Am I on the right track?

[jinzapa]

"Hi everyone,

My wife and I currently have $23,000 in credit card debt, which is eating us alive. Most of this was racked up during our college years as my wife had to put herself through school on her own. We are now both 27.

I started tracking expenses 2 months ago, after all the monthly bills are paid we have $600 left over- or should. The problem is the $600 gets eaten up by clothing for our daughter, toys, vet bills, all the random things that just don't get on the monthly bill list.

I contacted a national bank and requested a $23,000 personal loan to pay the credit cards off. They would only do $15,000 which would pay off the largest credit card we have. The interest rate is 9.9% and would save us $50 a month- and be paid off in 5 years vs 85!

This leaves us with $8000 in debt.

I have 3 options here:

-Apply for another personal loan at a different bank (doubt they would give me one?)

-Ask for a loan from a family member.

-Ask my parents to take a home equity loan out for the full $23,000 and let us make the payments. I do not know if they would help us like this or not, their house is paid for and has been for awhile. The payment would be low enough that defaulting should not be a concern.

I also have $70,000 +/- in a 401K but have been told I can not take a loan out against it (due to program rules?). We are very responsible with our money, but can't seem to get these cards behind us.

My goal here is to just get all the debt off the cards and into something that is a low fixed rate.

Any thoughts out there?"

[Evan Bedard]

Welcome and thank you for joining the community.

I'm not too sure how much (if any) you have in savings, but have you considered trying to settle the debt for a percentage of what is owed? I have seen quite a few people here able to settle their credit card debt for much less than the cc balance..

[samruba]

NO. It doesn't. That leaves you with the same $23,000 in debt but instead of owing it all to credit card companies you owe some to the credit cards and some to the bank. It does nothing to reduce your debt. It just shuffles it around a bit.

You can not borrow your way out of debt. Not from a bank. Not from a family member. Not from a retirement plan. You just can not borrow your way out of debt.

The only two ways to get out of debt are 1) increase income and 2) decrease spending. Number 2 is generally the easier of the two to accomplish. You have at least $600/month going to "random things." That needs to stop. You and your wife need to sit down and go through the budget with a fine tooth comb and cut out all unnecessary spending - new clothing, toys, entertainment, cable tv, fancy phone service, gym membership, haircuts, charitable donations, dining out, etc. As for number 1, go through the house room by room and collect anything that you don't need and can sell either on ebay, craigslist or a yard sale. I've read that the average family can make at least $1,000 by doing that. I don't know how old your daughter is but sell all of her outgrown clothes and toys she no longer plays with and books that are below her reading level. Sell tools you never use, wedding gifts that have never come out of their boxes, unwanted holiday gifts that you never got around to returning. Anything and everything that you can live without needs to go. The other piece of number one is working more. Do both of you work now? Get second jobs. Turn a hobby into a business. Whatever it takes.

Don't forget to look at every possible expense. Get new quotes for auto, home and life insurance and see if you can get cheaper policies. Buy more store brand groceries and clip more coupons to cut the food budget. Be more mindful of your driving to conserve gas and make sure you know which stations in your area tend to have the lowest prices. Lots and lots of ways to trim spending that can all add up to big savings.

What shouldn't you do?

DO NOT borrow from family.
DO NOT borrow from retirement plans.

Here you can find debt settlement reviews: How to save more and better | debit-free.us

[lisarojer]

i don't think that loan can solve your problem ,it will only increase your burden instead of this you have to search for other alternatives like overtime work and cut down your extra expenses..it seems tough but only this is the right way in yours type situation ..its only my view

thanks

[Jameslaker]

I feel taking another loan would lead to further financial troubles. The only alternative is to have Loan modification,can be done at no cost,no appraisal needed and almost always features lower interest rates.