Paying off all credit cards in full at once...?
- Thread starter kovacs32
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chacho44
Forum Member
indeed
wrath
Club Member
Taking out a secured loan to pay off unsecured debt is a Bad Idea (TM) unless you think you can go from ~30% to 3%. So, if you have a paid off automobile and want to "refinance" it at 3% then you'd come out ahead. To get a 12% signature loan to pay off a 20% credit card is a bad idea. This is because if you had up sphincter deep from another medical expense it is much easier to get rid of unsecured debt in bankruptcy.
Credit unions are great until you get behind. Never have more than one debt at a credit union, unless they don't participate in cross collateralization (pretty much all credit unions do). I also would not keep a deposit account at a credit union you have debt at. There are a lot of banks and credit unions in the world, there is no reason to be scared of having half a dozen accounts.
If you're still using credit cards, open a new one so then you don't have to pay interest on it (pay it in full every month).
Pay the highest one first and always pay more than the minimum.
Call each credit card and explain that you are nearing bankruptcy. They may lower your interest rate. I would not accept a change in the terms of the agreement except a lower interest rate. Citi is terrible for spreading out the debt over a longer period but keeping the same interest rate.
$10k isn't that much. I'd start selling shit to pay it down.
Credit unions are great until you get behind. Never have more than one debt at a credit union, unless they don't participate in cross collateralization (pretty much all credit unions do). I also would not keep a deposit account at a credit union you have debt at. There are a lot of banks and credit unions in the world, there is no reason to be scared of having half a dozen accounts.
If you're still using credit cards, open a new one so then you don't have to pay interest on it (pay it in full every month).
Pay the highest one first and always pay more than the minimum.
Call each credit card and explain that you are nearing bankruptcy. They may lower your interest rate. I would not accept a change in the terms of the agreement except a lower interest rate. Citi is terrible for spreading out the debt over a longer period but keeping the same interest rate.
$10k isn't that much. I'd start selling shit to pay it down.
Stalker
I removed my teeth on purpose....if you catch my d
This is the most contradictory post to my experience and knowledge.
1. An unsecured loan is an unsecured loan. The only thing that matters is the bank. A standard, flat payment loan will standardize your interest rate and make your payments steady. How is lowering your interest rate a bad idea? If the costs of the lowering exceeds the savings over the life of the loan or don't make it worth while, then you have a point, but I highly doubt going from 20% to 12% on a 10k loan would fall under that category.
2. Falling behind on a credit union account is no different than falling behind on a credit card. In fact it may be more advantageous to do it on a credit union. Why? Credit unions are localized, customer based entities who generally listen to their customers and work with them. Credit Cards don't. On top of that, in my personal experience, I fell behind quite a bit for a while and it had absolutely no affect on the 2 credit unions I use other than affecting my credit score. Again, when I was applying for a loan with the UMCU they sat down and actually talked to me. I explained why I had some late pays and they came back and approved a loan they wouldn't have approved otherwise. A normal large bank would just use metrics to quantify your loan and approve/decline based solely on that. no amount of explaining will do anything to help you.
3. Every time you do a credit search to expand your debt your score goes down 2-3 points. From the sound of this situation, he's not sitting on a whole heap of cash and just wants to waste his time paying a debt off. He's hurting and his credit may already be hurting. The longer you have a high balance on a credit card, the faster your score plummets. When I did my debt consolidation loan a while back, my credit score spiked up almost a hundred points within the first month of doing it. Opening up new cards all the time or playing the 0% interest game does not work in most situations. It kills your credit score which greatly restricts your ability to get new cards and has potential to become a big problem (talk about that later).
4. Paying off the highest one first is a good idea, but again, he sounds strapped for cash as it is and while paying 10$ extra will help over time, on a 10k debt load he's not going to whittle it down any faster than if he had a fixed payment loan.
5. When you call a credit card company and have them put you on a hardship program here is what happens. They close your card, lower your interest rate, and payment. Sounds good right? Sure, if you can't get a fixed payment loan from a CU it does. This will destroy your credit. it raises your credit to limit level to a massively high percentage. Which causes your credit scores to drop like crazy. It also shows on your record as having been in a credit repair status. Most banks when they see this will absolutely find this as a huge red flag. You almost are better off just filing for bankruptcy as opposed to this option.
6. The biggest thing you're not talking about is the fact that a credit card is a revolving compound interest account. This means you're constantly paying interest on money that you already paid interest on. A flat payment loan does not do this. This is a huge savings and allows you to pay the loan off in a guaranteed amount of time. The other thing is it's obvious that most people looking at this type of option aren't looking to just dump 2k in credit card debt. They are looking at large sums. They aren't going to pay that off overnight by any means. There's no guarantee what will happen in your lives that may stop you from making a payment. What happens if you are late on a credit card that you are at 0% interest? It spikes and majorly. There's no federal law which caps what your interest rate can go up to. State laws do but Michigan does not have a maximum that it can be increased to. Most cards push it up to near 30%. What happens if you are late on a credit union loan? You pay a late fee, but your monthly payment doesn't go up. Most credit unions don't have an early payoff fee either, so if you do put that extra 10$ in and pay it off faster, you're not hurting yourself at all.
lethalss
Forum Member
This is what I did when I was 30k in CC debt:
got consolidation loan from CU.
pay loan to CU, threw extra money at it when I could.
I did it right around tax time, and I got a nice return. I took that return and let two of my cards default fully (3mo+). I then settled with the CC co's and paid those off in full immediately (50% on the dollar). I was then dink'd with a 1099 on taxes next year (took another hit).
If I could re-do it, I would do #1 below.
if you cannot get a loan, do one of the following (preferably in the order below)
1) Pay off the balance with the highest APR first, then snowball.
or
2) Pay off the card with the lowest balance first, then snowball.
or
3) Consolidate your debt to a single card or loan, pay extra if you can.
and the MOST important rule of them all: Stop charging on ALL of your cards immediately
got consolidation loan from CU.
pay loan to CU, threw extra money at it when I could.
I did it right around tax time, and I got a nice return. I took that return and let two of my cards default fully (3mo+). I then settled with the CC co's and paid those off in full immediately (50% on the dollar). I was then dink'd with a 1099 on taxes next year (took another hit).
If I could re-do it, I would do #1 below.
if you cannot get a loan, do one of the following (preferably in the order below)
1) Pay off the balance with the highest APR first, then snowball.
or
2) Pay off the card with the lowest balance first, then snowball.
or
3) Consolidate your debt to a single card or loan, pay extra if you can.
and the MOST important rule of them all: Stop charging on ALL of your cards immediately
wrath
Club Member
OK?
An unsecured loan is usually in the 12%+ range (aka signature loan). He probably can't get one for less than his credit card is at (most places only give signature loans to people who don't need credit). An unsecured loan at a credit union is rarely actually unsecured (cross collateralization). Let's say you default on your unsecured loan but you also have an auto loan through them and a deposit account. First, they'll intercept any dollars going into the deposit account for the unsecured loan. Second, they can seize your automobile. Let's say you finally bite the bullet and file for bankruptcy. Few credit unions will allow you to only reaffirm part of your debt. So let's say you owe $5k on a $15k truck and you want to reaffirm that debt but you want the unsecured loan discharged. They're going to say bugger off and take your truck.
Credit card company can only send you to collections. Read the fine print on anything related to a credit union and you may be surprised. Credit unions want happy members that spread the word about how great they are. Credit unions do not play by the same rules as a "bank".
UMCU is not your typical credit union. Try the same thing at a normal credit union (like say Sagelink) and they will tell you the same thing as Chase.
Hard pulls hurt. Soft pulls don't. 15 searches at one time is the same "cost" as one. Otherwise, when people went to buy a car don't you think their credit score would go down 100pts when the monkeys at the dealership bang on the keyboard to 30 different financial kickback institutions?
Revolving debt is relative as far as much as it hurts. Having $4k on a $4500 credit card hurts. Having $4k on a $15k credit card does not.
Store cards hurt the most as many of them do not publish a credit limit. Most of the retailers do this. So having store credit cards usually hurt.
0% game works as long as you keep the cards active and you aren't opening a new one more than every 9 months. In fact, it can even help because if you carry a lot of debt but have a lot of available credit that proves that you are capable of making the payments. I'm sure the many people here who work at dealerships can tell you all about the people that roll in to buy a new Lincoln that have $100k in revolving debt and have a credit score above 800.
Fixed payment loan at what interest rate? What part of a credit card is not a fixed payment loan, assuming you are not adding more debt?
You don't agree to a change in terms with your credit card company. I know I said that already. What they do is put you on a loan program that is between 10 and 30 years at the same APR or higher. What's worse, is they often recreate the loan every 3-6 months so it looks like you *just* started paying on it. What you do is negotiate a lower interest rate on your credit card. This used to be easy, but it is more difficult now. Citi will tell you to go pound sand.
All of my "credit" accounts are calculated using average daily balance with the exception of my mortgage. But, I only have one non-mortgage non-student loan left and it's through Harris NA. Or was. I haven't seen any modern loans that don't use compounding interest. Simple interest is slowly going away. Why wouldn't lenders earn interest on unpaid debt (including unpaid interest)? I think the only reason it wasn't used before is because of no "e" key on a calculator.
When you sign up for a credit card you agree to the terms. You are correct, there is no national limit on penalty interest rates. Most national lenders are based in either Delaware or North Dakota because even though there are states that set maximums they only apply to the institutions within that state.
Depending on the terms of the "personal line of credit"/"unsecured loan"/"signature loan" there may be a pre-payment penalty and there may be a penalty interest rate that can be triggered by a single late payment. You have to read the terms of the loan.
I heard that there are these things on the Interwebs that make payments automatically for you. There is no excuse for making a late payment on anything.
4Gas$
Club Member
With all do respect Sir – that is dead wrong, at least in my case
It is. It is the opposite, “its not how much money you make, its how
you spend it”.
I am 100% debt free & have been almost all my adult life (all but 7 ½
years). I paid cash for my last two homes & I make less than the average
work pay!
Most folks could be debt free, if they really wanted to. The question is:
Why do you want to be debt free?
Why do you think you want / need “good credit”?
What is the reason to have “good credit”?
Is there ever a plan to not be in debt / concern yourself with debt?
What is being debt free worth to you?
That last question is killer. Because you’re not going to be debt free
until you are hungry…..like starving for it! You got to really want it!
I can tell you this. The benefits of being debt free far out weigh the
work & sacrifices to attain it. Can you imagine never paying a mortgage
payment ever again?
Another big advantage to being debt free is you are now able to save
money – and have that money work for you, instead of interest working
against you!
I don’t play the “credit game”, I haven’t ever played it. I don’t even know,
nor do I care what my “bank debt score is”. It simply means nothing to me.
Rule #1 - Don't ask for financial advice on a car forum.
$10k is not a lot of money, and certainly not worth going through BK & killing your credit history (and possibly employment opportunities) for the next ~7 years. So, to me, secured vs. unsecured debt is a pointless debate unless the OP seriously thinks he's not going to be able to pay.
- First off, stop using the damn cc. Stop buying stuff you don't need. Live within your means. Don't buy stuff on it unless you have the cash in hand to pay for it IN FULL at the end of month. Basic personal finance stuff....
- I would not get a personal &/or debt consolidation loan for this amount. Do you own a house? Do you have a HELoC? Do you have enough equity to transfer the cc debt over the HEL? That would be at much lower rate & tax deductible.
- Agree with the guys above - start selling non-necessity stuff (where it makes sense) to get some cash to pay these cards down.
- Mathematically speaking, it makes the most sense to pay the card with the highest APY first. But honestly, if you have one that is significantly smaller than the rest, there be some emotional benefit from paying one off earlier (keeping you motivated/committed)... vs. the minimal amount of extra interest it would cost.
I have to laugh at the comments about having money direct deposited into a separate account -- outta sight, out of mind. I mean, seriously, if you don't have the will power to control your own budget & spending, you're in trouble before you even start. That's like an alcoholic saying he's better so long as he never sees another beer bottle in his lifetime.
$10k is not a lot of money, and certainly not worth going through BK & killing your credit history (and possibly employment opportunities) for the next ~7 years. So, to me, secured vs. unsecured debt is a pointless debate unless the OP seriously thinks he's not going to be able to pay.
- First off, stop using the damn cc. Stop buying stuff you don't need. Live within your means. Don't buy stuff on it unless you have the cash in hand to pay for it IN FULL at the end of month. Basic personal finance stuff....
- I would not get a personal &/or debt consolidation loan for this amount. Do you own a house? Do you have a HELoC? Do you have enough equity to transfer the cc debt over the HEL? That would be at much lower rate & tax deductible.
- Agree with the guys above - start selling non-necessity stuff (where it makes sense) to get some cash to pay these cards down.
- Mathematically speaking, it makes the most sense to pay the card with the highest APY first. But honestly, if you have one that is significantly smaller than the rest, there be some emotional benefit from paying one off earlier (keeping you motivated/committed)... vs. the minimal amount of extra interest it would cost.
I have to laugh at the comments about having money direct deposited into a separate account -- outta sight, out of mind. I mean, seriously, if you don't have the will power to control your own budget & spending, you're in trouble before you even start. That's like an alcoholic saying he's better so long as he never sees another beer bottle in his lifetime.
Not to turn this thread into a political argument, but a great majority of your answers are also directly related to the US Govt's stance on the national debt, the recent Federal Reserve actions, and overall US public perception of the lifestyle that all people should be entitled to. The gov't wants people to spend, spend a lot, spend above their means - keep up with the Jones - to get the economy going again... and punishes the savers. Yet that's the same careless behavior that drives a lot of the problems we have in this country, like the OP, and what got us into this whole mess ~10 years ago with the mortgage bubble.
Frustrating.
4Gas$
Club Member
Laugh if you will, but when I was young & starting out, that is
exactly what I did! Guess what? It worked! It was the beginning
of my financial journey. I’ve come a long ways since.
I had to laugh when I read that. You see Sir, even a week & sorry
financial plan is better than NO financial plan – which is what
most folks have!
You are correct to a degree. If you are bent on debt, then yes you’ll
Justify being in debt as a “nessary tool” or a “way to hedge” .
But if you’re honest you’ll respond, with “debt should be minimized”
and “there should be a plan to eliminate / lower debt”. There should
always be a “plan” in place to deal with debt – and hopefully that plan
includes a way to kill it, weather we’re talking about the National debt
or some ones family debt.
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beertestr
Club Member
Killjoy said:
Laugh all you want, it works. Almost everytime I get a raise, I either increase my pretax withholdings, increase after tax savings contribution, or my daughters 599 account. To each their own. I like to buy toys, this helps manage my spending.
I also pretty much weaned myself off of using my primary income for my cars and motorcycles. I try to only spend side money on them. Building motors, making parts or wheeling and dealing parts funds 90% of my mod budget these days.
There is more than 1 way to manage your debt and spending. Take some time to figure out what your options are, and do what works best for you.
Sent from my DROID BIONIC using Tapatalk 2
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ASRoff
Club Member
mdhmi
Club Member
You have a low income and a low standard of living and are debt free. Good for you.
The op is talking about a a measly $10K. He doesn't need some BS consolidation loan.
He needs a second job, selling some junk, whatever. :cheers:
Systemax302
Forum Member
I agree, 10k is not an unmanageable amount, but you certainly want to stop the bleeding before it gets worse. I've known people that have went Chapter 11 or gotten loans from CU's to pay off CC debt, but they were in the hole like 30k plus. I knew a guy that was using credit cards to make monthly payments of $600 on a truck loan for well over a year :shake:
You should just do as advised and sell whatever you can that you own outright to get some liquidity out of your possessions you can part ways with, second job for a while, pay off the highest interest card first etc... MOST importantly of all, don't put anything else on those credit cards.
Overboost
Forum Member
I paid off all cards last year and have been living a much better life since. Here's what I did (no financial expert, but didn't want to go through any sort of consolidation).
1 - Cut up/lock up all cards. Get them out of your wallet ASAP. Stop charging on them! You can't make progress if you keep going back and forth by adding things to your balance.
2 - Start with the highest APR card and pay as much on it as you can. I thought of it like this: they're charging me more for X amount than the others (I had 3 cards). Once one is paid off, re-evaluate and repeat.
3 - Look at your interest rates and see if there's any way to reduce them. Again, the CC companies are taking more money from you than you should be paying.
You'll get a variety of advice on a place like this. Do your homework. The #1 thing is to STOP USING YOUR CARDS!!!!
1 - Cut up/lock up all cards. Get them out of your wallet ASAP. Stop charging on them! You can't make progress if you keep going back and forth by adding things to your balance.
2 - Start with the highest APR card and pay as much on it as you can. I thought of it like this: they're charging me more for X amount than the others (I had 3 cards). Once one is paid off, re-evaluate and repeat.
3 - Look at your interest rates and see if there's any way to reduce them. Again, the CC companies are taking more money from you than you should be paying.
You'll get a variety of advice on a place like this. Do your homework. The #1 thing is to STOP USING YOUR CARDS!!!!
ASRoff
Club Member
http://www.daveramsey.com/home/
another good resource.
Also start listening to Clark Howard. While I dont agree with all of the advice from Dave an Howard, listening to them will motivate you to make a budget, stick to it and help with other money issues.
Hope this helps you attain your goal!
another good resource.
Also start listening to Clark Howard. While I dont agree with all of the advice from Dave an Howard, listening to them will motivate you to make a budget, stick to it and help with other money issues.
Hope this helps you attain your goal!
beertestr
Club Member
Any way you do it is better than doing nothing. But if you have $3k at 18% and $10k at 4%...... which one should you go after first? I pulled those number out of my ass, but the best bang for the buck is the balance that costs the most interest accrued every month. Repaying debt debt with as little interest paid should be the goal.
Also be careful if you get an offer from a card you already have a balance with. If you get a low interest balance transfer they often apply any payments to the lower rate first, meanwhile the higher interest rate debt keeps compounding.
Read the fine print.
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Scooter70
Club Member
" I believe that sometimes you gotta wreck the truck to get the insurance money to make the truck payment."
-Larry The Cable Guy
