- April 9, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Financial Struggles and Debt Accumulation
When I first acquired my credit cards, I used them responsibly to pay bills, always paying off the full amount monthly. However, my financial situation has since changed significantly. I am now living on my own, facing a monthly rent of $1,400, along with other expenses such as bills and groceries. Despite the help I receive from my fiancé, who does not live with me, I am hesitant to continue relying on him for financial support.
With my credit card APRs skyrocketing, I found myself accumulating debt due to unexpected expenses like medical bills and vet bills. As a result, my credit cards are now nearly maxed out each month, with interest pushing me back into a cycle of debt. The high APRs, averaging around 27-28%, have put me in a financial bind.
### Seeking Debt Consolidation Solutions
I am hopeful to move in with my fiancé soon and aim to reduce my debt significantly before we tie the knot. Considering a loan offer from my bank to consolidate my debt, I am uncertain about the best course of action and which loan option would be most advantageous.
My pre-tax income is approximately $47,000 annually, with $15,500 in debt spread across three credit cards. While one card has a 0% APR for another year, the other two cards carry an average APR of 28.2%. This dire situation has me trapped in a cycle of making minimum payments and seeing no progress in reducing my debt. Despite maintaining a credit score of 627 due to my on-time payments, I struggle with high credit utilization and a relatively young credit history.
### Exploring Loan Options and Seeking Advice
If I choose to proceed with a loan from my bank, I have three options to consider, all with lower APRs compared to my current credit cards. The term lengths vary, ranging from 36 to 60 months, with the APRs ranging from 8.9% to 9.99%. While these loans promise lower interest rates, I am unsure about the long-term implications and whether consolidating my debt in this manner would be beneficial.
Aside from the obvious strategies of cutting expenses and curbing credit card usage, I am open to any additional advice or recommendations for managing and reducing my debt. In this challenging financial situation, utilizing the AI Legalese Decoder could help me navigate complex legal terms and agreements associated with debt consolidation loans, enabling me to make informed decisions with confidence.
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I see so many people here who once went this route and then wound up with both maxed out credit cards and a consolidation loan from the first time they maxed out the cards.
I’m generally not a fan of this approach because behaviorally so many people don’t follow through.
What does your itemized budget look like each month? I think that’s the first step to take here. Going through your budget with a fine toothed comb and using an app/service like Copilot or You Need A Budget to keep track of all of your transactions and budget progress.
A lot of those debt consolidation loans advertise a low APR, but once you apply it’s not nearly as low, especially if your credit isn’t very good. If you can apply for a personal loan for debt consolidation that would significantly lower your APR only on the high interest cards you have, then it wouldn’t be a bad idea. But take into consideration what your monthly payments will be. If you can tackle one credit card at a time, you can roll over the savings to the next credit card. Whereas, if you take out a loan, your payments are going to be the same every month for the next 5-10 years (or whatever your term is) and it’ll be more difficult to find extra money to get your other cards paid off on top of your loan.
[Here](https://www.npr.org/2019/02/14/694669510/7-strategies-for-digging-out-of-debt) is an article on how to pay off your debt. Here’s [another](https://www.npr.org/2024/01/18/1196978541/how-to-save-money-when-youre-broke) about saving while broke, in case you find it helpful. NPR has a [life kit on personal finance](https://www.npr.org/series/your-life-kit-to-better-personal-finance). USA Today has an article from November 2023 on [negotiating credit card debt](https://www.usatoday.com/money/blueprint/credit-cards/negotiate-credit-card-debt/).
While this asking for salary, I think bullet point #4 from Ask-a-Manager is also a good mental tactic for negotiating *down* debt [here](https://www.askamanager.org/2019/03/how-to-negotiate-salary-after-a-job-offer.html).
If you want to DIY your personal budget: The Consumer Finance Protection Bureau has [this on organizing your debts](https://www.consumerfinance.gov/about-us/blog/how-reduce-your-debt/); and [this for tracking your spending.](https://www.consumerfinance.gov/about-us/blog/track-your-spending-with-this-easy-tool/) There’s also *Personal Finance for Dummies* by Erik Tyson, which was recently published in September 2023; and, *Atomic Habits: An Easy and Proven Way to Build Good Habits and Break Bad Ones* by James Clear. I re-read this one from time to time when I want to change my behavior.
Go to your local library because they might have them and, best of all, it’s free!! If they don’t have it, you ask the library to buy it, depending on their budget.
If you think you might need some outside help, you could bring in a intermediary with the [National Foundation for Credit Counseling](https://www.nfcc.org/) does debt *management* and budget analysis. They do charge but take a look at their [FAQs](https://www.nfcc.org/faqs/) under *What do NFCC members charge for counseling services* to see how much. It says it varies, but the page does state that the majority of cases are low cost to nothing–not guaranteed.
The [Consumer Financial Protection Bureau](https://www.consumerfinance.gov/consumer-tools/debt-collection/) has a good description of [the differences](https://www.consumerfinance.gov/ask-cfpb/whats-the-difference-between-a-credit-counselor-and-a-debt-settlement-or-debt-relief-company-en-1449/) between a credit counselor and debt relief/settlement companies. They also have a webpage on spotting [a scam](https://www.consumerfinance.gov/ask-cfpb/how-can-i-tell-a-credit-repair-scam-from-a-reputable-credit-counselor-en-1343/).
You can look into the Justice Department, which has a list of [approved credit counseling agencies](https://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111) to possibly assist you. Look for the non-profit ones. Still be cautious about signing up with one of these because they have done everything correctly to get approved by the Justice Department but may have become less reputable once they got approved.
You have the [right to cancel credit repair services](https://www.consumerfinance.gov/about-us/newsroom/consumer-advisory-people-have-the-right-to-cancel-credit-repair-services/) within three business days for whatever reason.
You could ask the credit cards for a hardship plan, which could decrease your credit card interest rate, but they might close your accounts down, which will impact your credit score.