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 Post subject: Managing $0.5 million in debt (Starting w/$35k credit cards)
PostPosted: Mon Jan 21, 2013 12:13 pm 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
"Managing" may sound like a pretty weak goal, but "$0.5 million" looks as daunting as "managing" sounds weak. Broken down, I'm starting with:

$35k in credit cards (split among $21k at 22% or 20%, and the rest at 9%)
$120k in student loans
$305k in mortgages

My goals:

1) Pay off $21k in high-interest credit card debt in 2013, and all credit card debt by 2014's end
2) Get smart on student loans by Feb and implement a plan by March
3) Full audit of real estate and on process to refinance by March
4) Get some accountability by maintaining a blog at http://mydebtucation.blogspot.com

Any advice, criticism, judging, or encouragement is more than welcome :)

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http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Tue Jan 22, 2013 9:12 am 

Joined: Sun Mar 04, 2012 9:15 pm
Posts: 28
Did you look at Lending Tree/Prosper/Personal Loan to move that $21K.


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Tue Jan 22, 2013 9:23 am 

Joined: Sun Apr 29, 2007 8:11 am
Posts: 1088
Location: Sunny Florida
I would exclude the mortgages, for now, from your total.

Regarding the high interest credit card debt have you tried calling the cards to get a lower interest rate or have you tried moving those balances to another card that will give you a better deal. When we were paying off $55,500 in unsecured debt I never did that and simply paid the credit card debt at the rate it was (most were already low interest) and when we got to the end of that debt paying effort I realized I should have made those calls to see if we could have gotten an even better deal.

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Sam

http://adventures-of-sam.blogspot.com
(Follow Sam's financial and real estate adventures.)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Tue Jan 22, 2013 1:25 pm 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
k11 wrote:
Did you look at Lending Tree/Prosper/Personal Loan to move that $21K.


I actually haven't, but will when I get home.

I know what Prosper is, assume Lending Tree gives unsecured loans. What would you say the benefits of doing these over, say, doing a balance transfer to a credit card of some sort?

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Tue Jan 22, 2013 2:19 pm 

Joined: Sun Mar 04, 2012 9:15 pm
Posts: 28
Doing a BT impacts your credit score as it increases utilization.
Personal loans does not affect utilization as it is categorized as installment loan and not as revolving credit.

So a $20K BT will ding you more than a $20K personal loan.
Of course, BT are cheap (0-3%) and Personal loans start at 7%+. You will have to do some optimization.

I did the same thing, look at my debts. I have one third of my CC debt as personal loan.
I found this is the best way to keep my score around 710.
viewtopic.php?f=2&t=42152

It does differ from person to person.
Look at personal loans if you have low limits/high utilization.


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Wed Jan 23, 2013 4:39 am 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
Sam wrote:
I would exclude the mortgages, for now, from your total.

Regarding the high interest credit card debt have you tried calling the cards to get a lower interest rate or have you tried moving those balances to another card that will give you a better deal. When we were paying off $55,500 in unsecured debt I never did that and simply paid the credit card debt at the rate it was (most were already low interest) and when we got to the end of that debt paying effort I realized I should have made those calls to see if we could have gotten an even better deal.


I have the mortgages there more as a reminder that they're also not in great shape and that I have to do something about them too

And yes, on Monday, actually I called my credit card companies and two of them lowered my rate! Sorry for not updating this thread (the blog got the update and I didn't think to put it here)

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Wed Jan 23, 2013 5:53 am 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 491
k11 wrote:
Doing a BT impacts your credit score as it increases utilization.
Personal loans does not affect utilization as it is categorized as installment loan and not as revolving credit.


I'm not sure this is correct. If you do a balance transfer from one CC to another with a lower interest rate, how does it increase your utilization? You still have the same CC debt balance whether it's on one card or another. I'll give you that your balance may go up slightly initially due to the 3-4% fee usually charged for balance transfers, but with the amount you can save in interest on a $21k cc debt, that slight bump up in total balance is negligible ($630 for a $21k balance transfer at 3% fee).


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Wed Jan 23, 2013 8:36 am 

Joined: Sun Mar 04, 2012 9:15 pm
Posts: 28
alohabear wrote:
I'm not sure this is correct. If you do a balance transfer from one CC to another with a lower interest rate, how does it increase your utilization? You still have the same CC debt balance whether it's on one card or another. I'll give you that your balance may go up slightly initially due to the 3-4% fee usually charged for balance transfers, but with the amount you can save in interest on a $21k cc debt, that slight bump up in total balance is negligible ($630 for a $21k balance transfer at 3% fee).


You are right.

Sorry, I had a brain freeze when I was posting. I totally forgot that the 21K is on CC.

BT is much better than personal loans for OP.


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Wed Jan 23, 2013 12:53 pm 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
alohabear wrote:
k11 wrote:
Doing a BT impacts your credit score as it increases utilization.
Personal loans does not affect utilization as it is categorized as installment loan and not as revolving credit.


I'm not sure this is correct. If you do a balance transfer from one CC to another with a lower interest rate, how does it increase your utilization? You still have the same CC debt balance whether it's on one card or another. I'll give you that your balance may go up slightly initially due to the 3-4% fee usually charged for balance transfers, but with the amount you can save in interest on a $21k cc debt, that slight bump up in total balance is negligible ($630 for a $21k balance transfer at 3% fee).


Sounds about right. I would also likely shop around and take a one-time hit by getting a new credit card with a low introductory balance transfer rate to get the best offer possible...

So in that case, my utilization would get slightly better as a percentage

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Wed Jan 23, 2013 3:02 pm 

Joined: Sun Mar 04, 2012 9:15 pm
Posts: 28
Recently opened New credit can also ding you a little bit.
Also average age of accts might go down little bit depending on age of your other cards.

Of course, recent credit pull to apply for new card will also affect.

It might be a very small impact, especially if you have lot more aged accounts and very less credit inquiries.

Overall it might worth to take a small hit to save a lot of interest costs.

See if you can get a BT offer on existing card before you apply for one.


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Thu Jan 24, 2013 8:30 am 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
k11 wrote:
Recently opened New credit can also ding you a little bit.
Also average age of accts might go down little bit depending on age of your other cards.

Of course, recent credit pull to apply for new card will also affect.

It might be a very small impact, especially if you have lot more aged accounts and very less credit inquiries.

Overall it might worth to take a small hit to save a lot of interest costs.

See if you can get a BT offer on existing card before you apply for one.


Did a quick check; the best among my current cards would give me is 1% for a year with a 3% transfer fee. If I applied for and got a Navy Federal card, they offer 0% for a year with no transfer fee.

The difference of a combined 4% would be near $1,000 in interest for the 12 months... I wonder how I could put a price on the ding to my credit

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Thu Jan 24, 2013 9:10 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1842
Unless you plan on refinancing soon, why would the ding matter? You already have a mortgage. Your student loans aren't going to grow. Your CC balances would go to the zero balance card. Why all the agonizing over the ding, unless you intend to add more debt?


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Thu Jan 24, 2013 9:57 am 

Joined: Sun Mar 04, 2012 9:15 pm
Posts: 28
Mario wrote:
Did a quick check; the best among my current cards would give me is 1% for a year with a 3% transfer fee. If I applied for and got a Navy Federal card, they offer 0% for a year with no transfer fee.

The difference of a combined 4% would be near $1,000 in interest for the 12 months... I wonder how I could put a price on the ding to my credit



Apply for Navy Fed.

$1000 is way too much, unless you are refinancing like VinTek says.


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Fri Jan 25, 2013 7:16 am 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
k11 wrote:
Mario wrote:
Did a quick check; the best among my current cards would give me is 1% for a year with a 3% transfer fee. If I applied for and got a Navy Federal card, they offer 0% for a year with no transfer fee.

The difference of a combined 4% would be near $1,000 in interest for the 12 months... I wonder how I could put a price on the ding to my credit



Apply for Navy Fed.

$1000 is way too much, unless you are refinancing like VinTek says.


Alright. Applied last night

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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 Post subject: Re: Managing $0.5 million in debt (Starting w/$35k credit ca
PostPosted: Fri Jan 25, 2013 7:19 am 

Joined: Fri Jan 18, 2013 7:21 am
Posts: 95
Location: New York
Oh, and speaking of refinancing, I got around to calling my bank to look into refinancing my mortgages.

The VA Interest Rate Reduction Refinance Loan was streamlined and I'm fairly deep into the process.

However, for the other non-VA mortgage, their home value estimates put me around 88% loan-to-value (12% equity)... which raises some options which I've listed here in order of increasing action:

  • Don't refinance, pay down toward 80%, and just wait (hope?) the value goes up enough and soon enough to refinance at still-low rates
  • Find a bank that will refinance me at 88% LTV perhaps paying PMI until I pay down to 80% (Given that I've currently got a 7.5% loan, I may likely come out positive if PMI is 1% a year)
  • Try to sell (If closing costs end up around 5% and the value is what they estimated, I'll come out positive)

Option 3 feels like the most conservative... Option 2 doesn't feel terrible... Thoughts?

_________________
http://debtblag.com

Track my fiscal fitness with $0.5 million in debt: http://getrichslowly.org/forum/viewtopic.php?f=11&t=61052 Latest update: As of April 16, I've paid off $21,400 in credit card debt this year (after starting with $35k)


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