Best way to tackle my debt… thoughts?

Discussion
1

~$38,000 in credit card debt. I’m trying to figure out how to handle this—should I just keep working to pay it off, try credit counseling or a program, or maybe a consolidation loan? I’ve tried applying for one, but either got denied or got an interest rate that’s too high (32%).

I’ve already made up my mind to stop using the cards until I can pay them off and use them responsibly.

I don’t mind getting rid of all of them except for one.

Income: ~$6400/month.

FICO: 693

  • Rent: $2300/month
  • Car Lease: $826/month
  • Groceries/Dining: $600/month
  • Child Support: $1250/month
  • Other bills/utilities: ~$500/month

Credit Card #1: $11,796 at 28%
Credit Card #2: $10,000 at 29%
Credit Card #3: $5,800 at 0% until March
Credit Card #4: $5800 at 0% until March
Credit Card #5: $5000 at 18%

2

Can you reduce the housing or car costs? That lease amount seems super high.

3

Hayes said:
Can you reduce the housing or car costs? That lease amount seems super high.

My rent is locked in for the rest of the year. It was the best option for the area and my family. I’m not sure if I can reduce the car lease without buying it out. Is there a way to do that?

4

@Phoenix
Definitely look into getting out of the car lease. Even if you have to pay, it might help in the long run.

Here’s a link you can check out: https://www.lendingtree.com/auto/how-to-get-out-of-a-car-lease/

5

@Zhi
I’ll look into it, but I’m worried the cost will be out of my budget.

6

@Phoenix
I don’t know much about car leases, but you could check the lease terms or call the company to ask about options.

7

@Phoenix
You could refinance your car loan or lease. Look into it, it’ll lower your payments but might extend the term.

8

American Financial Solutions helped me out. They reduced my Chase card to 0% from 29%, and gave me 65 months to pay it off. My card had an $18k balance. They also gave me 1.9% interest on my Capital One card. Highly recommend them.

9

@Koa
Are they a DMP? Would they close the cards automatically? Will it affect my credit?

10

Phoenix said:
@Koa
Are they a DMP? Would they close the cards automatically? Will it affect my credit?

Yes, they’re a DMP. My Chase cards were closed, and my Capital One is restricted. Your credit will take a hit in the short term.

11

@Koa
Thanks for the info! How long have you been on the program? How long until you think you’ll be able to get a loan again?

12

Jesse said:
@Koa
Thanks for the info! How long have you been on the program? How long until you think you’ll be able to get a loan again?

I just started the program in December. First payment was on the 18th. With my high debt-to-income ratio and those high interest rates, I was stuck. My 3-5 year plan is to get a house. That’s my next big goal after clearing this debt. I’m working two jobs now, and both are going well. Changing careers got me into this mess, but I don’t regret it. Honestly, I don’t know if buying a house will be realistic with how the housing market is right now.

13

I’m torn because you have some credit cards with 0% interest ending soon. I assume you’ll get charged all back-interest if you don’t pay it off by March?

If not, I’d start with #5 since it has the lowest balance. Pay extra on that while making minimum payments on the others until it’s paid off. Then roll those payments into 3 or 4, and so on. Some people prefer the avalanche method, but I like the snowball method because it feels motivating to see the debt go away.

Do you have anything you could sell to make extra cash? Or maybe pick up a side job?

14

@Val
From my experience, 0%-interest cards don’t accumulate unpaid interest. They just raise the interest rate after the promotion ends. But if you have a good credit score, you could get another 0% balance transfer card. It’s not perfect, but a balance transfer fee is better than a high interest rate.

Of course, that only works long-term if you can pay down the balance and not get into more debt.

15

@Hayes
I’ve never had a 0% card, so thanks for explaining! A balance transfer might help, but I agree—if OP doesn’t change their habits, it could just add more problems.

16

Val said:
@Hayes
I’ve never had a 0% card, so thanks for explaining! A balance transfer might help, but I agree—if OP doesn’t change their habits, it could just add more problems.

I’ve already changed my habits. No more using the cards until I clear the debt. Then, I’ll keep just one card and use it responsibly. But I don’t think I’d qualify for a 0% balance transfer card with my current credit situation.

17

@Phoenix
That’s great to hear! In that case, your options are what I listed earlier. I wish you the best of luck!

18

@Hayes
Both were 0% for 16 months. I thought about doing the balance transfer, but my credit took a hit from the utilization.

19

@Val
I need to check if the back-interest applies to these cards. They’re Chase Freedom Flex and Freedom Unlimited cards.

Unfortunately, I don’t have anything to sell. The best I can do is pick up extra shifts, but it’s tough with the long hours and custody scheduling.

20

@Phoenix
I totally get it. This is tough, but you’ve got this! Unless there’s another option (like cutting some expenses), there’s no easy way to tackle the debt faster.