Debt Consolidation & What to pay first?

iVillage Member
Registered: 06-09-2008
Debt Consolidation & What to pay first?
5
Mon, 08-04-2008 - 8:07pm

I posted about this once before but I can't find the post :) Has anyone ever done a debt consolidation loan and if so who did you go through? Dh and I are in about $30k worth of cc debt, not the greatest credit, but nothing is past due currently.

iVillage Member
Registered: 12-04-2006
Tue, 08-05-2008 - 2:15am

I would advise against a debt consolidation loan unless you know that you absolutely will not get into debt on the credit cards again.

In terms of where to start in debt reduction - its very much a personal choice.
Lowest balance first has the benefit of feeling like you are getting somewhere with your reduction. Each debt eliminated tends to give you the motivation to keep going. Sometimes interest rates can mean that this is not the ideal way to reduce debt from a financial perspective. The bonus of this method is that you can focus on the target debt balance rather than the whole debt balance.

Highest interest first is the better way to go if you don't need the motivation of paying off debts to keep you going in your debt reduction. Paying off the debt this way does mean that it is more likely that you will focus on the debt total.

Lyn

iVillage Member
Registered: 07-02-2008
Tue, 08-05-2008 - 10:53am

I have no experience with debt consolidation

iVillage Member
Registered: 08-04-2008
Tue, 08-05-2008 - 12:06pm

i would advise agains the consolidation loan, too. i got a home equity loan to consolidate my credit card debt, and i went and racked up more debt right away. you really have to solve the problem at the source-for me it was a matter of not paying attention to how much money i was spending and living beyond my means. i've created a budget and put some money to an e-fund to avoid having to use a credit card in the case of an emergency. then i am basically paying off the credit card with the lowest balance first. I know people will say that mathematically this doesn't make sense, but it's a huge psychological boost when you can at least scratch one card off your list. Once that first card is paid off, I'll take the money I was paying to it and add it to the amount I'm paying to my other one, until it's paid off. Does that make sense?


There's a great blog called Get Rich Slowly which has some great advice about getting out of debt. Here's a really helpful post I found


http://www.getrichslowly.org/blog/2006/11/16/how-to-get-out-of-debt-2/

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Tue, 08-05-2008 - 12:20pm

Ditto what everyone else is saying about the consolidation loan.

All my best,
Danni

iVillage Member
Registered: 06-09-2008
Tue, 08-05-2008 - 6:25pm
Thanks for all of the advice! I think we will hold off on the consolidation loan so that it won't tempt us to charge things back up again. I think that we'll start off paying off the lower balance cards and go from there. There isn't anything we can cut back on-we have already done that. The way we figure it we can hopefully be debt free in a year if we are discplined enough. I will have to check out the blog that climbin girl posted about. I can use all of the ideas that