Erasing Our Debt

Well in response to Bank of America almost tripling my interest rate, I have put up a listing on Prosper to try and get a lower interest rate. Let's hope it works!

One thing I was really wondering about is why it only allowed me to set my max interest rate at something around 8% when most of the loans with my amount request and credit rating were showing somewhere around 14%. Hmmm?

Anyone know anything about that?

Labels: Bank of America, debt, prosper

Oh how I can't wait for 2008 to get here. Yes, we've still got some time to go to get there, but man am I ready.

Why, you ask?

More spare money to pay down debt.

How, you ask?

• I will be receiving a large check for tuition reimbursement from work. I expect this to be at least $2,000. They only pay 80% of your tuition to a max of $5,000 a year. I'm hoping to get all the paper work filed before 2008 so that it will count towards 2007 meaning I would still have the $5,000 to max out next year. While I debated about just putting that money directly back onto the student loans I had to use to go to school, I decided (through the help of some commentators on here) it would make more sense to pay off credit card debt that is at a higher interest rate. That pretty much makes it a balance transfer. I'll still be knocking out my debt as I normally do, this will only help. Once I get my credit card debt paid off, I'll have plenty of cash freed up to pay off the student loans.
• As of 01/12/2008, my wife's braces will be paid off. That will free up almost $200 every month. I'm debating on how to use that money. I want to put it towards her car payment and have her car paid off ASAP. But I also think it would serve a better purpose going towards our CC debt. I'm leaning towards the CC debt.
• With the new year comes renewal of benefits at work. I currently pay about $190 a month for a pretty good health insurance plan that covers the both of us. By pretty good, I mean that I've never received a letter from them saying they're denying me coverage for something as my previous health insurer did. I'm pretty sure the rates will go up, so I'm going to look into more plans this time. Last year, I just looked over this one and said sure I'll take it. I'll be looking into an HMO. I know, I know. Those are bad, right? But I do believe our current physician's are already used in the HMO. Should I go with the HMO plan, I could save about $100 a month on health insurance.
  I'll also be able to change our contribution to our Health Care Spending Account. Currently, I contribute about $270 a month. Of course part of this is for the braces, but we're still paying that out of pocket and waiting to get reimbursed everything at the end of the year. Believe me, it has come in handy this year with the pregnancy and then miscarriage. If we didn't have the HCSA, we wouldn't have had the money to pay for it. I'm planning on taking the contribution down to about $100-125ish a month.
  While our dental and vision insurance deductions might go up, they won't go up much. I currently pay about $35/month for the dental plan and $10 for the vision plan. That total of $45 may go up to $50. A $5 increase I can surely live with.
• Almost forgot! I will be submitting reimbursement papers for the braces payments at the end of the year. I suspect about $700-800 will be left in the HCSA, so that will be another big chunk of debt that will be out of our way!!

Of course, the drop in pre-tax deductions on my paycheck will mean more taxes to pay. But that's ok. It shouldn't be that much of an increase.

So here's the summary:

$200 payment from braces will be no more
$150ish reduction in our HCSA contribution
$100 reduction in health insurance deduction(should I choose a different plan)
$350-450 more to put towards debt each month

That will put us at about $1,000 each month going towards debt.

Then with the tuition and HCSA reimbursement money, we'll have another $2,800-$3,000 to knock off more debt.

With all this freed up money, I really need to run the numbers to see when we'll be (at least CC) debt free!!!

Labels: benefits, debt, extra income, HCSA, health, pre-tax deductions

I've always had this preconceived notion that big banks are not friendly or "forgiving" as small-town banks. And with most of my experiences it has been true. But that all changed this past week and it's going to help me get out of debt even quicker. Or at least I hope it will.

Thursday I received my monthly statement from my former bank for my line of credit. Instead of showing the usual regular $90 minimum payment being due, it showed that the entire $3,500 was due in full by the 25th of March. I was worried and pissy all Thursday night and most of Friday morning before I went up to the bank to talk about it.

Back story to the line of credit is that I applied for it when I thought I wanted to get out of debt in 2005. I had a theory that I was just going to roll all my debt into one big account. It even came with a 2 year maturity date. I thought it had a 3 year maturity date which is why I was confused as to why the entire debt was to be paid off now.

So I head up to the local branch and explain my situation to the first dude that came out to help me. He thought it was quite odd that a line of credit had a maturity date because the ones they give people now are basically treated like a credit card, you pay it down to a zero balance. I explained to him that it was with the bank that they took over so that's why it was probably different. He offered to see if we could refinance it. I agreed as it looked like my only hope. We submitted the application and I went on my merry way as it would take a couple of hours to find out. I knew without a doubt I would be denied as my credit utilization is very high. He called me back within 20 minutes to tell me I was denied and gave me the number to personal loans to see what could be done because basically it would just go to collections.

Long story short, I talked to 4 people for 14 minutes telling the same story over and over until finally I got transferred to the right person that was very helpful and said well I'm sure my manager can just provide an override for this and we can approve the refinance. I was very relieved.

Later at work I received a call from the guy at the branch to tell me the latest news that they were willing to work with me as long as they could get a firm commitment to pay this off and they would need some type of down payment. I had some extra cash in my emergency fund that was over $1000 so I put in for a transfer to take place so I could make about a 20% down payment. I plan on getting this paid off ASAP as was the original plan as this is the only credit I have that is over 10% on interest. Now this just provides extra "incentive" to get it done now.

Moral of the story: If you're going to be going to collections, it never hurts to explain your situation to them just to see if there is absolutely anything that can be done. I've always read articles about doing that but never thought it would actually matter. But apparently it does.

Labels: collections, debt

With the addition of baby coming in October, I've been trying to decide what to do with my debt snowball. Should I continue to knock out as much debt as possible over the next 5-6 months or should I save up as much as possible for baby expenses? Let me see if I can't discuss some pros and cons of each and then hopefully get some input from the readers.

Debt Snowball
If I continue to put as much towards this as possible, my minimum payments will be less when baby gets here. This would almost force me to do a reverse snowball. Putting all I could towards my largest debt would help tremendously with reducing my largest minimum payment which is currently about $130.
If I didn't continue to put as much toward my debt, I may get behind on payments later down the road and it would take a lot longer to get rid of my debt.

Save up for Baby
If I save up for all the baby expenses that are due to come, I will not be pressured to use credit for anything later.
If I have too much saved up (is that possible?) I can then use the excess towards the credit cards.

Anyone else got any thoughts?

Labels: baby, debt, saving money

I received a text message from a lifelong friend on Tuesday. He said he was considering a debt settlement company and wanted my input. I preferred to call him to let him know that I thought it was a bad idea.
He recently got married and the attempts to get finances under control with his wife are going for naught. The story I got was that they had both used the same checking account and basically they weren't communicating when each other was spending money. She would write checks unknown to him and they would be low on funds. He felt at the end of the ropes and wanted to use a debt settlement company to get rid of his debt. They told him he could pay about $450 a month for about three and a half years. The total paid was going to be around $15k. And in the process his credit would be trashed. Good thing he just bought a house and a car(not sure if its new or not).
He's a salesman for his current occupation and plans on earning about $50k this year. Not sure on his wife's job but it's probably good to bet she makes at least $15k a year. $65k a year for the area they live in is great money.
I tried my hardest to talk him out of it. I told him repeatedly that he'd only be curing the problem and not the symptoms of what got him into debt. Should this ever happen again, he'd look to do it again as an easy way out.
I've offered to drive up to his house to sit down for a couple of hours to go over his and her finances to get their financial life in order. I've even thrown out there that he should come to Dave Ramsey's Total Money Makeover in Dallas at the end of February.

Does anyone else have any advice I could offer up to him to keep him from making a big mistake??

Labels: dave ramsey, debt, friends

I did some research and did a little reading on my statement for my credit card. There was a little section that explained why my minimum payment is $10.

Because of the careful way you manage your account the minimum payment due on this statement has been reduced to $10.00. If you prefer to pay your regular minimum amount due, it is $73.59. Please remember finance charges will accrue as usual. Thank you.

So it says I manage my account carefully. If you read between the lines, that means that I have hardly charged anything to my account lately and while even though I did last month for medical reasons, I immediately made a payment from my savings account. Also another hidden meaning is that they want me to think good about myself and my ability to manage my account oh-so carefully so that I will think long and hard about using this card to make purchases for the Christmas season.

I am actually thinking about transferring this balance within the next 4-6 months and then calling them back to see if I can get a good balance transfer offer.

Labels: debt, payment

So one of my credit card statements came out today. I was checking it online and noticed my minimum payment was only $10. The balance is just a shade over $3,900. So my minimum payment is less than 0.3%.

Last month my minimum payment was just over $69 with a balance of $3,835, which is just about 1.8%. That seems reasonable.

Surely there was some kind of glitch in the system. They also increased my credit limit by $800. Maybe this low payment is a teaser to get people to spend more in anticipation for the upcoming holiday season.

Since I'm working the debt snowball method, I paid as little as possible. Since the payment wouldn't even cover the interest they added, I just added that to the $10 they requested.

Does anyone know why they would have lowered the minimum payment so low?

Labels: debt, minimum, payment