12K in credit card debt and a Student.. what are my options?

[Toasterdude]

Hey All,

Just looking for some much needed advice/opinions.

I got my first credit card a year and a half ago (age 18), and have been irresponsible since the beginning. I now have 12K worth of credit card debt with 18% interest.

I can only afford to pay the minimum payment and now I'm looking at my options to get out of debt and to stay out of debt.

Some Background:

1. I work at sears.
2. I make about $1200 a month after taxes... and pay $500 on my CC and $100 for my phone and internet.
3. $600 to rent and food.
4. I'm looking to get a second job.
5. I have cut up all but one credit card (emergency's).

I've contacted Credit Counseling Service of Toronto and they have recommended I get a consolidated loan.

Through the bank that's not possible as I've already tried.

But there seems to be tons of independent consolidation company's.

http://www.consolidatedcredit.ca/ is one of them, has anyone used them or no any one who has? I'd love some feed back.

If not does anyone know of a reputable consolidation company?

Any advice or feedback is greatly appreciated!

Thanks,

Toaster

[djino]

Try MBNA.

I was in your position about 4 years ago. Student with close to 10K in credit card debt (across 5 credit cards) paying 19+% interest. One of the credit cards I had with MBNA's mastercard.

4 years ago MBNA contacted me about consolidating my debt. They said they will cancel my MBNA Mastercard and move it to their loan product, to which they also move the balances from my other credit cards (Visa, CapitalOne Mastercard, and a few department store cards). They also gave me 10.9% interest. My minimum payments were $215/month for 48 months.

It really helped. I recently paid it all off, checked my credit score 6 months ago I'm now in the 700s. Just make sure if you go this route, that you cancel those credit cards (except for your emergency one, which I assume is your oldest one). Just so you do not make your financial situation worse by racking up the cards again. Make sure you do keep your oldest credit card, so that you maintain that length of credit history.

djino
"Goodluck!"

[MrBurns]

Here's some options:

1) Get a lower interest card and transfer balance. CANCEL THE OLD CARDS.

2) Get a consolidation loan from a bank, generally lower rate (I know you tried). REDUCE THE LIMIT ON THE CARDS.

3) Get another job.

4) Get all the crap you bought with the cards and sell them; use that money to pay down your debt. (If you just drank it away then you're SOL).

5) Don't pay. Screw up your credit for a long long long time.

DON'T hit up your parents for a loan (unless they're loaded). Your folks worked hard for their money (I assume).

If you don't learn a lesson from all this, it's a pointless exercise.

Good luck.

[Jacklad]

Here's some options:

1) Get a lower interest card and transfer balance. CANCEL THE OLD CARDS.

2) Get a consolidation loan from a bank, generally lower rate (I know you tried). REDUCE THE LIMIT ON THE CARDS.

3) Get another job.

4) Get all the crap you bought with the cards and sell them; use that money to pay down your debt. (If you just drank it away then you're SOL).

5) Don't pay. Screw up your credit for a long long long time.


+1


DON'T hit up your parents for a loan (unless they're loaded). Your folks worked hard for their money (I assume).

+ 1,000,000 :cheesygri

If you don't learn a lesson from all this, it's a pointless exercise.

Good luck.

Some other things to consider - always, always pay at least the minimum (this will preserve your credit rating). In fact, preferably pay more than your minimum payment. If you are paying $500 per month towards the cards, don't drop that amount as the minimums drop. Budget for it and stick with it.

Go online or call and check your card options - you may be able to convert to a card with lower interest, which may be easier than getting a new card and usually won't involve a credit check. While cards that cost a fee usually aren't worth it, if you are carrying a balance it may help a great deal. Most of the big banks offer a low-rate option. Once you get a lower rate, gradually transfer the balances to the low-rate card.

Drop any other extras - balance insurance, etc. These run up the costs and aren't worth it.

Devote any "found" money (overtime, tax returns, etc.) to your debt.

$12 k isn't insurmountable.

[olddog]

at least you are admitting your mistakes and taking positive steps to counter them.
the most important thing is learning your lesson and not going back into debt once you are out of it. Credit card debt is one of the easiest debt to acquire.:it feels good just pulling out that card and "swiping your life away".
try to make more than just minimum payments so as to avoid just interest payment. cut off unneccesary spending, etc

its not impossible to get out of debt.


good luck

[brunes]

Drop any other extras - balance insurance, etc. These run up the costs and aren't worth it.


I dunno about this one. If he already has been been paying balence insurance and is budgeting for it it might be worth keeping, especially if he doesn't feel secure in his Sears job.

[Toasterdude]

Great comments guys! They're all appreciated!

I feel like I have learned a lesson but it won't be complete until I and not my parents pay it off.

I actually do have insurance on one of my cards. How exactly does that work? Do I get back what I've paid into?

I really appreciate all the support and positive comments. I checked my Credit score a few hours ago. Looks like I'm high risk... 645. Could be my age and credit amount but I've yet to miss a payment.

I've applied for a consolidation loan to Citi Bank, so we'll see how that goes. I will be lowering my credit limit immediately if it goes through.

I have some very nice things thanks to the credit card, and I'll be looking to sell some of them.

Again keep the comments coming I really appreciate it!

Toaster

[jedijome]

i don't really have much to add other than it sounds like you're on the right track and learned from your mistakes.


having said that if you can't get a consolidation loan and you have debt spread over many cards look into using the "snowball method" to pay off your debts. basically you dump most of the money into the account with the highest rate of interest while making minimum payments on the accounts with the lower interest rates. once that's paid off move onto the account with the next highest interest rate and so on. don't reduce the amount you pay off as your debt decreases and if you get extra money instead of blowing it on something frivolous use it to pay off debt.

having said that you could probably cut down how much you pay for phone and internet. look around on rfd and i'm sure you can find something. switch to teksaavy and switch to one of the new plans that fido and rogers have for 17.50 a month +saf + tax. you could probably cut your monthly costs down to around 60 or 70 that way.

working extra hours/an extra job is also a great way make extra money to pay off the loan faster.

still having said all that, sounds like you've learned your lesson, you're taking responsibility for your actions and you're on your way to a better financial
situation.

ps: once you're done paying off the loans keep paying the extra money into a savings account at the same rate so you build up a cushion where you can support yourself for 5 or 6 months and then you can ease off a bit. just don't fall into the trap again.

[Xtreme2001]

Look for a credit card that offers a low balance transfer rate. I remember seeing some as low as 2% until the full amount is paid off. Keep in mind you may not receive a 15k credit limit, but anything it better than nothing.

[VivienM]

If you're a student, you miiiiiiiight be able to get a student LOC... then again, with a 645 credit score and 12K in CC debt at age 20, banks might not feel too generous.

[YYZFA]

If you're a student, you miiiiiiiight be able to get a student LOC... then again, with a 645 credit score and 12K in CC debt at age 20, banks might not feel too generous.

I agree with this post. You might get an LOC or a consolidation loan, but you might not. If you don't, then trasfer your balances to a lower interest credit card or cards. There are fees associated with them, but you might get your interest rate down to ~10%. Once you've done that, STOP USING YOUR CREDIT CARDS. Pay as much as you can toward your debt and live frugally. If your studies permit, get a second job or work more hours, but make sure all of the extra income goes directly to your credit card debt.

It's good that you want to pay back this money. It may seem like too much at the moment, but you can get a handle on this.

I completely agree with some of the above sentiments that you should not hit your parents up for the money. You admit to past irresponsible spending, and you are now doing the responsible thing by correcting your mistakes. We all make mistakes, and that's normal. Just learn from your mistakes and pay back the money as quickly as you can!

[UrbanPoet]

what banks are they from?
Most big banks have a 'low interest' option. You pay an annual fee and your interest rate is lower. usually between 11-16% depending on your credit rating...

This will work if your credit is in good standing and you were never delinquent.

[YYZFA]

what banks are they from?
Most big banks have a 'low interest' option. You pay an annual fee and your interest rate is lower. usually between 11-16% depending on your credit rating...

This will work if your credit is in good standing and you were never delinquent.

I think I basically said the same thing. My buddy has the TD low interest rate card, because he carries a balance. He pays $25/year, but it's worth it for him, until he can pay off his bill.

I'm sure other banks offer similar products. I don't know, because I've never applied for one myself.

[VivienM]

I think I basically said the same thing. My buddy has the TD low interest rate card, because he carries a balance. He pays $25/year, but it's worth it for him, until he can pay off his bill.

The TD card is interesting, because different people with that card pay different rates.

That being said, it's still way more expensive than a LOC. But it seems that crafty banks throw LOCs at people like me who don't need them (well, okay, I had to use mine for a month because it took a while to get paid at a new job), while they keep them away from people for whom they'd save lots of money...

[oilfan69]

Hey All,

Just looking for some much needed advice/opinions.

I got my first credit card a year and a half ago (age 18), and have been irresponsible since the beginning. I now have 12K worth of credit card debt with 18% interest.

I can only afford to pay the minimum payment and now I'm looking at my options to get out of debt and to stay out of debt.

Some Background:

1. I work at sears.
2. I make about $1200 a month after taxes... and pay $500 on my CC and $100 for my phone and internet.
3. $600 to rent and food.
4. I'm looking to get a second job.
5. I have cut up all but one credit card (emergency's).

I've contacted Credit Counseling Service of Toronto and they have recommended I get a consolidated loan.

Through the bank that's not possible as I've already tried.

But there seems to be tons of independent consolidation company's.

http://www.consolidatedcredit.ca/ is one of them, has anyone used them or no any one who has? I'd love some feed back.

If not does anyone know of a reputable consolidation company?

Any advice or feedback is greatly appreciated!

Thanks,

Toaster

Pack up, move to Alberta, and work in the oilpatch, that's what I did about 5 years ago when I was in your situation, now I own two very nice 07 vehicles, up until last month I owned two houses(w/mortgages) made 6figures on the sale of a rental house last year... and no longer make minimum payments but pay whole balances monthly and pay no interest....

If that don't fly, read mrburns's post..

[YYZFA]

The TD card is interesting, because different people with that card pay different rates.

That being said, it's still way more expensive than a LOC. But it seems that crafty banks throw LOCs at people like me who don't need them (well, okay, I had to use mine for a month because it took a while to get paid at a new job), while they keep them away from people for whom they'd save lots of money...

I agree. I have a feeling my buddy got denied an LOC because of his large debt load. He also got one of the higher rates on this card ~10%. It may be the best thing for some people who can't get LOC's.

I forgot to mention in my previous post, that I don't recommend the OP go with the MBNA 0% BT, because it seems like he or she will be unable to repay the amount in full by the time the promotion is over, and he or she will be right back where he or she started. I know many people would argue that the money saved during the promotional period would be worth it, but I think the OP should just get a consistently lower rate from an LOC, consolidation loan, or a lower interest rate card, possibly with an annual fee, and just concentrate on paying down the debt with some interest relief.

[VivienM]

I forgot to mention in my previous post, that I don't recommend the OP go with the MBNA 0% BT, because it seems like he or she will be unable to repay the amount in full by the time the promotion is over, and he or she will be right back where he or she started. I know many people would argue that the money saved during the promotional period would be worth it, but I think the OP should just get a consistently lower rate from an LOC, consolidation loan, or a lower interest rate card, possibly with an annual fee, and just concentrate on paying down the debt with some interest relief.

Well, it seems to me like the 0-2% BT offers aren't a bad idea... do THAT for 9 months or whatever, use the interest savings to pay off more principal, then when the interest promo ends, transfer the balance to a low-interest car.

But you have to be VERY careful with those BT offers, otherwise they screw you. (e.g. how new purchases get charged at full interest, and your payments go to the transferred balance first).

Ultimately, the thing is this - getting OUT of a messy credit card situation requires discipline... and if one had discipline, one wouldn't be in that situation in the first place.

Hell, if you could ANTICIPATE your borrowing 'needs', I'm sure most banks would give an 18 year old university student with no debt a student LOC. But instead, people spend stupidly on credit cards, then when they see their mistake, oooops, now banks have trapped them.