Hi guys and gals

[mrgorth]

I'm not too financially saavy and was wondering if I could get some help understanding credit cards, loans, all the different charges, etc.

Thanks,

Mark

[A HERETIC I AM]

1. What specifically do you want to know? n/t

[mrgorth]

2. Well

I'm just trying to understand this stuff. I'm a pretty bright guy (BS, got through 2 semesters of calculus and 4 of chem) but all these "these rates then, these other rates then" stuff is confusing as hell. Bottom line, I got divorced last year and though I make a good living I live week to week. I never did a budget before I moved out and I had no idea how tight it would be. I have 1 credit card with a 4.9% interest rate. As of the spring I was aggressively paying on it and it might have been 4 of 5k balance. I started relaxing a little and using a cash advance here and there (nothing obscene) to make ends meet (better than missing a payment). So by the end of summer I was near 8k or so. Well, I had some moments of weakness in the fall and bought a few big ticket items. Next thing I know my min. payment is $135 which scared me but I understood. My balance at this point was probably $14,500. So, after Christmas I was up to $15,300 or so. The min. payment went up to $186 which seems disprortionate compared to the last increase. Now I find out that my interest rate on the advances was 19.99%. Fine print. Ugh, and the lower rate stuff gets paid off first, nice. So here I am with about $16k or so on the 1 card. No other cards. Car is paid off. But I'm stone poor. I've never missed a payment on anything yet and I have good credit to my knowledge. So, do I just try and pay what I can on the card/month? A buddy of mine says that I should pay half the min.(or more) twice a month. This makes no sense to me but OK. I'm also considering a home equity loan (I hear they can take my house though). I've also got loan offers from Capital One and Bank of America which will let me pay off my balance at a lower min. payment but a higher APR%...I don't get that. I can get a loan off my 401K (ONLY $1750) but I have to pay that back at like a 9% interest rate or something. I just want to understand how my min. payment jumped so disproportionately last month and what to do next. I think I can stop using it but I have very little money to spend/month and it's hard not to use it if I have a date or something. My mortgage is only $820 or something a month so I can't get into anything cheaper as I have 2 kids sometimes. Any help is appreciated and yes, I feel stupid. Thanks.

[wakemeupwhenitsover]

3. First, don't feel stupid. Lots & lots of really smart people

get into debt. And lots & lots & lots of people don't read the mice print that says that cash advances are charged at a way higher rate than purchases. As to how your minimum jumped so high, that's probably in the mice print too. The closer you get to maxing out a card, the bigger percentage of the amount due is charged each month. So, if you only have a balance of $100 the company might just charge 1%. If your balance is $20,000, the company could raise the minimum payment to 10% of the total due. (I'm just throwing these figures out as an example.) Also, the company can increase your APR if you get close to maxing out the card. Lots of teensy, weensy print in there. In fact, you might want to double check that you're still paying the purchases at a rate of 4.9% & cash advances at 19.99%. In fact, maybe that's a good place to start. Check on that & then we can go to step 2.

Second. I would strongly advice you not to draw against your 401K. You'd have to pay it back at 9%, plus you might get stuck with penalties & other stuff. I just don't think it's worth the risk.

[mrgorth]

4. OK

It DOES seem like I'm still at 4.9 and 19.99. I've had several people from the CCC on the phone and they all seem to agree. Thanks for the 401K info. I was worried about that too. How about a home equity loan, which would be through my local bank, vs. the loans I'm seeing through Bank of America, etc.? Thanks.

[wakemeupwhenitsover]

5. The problem with a home equity loan is that they're

usually tied to your house. So, if you get behind in payments then creditors could go after your house.
Pretty scary.

You could go after a card with a higher APR & lower payments, but if you don't pay extra every month & quit using your card then you will end up paying even more than the probably obscene amounts of interest you're already paying.

This is a hard truth, but you have absolutely got to cut your expenses somewhere & pay down that card. Paying half the balance every two weeks will help you pay it off faster. Remember, anything extra you send in goes to the principle, not the interest -- or it should, definitely check first. The key here is paying half every two weeks, not half twice a month. So, every other Monday you send in $100.00. Or whatever day of the week you pick. That means you'll make payments 26 times per year, not 12 times. So in one year you'll have paid $2600. v $2232. on the monthly plan.

I can help think of some ways to cut expenses, but they'll probably hurt. And you really need to cut that card.

Hang in there. You can do this.

:hug:

[mrgorth]

6. Thanks a lot for your help

I feel so useless and dirty. I swore I wouldn't do this. The thing with the HE loan is that I think I can stretch the payments out quite a ways. I definitely need to find a pt job. I've tried but I don't seem to find anything stable that guarantees me a certain amount of hours every week.

[wakemeupwhenitsover]

7. Do not feel useless or dirty.

Sheet. The Trumpster got himself into major trouble. And when the asshat runs around telling everyone that he pulled back from the brink himself, don't believe it. He owed so damned much money his creditors could nothing but renegotiate & work with him. There was no way they could write off billions without getting called to account for loaning trump so much.

Okay, I think the part time job sounds good. Instead of looking for something stable, maybe just look for anything close. Even a temporary job can give you extra cash flow. Are there any temp agencies in your area? I'm thinking that they probably specialize in day work & since you have what I assume is a day job that might not work out, but maybe worth a shot. Even if you bounce from temp job to temp job you'll still have some extra cash coming in.

How about a roommate? Even a temp roommate could give you some cash flow.

Cut expenses to the bone. No more latte's, text messaging, etc. Remember, it's not forever, just until you get this card knocked down.

:hug:

[A HERETIC I AM]

8. Wakeme gives good advice. Check out this website for some great tools.....

http://www.fincalc.com/

When the page opens, click on "ConsumerCalcs"

There are dozens of financial calculators there that can help you fashion a budget, project the actual time to pay off a given balance at a given percentage interest, Retirement needs calculator, cash flow and on and on.

Discipline is absolutely paramount. The idea of getting a Home Equity loan to pay off credit card debt has some merit but you must calculate how long you would be paying at what interest rate, etc.

I know Wakemewhenitsovere made some great suggestions to you but bear in mind, on important financial decisions or questions, it is always best to seek and find face to face help with a qualified professional in your area. You might find even a family member that knows a financial planner that can help you formulate a budget that will not only help you pay off the debt but build your savings at the same time.

DON'T TAP INTO YOUR 401(K)!!!!

Trust me, you'll regret it later on plus it is financially unwise if for no other reason than the 10% penalty you will have to pay. PLUS the entire sum you withdraw before age 59 1/2 is added to your income for the year, forcing you to pay income tax on it.

PM me if you like. I am in the business and i can offer more advice in a private message than i am allowed to on a public message board, but i highly recomend seeking help (if you feel you need it) from someone in your area.

Best of luck

Paul