think you need to spend more. If people want you to buy stuff (like drinks), be straight up and honest and say "I don't have the money". Even if they pester, don't give in. You need to put yourself first to get out of this.

    Just don't give into your credit cards!

    And keep your chin up. You'll get through it if you stick at it. When it's over, that's when you can save up for that Macbook. It'll feel much better having it and knowing that you worked hard to pay for it.
  17. Gray-Wolf macrumors 68030


    Apr 19, 2008
    Pandora, Home Tree
    Depending on your debt level, and where you live, CCCS is a good answer.
    Consumer credit counseling service will coordinate with those you owe, and make payment arrangements that are reasonable. You pay them once a month, then they pay the creditors. I used it when my debt was $19,000 In the end, I payed a total of $26,000 when complete after 4 years, but all debt was payed, and I had money to live on. It was well worth it.

    Note - they were able to work with 3 of the 5 debt holders to get the interest stopped, the other 2 to be reduced.
  18. The Doctor macrumors member

    The Doctor

    Jun 19, 2008
    Chestnut Ridge, NY
    did that mess up your credit?
  19. jb60606 macrumors 6502a

    Jan 27, 2008
    play ignorant for seven years? :D

  20. Raid macrumors 68020


    Feb 18, 2003
    Souldawg as many have said before you should look into consolidating your debt. If you have your spending under control and not accumulating any more debt you don't need any credit counseling or another credit card; just get a bank loan.

    Before going to your bank though, research how much is currently owed, and the interest you pay on each account (oh and check the early pay-off rules on your loan for school). Most importantly figure out how much you can afford each month to pay down your debt. Make sure you have a clear understanding of your situation before heading to the bank!

    Then when you talk to the loan officer at the bank, explain that you are using the loan to consolidate your current debt and try to set a pay schedule that you can meet. The interest rate on the loan is almost certainly better than the rates from your credit card, and you'll most likely be able to pay off the loan quicker with less of your money going to interest payments.
  21. Roger1 macrumors 65816


    Jun 3, 2002
    How about getting a 2nd (part-time) job? Take that money, and set it aside for the macbook. After the macbook it purchased, start applying the money toward paying down your debt.

    Go to this website for some good tips on how to get out of debt:
  22. Thanatoast macrumors 65816


    Dec 3, 2002
    +1 to Rodimus Prime.

    Pay off one CC as fast as possible while making minimum payments on the other, then switch all that cash to the second CC.

    Make a budget. Budget everything - gas, lunches at work, movies on weekends - everything. Stick to it.

    Over budget a little. It's nice to have some slack when things come up.

    Budget yourself a *little* fun. It's too hard to be 100% good 100% of the time. Put some entertainment dollars in there.

    Eat out less - #1. You'd be amazed how much can be spent in a month eating out.

    Make a small budget item for savings. Seeing it grow will be incentive. When you've got enough you can pay off a CC or buy a MacBook (long-term), or even just have a nice dinner out (short-term).
  23. Sun Baked macrumors G5

    Sun Baked

    May 19, 2002
    Right now, you don't "get out of debt" with a student loan other than pay it off and transfer it.

    Consolidate the loans into something other that school loans, and you should be able to treat them like any other debt.

    Do it while the credit is good, that way if something happens at least they will be written off.
  24. gmecca2 macrumors regular

    Jan 17, 2008
    Why are you people telling him to consolidate his students loans into a personal loan, that may be one of the dumbest things I have ever heard. Please tell me where you will be able to get a personal loan lower than rates on a student loan. When you do and its realistic (no fees) please post the link because I'll be ready to convert mine. On a credit report, student loans will be viewed as much more positive than a personal loan. If you fall on hard times you may defer payments on federal students loans, you cannot call up your credit card company and say "hey dude, I can't make my payments because I lost my job" can I have six months no payments. The negative about students loans is they cannot be discharged in a bankruptcy, the federal government will even go as far as to garnish you social security payments when your eligible to retire if you are delinquent. But if you are already on that road, well then you're probably already too deep.

    Another Book Recommendation: Maxed Out by James Scurlock
    It's not as educational other financial strategy books but a good read.

    I think if you want better help you may have to post:
    Your student loan debt:
    CC Debt:
    Other Major Debt:
    Hours worked per week:
    This is needed because 15k in CC and SL debt is much different than 35k debt with a salary of 40k.
  25. Raid macrumors 68020


    Feb 18, 2003
    Well first off I haven't really heard of anyone getting a student loan that has lower interest than any other loan out in the market. Student loans often have that 'no-payments for 6-months after graduation' clause (and some have other restrictions), but I guess that depends on whats offered at the moment.

    Generally the rules around student loans can vary, and that's why I suggested to the OP that he makes sure he's aware of the terms of his loans before talking to the bank.

    Now you do have a point about the student loan, depending on the loans structure and current rates available it might not be worthwhile to consolidate the student loan. However credit cards usually have much higher interest rates compared to bank loans and that's where the OP would see the most benefit.

    So to summarize, knowing how your debt is structured and minimizing the interest paid on that debt is always a good idea. I suggest everybody has a look from time to time.

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