Debt consolidation plans
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| Wed, 09-07-2005 - 4:33pm |
Hi Everyone,
I am new here and been watching this board for a while. I am not in major debt but I do have one card I am really worried about. My discover card balance is $2500 and they keep raising the rate. It is now up to 21.49%. My minimum payment is $50 which is all I can afford. I am 25, living on my own and living paycheck to paycheck. I have no savings what so ever. I do have another card but the balance is only $250 so I am not really worried about that one. Anyways, I called Discover I don't know how many times to get the interest lowered beings so I am never late and always make minimum payments. They wouldn't budge on the rate. So I considered getting credit counseling to try to get it lowered. I talked with someone from Consolidated Credit and she said the best thing to do was to set up a plan even if it is just for that one card. She said she could probably get it lowered to 10% and my monthly payments would be $63 with $8 dollars going to the credit counseling. With that, she said I could get it paid off in 4 years. Does that sound right? Isn't paying them an extra $8/month plus the payment to the credit card, wouldn't it almost be the same as me paying on my own? What I am asking is, is it worth it for this one card?
I decided to try one more thing so I called discover card again and tried to get it lowered one more time. She wouldn't do it. So I told her I was thinking about getting into a debt management plan and if they would work with that kind of company. All she said was, you know I would have to cancel the account, right? I said yes, of course. I guess that scared her because she then said let me transfer you to someone who might be able to lower your interest. HA! It worked. Well, they only lowered it to 17.49% but at least that is better than nothing. He said to keep calling back and asking for lower interest rates. So I guess I will hold off on the management plan and see what happens. But it will still take me forever to pay this card off. Do you think it is a good idea to still do the management plan? I don't know of any other options. Thanks for your help.

Hi Jamie,
Good for you for sticking to your guns and getting Discover to lower your interest rate. It will make a difference in the time it takes to get it paid off. I think your instincts are right about the credit counseling. If you're going to pay an extra $8 a month, you would be much better off applying that directly to the card, especially since it looks like you ought to be able to qualify for even lower interest rates as you pay down the debt. As for accelerating the pay-off time, would it be possible for you to get a temporary part-time job and apply the extra income to your debt? I suggest this because getting a second job was a significant factor in my being able to pay off my HUGE credit-card debt. With your relatively manageable debt, a second job might make a big difference right away and also might enable you to build up some savings and an emergency fund and to make progress toward any other financial goals you might have.
Good luck to you in your journey out of debt.
-- Claire
Hi! I have an appointment to meet with a counselor at Consumer Credit Counseling Services tomorrow. They are a member of the Better Business Bureau and funded by the United Way. A friend of mine recommended them - her mother and her sister had help paying their debt off through them. I'm hoping they can help me, too. Like you, I live paycheck to payckeck, too. They sent me information by mail and they stated that you pay a monthly fee, but it's based on your income. They also help you with your budgeting. So I'll let you know tomorrow how I make out at the appointment.
Here's their website address, if you're interested: www.cccsbuff.org
Thanks for de-lurking, and welcome. I would say for a credit card balance that small (believe me, $2500 is small! LOL), I would NOT go for consolidation. Of course the counselor/salesperson/whatever said you should do it--she makes money if you do it. But the consolidation/counseling/whatever will go on your credit report (the agency may not report it, but the credit card company certainly will), and it will look bad there. $2500 is a small amount of debt for most people in the U.S., and while it may seem like it will take forever to pay it off, you'll feel good about it when you do.
I suggest you just keep calling Discover and asking them to lower the interest rate. Also, if additional available credit won't tempt you to overspend and run up more debt, then I strongly suggest you look around online for better credit offers. You may be able to transfer that balance to a lower rate card, especially if your credit is decent (which it probably is if you've always made your payments on time). If you think you might be tempted to overspend if you have another credit card, then I suggest you look for a better rate anyway, and then close the Discover Card. They are not known for their ease to work with anyway (although I had a decent experience with them when I was having financial trouble, but they did charge high interest rates).
If you're really worried about getting this paid off quickly, you might consider a second job. Waiting tables is usually pretty lucrative, and you can do it just for a few months in the evenings until you've paid off the card. In my experience, $250 a week (cash) is not an unreasonable expectation for a four-night-a-week table-waiting job (especially if you choose either a bar setting--where the tips are good because people pay higher percentage tips on drinks than they do on food--or a high-end restaurant--where people tip well because they are tipping a percentage on an expensive meal), and at that rate you would have that baby paid off in ten weeks.
Good luck and stick around. Blessings,
Heather
I agree w/Heather. $2,500 balance on a c/c isn't much. Have you tried applying for another credit card which offers a lower interest? It may be worth a try.
I personally wouldn't join a DMP for a credit card with a balance of $2,500. Simply try to find a lower interest c/c to transfer it too.
Just a thought.
Good luck.
MYM