Relief, but paid a price
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| Thu, 02-16-2006 - 3:15pm |
Hi Friends!
I found myself heading into the end of 2005 with only one credit card balance. The trouble is, it was almost 22,000 with an APR of over 20%! I was making the minimum payments and usually slightly more every month, but it was still a struggle at just a 2% payment of 440.00 a month or so. That minimum payment was to go up to well over 500.00 a month with the new laws. Gas bills this past winter have been phenomenally high, my adjustable rate HELOC payment was steadily climbing, my property taxes skyrocketed, yada yada yada! I'm a single woman, no kids, but still was losing sleep wondering how I was going to make ends meet and what I was going to do if things got worse.
I made the difficult decision to cash in my mutual fund. I agonized over doing this, as it went against what any financial expert would have advised me to do. My rationale was that I was looking at paying over 350.00 a month in interest alone on my credit card with nothing to show for it and no end in sight. The only other thing I have of high value is my home, which I didn't want to sell. So I cashed in the fund, took a very big hit on it taxwise--about 31% paid in taxes and penalty. I then refinanced my HELOC with the same lender, but I got a fixed rate. Between cashing in the mutual fund and refinancing, my credit card is now paid off. I can't tell you what a relief it is to look up my account online without getting a stomache ache.
Naturally, as soon as my debt got paid, my heating/air conditioning unit for my house died and I had to replace it entirely! Fortunately the company I bought the new system from gave me decent payment terms--no interest for the first year--so I am piling as much money towards that balance as I can in hopes of getting it paid fully or mostly while it's interest free.
So the beat goes on! My challenge now will be to not use my credit card. I don't want to close the account because I've had it for years and it's the only major credit card I've got. My income taxes are all paid, I have 1900.00 in an emergency fund, and I am putting at least 100.00 a month into that fund. Things are definitely better than they were. I'm going to try to keep them that way, and I'm going to visit this board regularly to keep my resolve strong.
Cheers
Nini

I'm sure you know all the pitfalls, but just in case, remember to beware of those 'interest free' offers.............many are very legit, and a good deal AS LONG AS YOU PAY THE BALANCE before the interest free period ends. IF the period ends, and you still owe, let's say $300, then boom....they'll charge you all the back interest that the loan WOULD have earned.......so just beware.
I'm sorry if you already knew this, I just wanted you to know, just in case.
I'm glad you are feeling better about your situation.
I know you didn't want to cash in your mutual fund, but sometimes you just have to do things like that. It sounds like you did the right thing. You're out of credit card debt, you won't be throwing money away on interest, and you still have an emergency fund in case of unexpected things like a car repair or household repairs. Great job on getting the no-interest payment plan for your heating/AC system!
Pat :-D
Nini, that sounds pretty good to me! Keep socking $$$ away into your Efund and DO NOT TOUCH THE CREDIT CARD! :)
You are doing great, girl! Just keep plugging away at it!
~Aravis~
Good for you -- you did exactly the right thing. Besides, you had absolutely no guarantee as to the return on the mutual fund -- but you knew for sure you were going to lose about 4,000 a year on the credit card interest. Doubt very much that you would have made that much on the mutual fund. Besides they are totally unpredicatable.
So good for you on a very hard decision.
Megan