Consolidating credit card debt

jmccracken1214

jmccracken1214

Well-Known Member
Joined
Jan 12, 2017
Messages
5,751
Location
Thomasville, North Carolina
Rating - 100%
152   0   0
Has anyone used places like LightStream?
I've got 3 cards at the moment. $550 on one, and $1600-1700 on each of the others. It's not what I consider extreme debt but with other bills, it makes it hard to throw down a couple hundred bucks a month on them. I thought about trying to get 1 loan to consolidate them all into 1 payment at a fixed rate instead of 3 at 3 different rates.

Not sure what we will be getting back on our taxes this year but we are paying off 1 of the cars and using what's left towards the cards. Goal is to not have any credit card debt for 2019
 
I've used SoFi a couple times. Quite painless to go through the process.
 
your on the right track, eliminate the largest debt first and work down from there. wait till you get your tax return and go from there. if your getting a large return

your loaning the gov. money consider changing things and put that money wherever you need to.

jim
 
If your credit is decent, look for low/0 interest rate balance transfer offers from one of your existing cards. You can bounce the debt from a couple cards and pile it all onto a single card. You'll pay ~3-5%. BUT, your credit won't take a hit from additional open accounts. And, honestly, with that low of a balance the interest savings really doesn't justify a new account.
 
I would pay off the highest rate first, not the largest balance. The rate on the car is probably less than the rate on any of the cards.

Have never used a debt consolidator, but need more info to determine what you’re gonna pay for the convenience of having a single payment. Balance and rate on each card, balance and rate on car, any fees and rate on the consolidated loan, and finally how much you plan to pay each month. Math is pretty straightforward once you’ve seen it a time or two, shoot me a note if you want a hand with it.

Last bit of advice is that interest on a home equity line is generally deductible on your taxes while other interest is not, so if you consolidate to an equity line the effective interest rate can be very low.
 
Debt is debt whether it’s on one card or three. Pay minimum on the two biggest ones and aggressively attack the smallest. Once it’s done roll that payment into the next smallest one, then the next. After those are knocked out roll all three payments into the car payment and knock it out. We were able to pay off around the same amount on cards in a 1.5 months using that method and a very strict budget. Should have he ol ladies car paid off a year early and my truck the same. After that we’ll do cash or do without.
 
Here's a lesson I learned in 1986. I was charging several hundred a month, always paying it in full every month, never carried a balance, so I never paid any interest. One month, I chose to carry $200 over to the next month, because I was on a big vacation. I expected that the interest would be $200 x 18% for one month = $3.00. Wrong! I paid over $20! That's 10% a month! Why? Because the next month, I charged another $800. And if you pay one cent less than the full balance, they calculate interest on every dollar you charge from the day you charge it. So it's not the rate that kills you, it's the fact that you didn't pay it off in full the previous month. It's been 32 years, but that was the last time I didn't pay the whole thing. A few times, I went into my checking overdraft protection account or home equity line to pay it off, because that is calculated the $3.00 way.

Once you get one card paid off, you can use it for things like online or gas pumps, where you need a card, and then pay it in full when the bill comes in, so there's no interest on those.
 
Last edited:
jmccracken1214 said:
Has anyone used places like LightStream?
I've got 3 cards at the moment. $550 on one, and $1600-1700 on each of the others. It's not what I consider extreme debt but with other bills, it makes it hard to throw down a couple hundred bucks a month on them. I thought about trying to get 1 loan to consolidate them all into 1 payment at a fixed rate instead of 3 at 3 different rates.

Not sure what we will be getting back on our taxes this year but we are paying off 1 of the cars and using what's left towards the cards. Goal is to not have any credit card debt for 2019
Click to expand...

The real question is what is the rate on the current cards? You need to attack the debt with the highest rate first. CC debt is revolving and compounding. If you are still making purchases on the CC you are paying interest on the balance and new purchases from the day you make a purchase. You are also getting hit for interest on interest because they are often calculating interest based on your avg daily balance. Sometimes they are hitting you for the avg of 2 cycles. If you can lower the rate it can help but you have to compare the current rate of your debt vs the fees from consolidation.

I do not recommend home equity because of the upfront cost of home equity lines. You will spend more taking out the loan then you will save from writing off the interest vs other forms of debt consolidation with lower fees. Your total amount of debt does not on the surface seem high enough to go that route. The only way I would recommend that is if you were going to roll the cars and all the CCs into a home equity loan at a good fixed rate with a fixed time frame not a equity line of credit which is basically a CC tapping into your homes equity.

If the highest interest rate is the car then pay that off but often revolving credit card debt is higher than auto loan debt. The car which acts as security normally gets you a better rate. I would take whatever you get back on your taxes and pay off the highest interest rate debt. I would then transfer the rest of the CC debt to a 0% card via a balance transfer. You can often get 12-18 months 0%, depending on your credit for a 2% to 5% fee. Use a card you have paid off with your tax return or a new card. New cards often have a balance transfer deal. Your credit will take a small hit for a new card but if you are not looking at another credit based purchase in the future it will not really effect you. Then take the total debt on the CC balance transfer and divide it by the number of months you have 0%. That will knock that the CC debt for at most the 5% transfer fee. That is most likely better than the double digit rate on most CCs.

For the car take any additional cash you have and make additional principle payments if you can or simply let the loan go to a payoff because again more than likely it is a lower interest rate than the CCs. Once you have knocked out the CCs you can then double up on the cars. Knock them out as fast as you can.

From there you only use the credit cards if you can pay them off every month. This is what I do and I get a basically a 25+ day free loan + 1-3% cash back for my purchases. They are literally paying me to take a free loan. I never pay any interest because I pay the bill in full every month. I keep my cash in the bank where I can earn interest. It also protects me from fraud because all of my online transactions are on CCs so if there is fraud they cancel the card. Delete the fraudulent charges and I am out ZERO $$$ and have ZERO liability. Debt card fraud impact your $$ directly. I worked in a bank for years and would see people's financial world crash because they did not have enough of a cushion on hand to make it threw a fraud claim on their debt card. Most banks take time to get you your $$$ back once fraud has occurred.

Good luck in 2019. Being debt free is a awesome goal!
 
Last edited:
wvsig said:
You need to attack the debt with the highest rate first.
Click to expand...

Best advice in this thread. Absolutely get rid of the most expensive debt first.
The only exception might be if you can eliminate the smallest debt quickly you have a) reduced your minimum monthly payment and b) reached a minor milestone quickly so it feels like progress.
 
dman24 said:
Debt is debt whether it’s on one card or three. Pay minimum on the two biggest ones and aggressively attack the smallest. Once it’s done roll that payment into the next smallest one, then the next. After those are knocked out roll all three payments into the car payment and knock it out. We were able to pay off around the same amount on cards in a 1.5 months using that method and a very strict budget. Should have he ol ladies car paid off a year early and my truck the same. After that we’ll do cash or do without.
Click to expand...

Wish I could double like this post. Definitely the best way to attack the problem. Sounds a lot like the Dave Ramsey method though he says pay off the smallest debt first what ever it is, don't worry about the rate. Makes a bunch of sense. Pay off something small and feel good about accomplishing a goal. Will put you in a better frame of mind attacking the next biggest debt. Get a budget, stick to it, and get out of debt. Ive never used Dave Ramseys program as I have remained pretty much debt free most of my life but have listened to his radio show some, lots of good wisdom there.
 
Take your credit and buy a tank. A full blown surplus tank. Use the rest of your funds to outfit it and buy gas.

Then don’t worry about your debt. If they come for you, well...you own a tank. Lizard Lick towing is no match for a well driven Sherman.




Sent from my iPhone using Tapatalk
 
Don't use any loan companies. If you are not already a member, please join a Credit Union,
you can get a credit card with a competitive rate and most offer checking accounts for $1 fee per month.
You are a member not a customer at a credit union. If you like the bank you use now for checking, keep it
and open a share account at the credit union.
 
In all seriousness:


Your debt amounts don’t seem that extreme, so I would shy away from a consolidation plan. Sometimes, what can happen is people consolidate a number of cards, then continue to use those cards because “they have such a low balance now!” So the problem never really goes away.

Also, retaining a small amount of revolving debt is a good thing and shows lending institutions that you are capable of making payments on debt.


Sent from my iPhone using Tapatalk
 
DO NOT Take a second morgage to pay off CC's
Borrowing secured money vs unsecured is stupid. Pay smallest off first. It's gives you a sense of accomplishment. Then take the extra money to pay off the next smallest.tepat this until they are all paid. Once again do not take out a secured loan to pay off unsecured loans.
 
dman24 said:
Debt is debt whether it’s on one card or three. Pay minimum on the two biggest ones and aggressively attack the smallest. Once it’s done roll that payment into the next smallest one, then the next. After those are knocked out roll all three payments into the car payment and knock it out. We were able to pay off around the same amount on cards in a 1.5 months using that method and a very strict budget. Should have he ol ladies car paid off a year early and my truck the same. After that we’ll do cash or do without.
Click to expand...

100% @dman24 is spot on.
 
dman24 said:
Debt is debt whether it’s on one card or three. Pay minimum on the two biggest ones and aggressively attack the smallest. Once it’s done roll that payment into the next smallest one, then the next. After those are knocked out roll all three payments into the car payment and knock it out. We were able to pay off around the same amount on cards in a 1.5 months using that method and a very strict budget. Should have he ol ladies car paid off a year early and my truck the same. After that we’ll do cash or do without.
Click to expand...

I definitely understand that this is very common advice but I have never understood it. Also were you able to payoff the debt in 1.5 months or 15 months? 1.5 seems awful short. If I have 3 credit cards with balances and a car loan. Why not attack the highest interest first.

For example:

The car loan is at 1.99% with a balance of $6,000
CC #1 is 18% with a balance of $1,700
CC#2 is 13% with a balance of $500
CC #3 is 22% with a balance of $1,800

Debt is not debt in this scenario. There are 4 different levels of debt. CC#3 is costing the borrower more $$$ than the others. If you use the attack the smallest debt first you are paying off the cheapest CC loan first. Then the 2nd cheapest and leaving the highest accruing rate in play the longest. You are not being efficient with your money. IMHO

If this is the scenario that the OP is in the best thing to do is to leave it as it is until tax time. See what your refund will be. Pay as much of CC #3 as you can. Keep paying the car loan it is the most efficient loan the OP has and it is not compounding. If the tax return is more than $1,800 put the rest towards CC#1 and keep making min payments on CC #1 and the car loan. Aggressively pay down the highest interest which is CC #1. Once it is paid off then pay off CC #2. Only once all the high interest CC debt is paid off does it make sense to go after the car payment IMHO.

Now the OPs actual numbers might change and which debt you are attacking first might change but the strategy and approach stays the same. Pay off the debt that cost you the most $$$ to service first saving yourself interest vs lower rate loans.
 
Last edited:
B00ger said:
In all seriousness:


Your debt amounts don’t seem that extreme, so I would shy away from a consolidation plan. Sometimes, what can happen is people consolidate a number of cards, then continue to use those cards because “they have such a low balance now!” So the problem never really goes away.

Also, retaining a small amount of revolving debt is a good thing and shows lending institutions that you are capable of making payments on debt.


Sent from my iPhone using Tapatalk
Click to expand...

Yes!!! Once you payoff a card you cannot use it in a revolving manner. CCs are a great convince and perk if used properly. If you can't pay them off every month then pay cash. IMHO Revolving debt does show payments on debt but things like car loans or mortgages are more efficient for doing that. I have not paid interest on a revolving debt for almost 10 years and it does not hurt my credit.
 
eddie0225 said:
take this from someone who's been thru this so to speak best thing you can do is cut those cards up and never use them again those things are one of the worst traps ever made by banking systems
Click to expand...

Man I understand that mentality but if you are disciplined enough to pay them off every month the banks are literally giving you a free 30 day loan + 1-3% cash back to use credit cards. I pay for everything on them and pay it off every month. I am only buying what I would have bought with cash but instead paid on a CC and paid it off. Every year at Christmas time I get my cash back reward and use it towards Gifts. I save money by using CCs.
 
eddie0225 said:
take this from someone who's been thru this so to speak best thing you can do is cut those cards up and never use them again those things are one of the worst traps ever made by banking systems
Click to expand...

Been there too,, at one time we had 25k in CC debt. It took us almost 6 yrs to pay them off sending every extra dime to do it. We don't even have a CC now. I haven't used one in 11 years.
 
wvsig said:
Man I understand that mentality but if you are disciplined enough to pay them off every month the banks are literally giving you a free 30 day loan + 1-3% cash back to use credit cards. I pay for everything on them and pay it off every month. I am only buying what I would have bought with cash but instead paid on a CC and paid it off. Every year at Christmas time I get my cash back reward and use it towards Gifts. I save money by using CCs.
Click to expand...

If you really are buying what you would ONLY buy if using cash that’s a good idea in theory. However most people can’t do that. They will buy more than they normally would case it’s just so easy to slide that card through. Hey, we’ve all been there, you have that $47 dodad in your hand that you probably really need, but maybe not. If you’re on the fence sliding the card is easy, when you have the cash in hand it’s a little harder to let it go. Do that a few times a month and now you’ve spent an extra $500 you may have not spent. One or two % cash back won’t make up the difference.
 
dave33 said:
If you really are buying what you would ONLY buy if using cash that’s a good idea in theory. However most people can’t do that. They will buy more than they normally would case it’s just so easy to slide that card through. Hey, we’ve all been there, you have that $47 dodad in your hand that you probably really need, but maybe not. If you’re on the fence sliding the card is easy, when you have the cash in hand it’s a little harder to let it go. Do that a few times a month and now you’ve spent an extra $500 you may have not spent. One or two % cash back won’t make up the difference.
Click to expand...

So what it really comes down to is discipline. There is no in theory about it. I don't spend what I don't have. Don't do it in cash don't do it on CCs or other credit. The card does not make it easier to spend because I know what $$ is in the budget. 1%-2% is better than you are getting on a 12 month CD so it is something. No I am not going to retire on it but it pads the Christmas money on the banks dime. People constantly bad mouth credit and debt but when used properly they enable and build wealth. 99% of the time the people who bash credit are people who have abused it because they were not discipled enough to use it to their advantage. I fully understand that many people cannot do that. I personally do not believe that it is most people but maybe I am wrong.
 
Last edited:
Just go to your bank and consolidate. I wouldn't wait for your tax return simply because of the interest on each card.
 
wvsig said:
I definitely understand that this is very common advice but I have never understood it. Also were you able to payoff the debt in 1.5 months or 15 months? 1.5 seems awful short. If I have 3 credit cards with balances and a car loan. Why not attack the highest interest first.
Click to expand...

I understand what you are saying, but a lot of time people need motivation, not math to get out debt. The psychological victory of paying off the smallest balance adds fuel to fire. Also it can be more productive to focus on, and eliminate one debt at a time.
 
Not to be a wise guy, work out a budget, see where all your income is going, all fixed expenses such as rent it mortgage, utilities, car insurance, etc.
Then your other expenses. Good luck you can do this.:)
 
We paid off almost 4 grand in a month and half but it was on two cards. Not something we are typically able to do, and we don’t make a lot by most standards. Using the method I described above we base our budget on my monthly salary, and the minimum my fiancée makes. Luckily for us in that month and a half she made about 4 times what we base her income on so all the extra went to the cards and knocked them out. It is Dave Ramsay’s plan and I really believe it works if you do it.

If the smallest card has a balance of $100, number 1 for this example and has a $10 payment card 2 has a balance of 200 with a $20 payment and card 3 has a balance of 300 with a $30 payment. You pay minimum on card 2 and 3 and every extra penny you can scrape up goes to card one. Once it’s knocked out you put every extra penny and the $10 payment from card 1 onto card 2 and pay minimum on 3 still. Once it’s done you pay the $10 payment from 1 and $20 payment for 2 on card three plus any extra money from your budget. So you’ll be paying the $30 payment plus the $30 payment from the other two cards and it will wipe the debt out in no time. Once I convinced my fiancée we should do this we calculated all of our debts. Totaled close to 80 grand. By the time the snowball gets to the end we will have been paying minimum on the largest debt for a while and then paying over two grand extra on it a month. My largest debt is my motorcycle, roughly 26 grand. Once we get to it in the snowball it will be paid off in less than a year. Then we will be debt free.
 
dman24 said:
We paid off almost 4 grand in a month and half but it was on two cards. Not something we are typically able to do, and we don’t make a lot by most standards. Using the method I described above we base our budget on my monthly salary, and the minimum my fiancée makes. Luckily for us in that month and a half she made about 4 times what we base her income on so all the extra went to the cards and knocked them out. It is Dave Ramsay’s plan and I really believe it works if you do it.

If the smallest card has a balance of $100, number 1 for this example and has a $10 payment card 2 has a balance of 200 with a $20 payment and card 3 has a balance of 300 with a $30 payment. You pay minimum on card 2 and 3 and every extra penny you can scrape up goes to card one. Once it’s knocked out you put every extra penny and the $10 payment from card 1 onto card 2 and pay minimum on 3 still. Once it’s done you pay the $10 payment from 1 and $20 payment for 2 on card three plus any extra money from your budget. So you’ll be paying the $30 payment plus the $30 payment from the other two cards and it will wipe the debt out in no time. Once I convinced my fiancée we should do this we calculated all of our debts. Totaled close to 80 grand. By the time the snowball gets to the end we will have been paying minimum on the largest debt for a while and then paying over two grand extra on it a month. My largest debt is my motorcycle, roughly 26 grand. Once we get to it in the snowball it will be paid off in less than a year. Then we will be debt free.
Click to expand...

Oh I understand how it works but it does not make financial sense. It appeals to emotion and people's psychological dispositions but from a pure financial stand point it makes no sense. I do not doubt that the system can get you out of debit but it is psychologically efficient but not monetarily. Ramsey is great for people who are already in a hole. It is a path to getting yourself out but if you are young and you follow his advice you will never own a house. You will never start a business and you will never move up economically.

Without some credit and taking on some debt you cannot be economically successful in the current economy. IMHO clearly YMMV.
 
To the OPs question my wife and I have used Lightstream for 3 used car loans. A paid off now. Rates were better than anything I could get at the credit union. I want to say they were 2.49, 2.74 and 3.19%. All over the past two years.

I'm not sure what rates they offer now but we had nothing but good experiences with them. You must be a excellent borrower as far as credit history goes, debit to income ratio etc as they are personal loans with zero collateral. We submitted each application and had the money in our account to purchase the vehicles we were looking at in less than 48 hours.

As the other members have posted get a zero % CC and transfer the balance ONLY if you are disciplined enough to not run the other cards back up. Best of luck. We are debt free besides our house and to say we wake up every day with less stress is an understatement. Life changing for sure.

Sent from my Moto E (4) Plus using Tapatalk
 
Last edited:
wvsig said:
Oh I understand how it works but it does not make financial sense. It appeals to emotion and people's psychological dispositions but from a pure financial stand point it makes no sense. I do not doubt that the system can get you out of debit but it is psychologically efficient but not monetarily. Ramsey is great for people who are already in a hole. It is a path to getting yourself out but if you are young and you follow his advice you will never own a house. You will never start a business and you will never move up economically.

Without some credit and taking on some debt you cannot be economically successful in the current economy. IMHO clearly YMMV.
Click to expand...
What doesn’t make sense about it. I don’t understand how debt helps you move up economically and why it will keep you from owning a home. Using his method mortgages are ok, not recommended though. If you have no debt related bills it should be easy to quickly build wealth with cash and investments.
 
My business has had its ups and downs, and while it is more than a little stressful to sign for a $18mm loan at 14%, I felt good about growing the business fast enough to stay ahead of it, and I was mostly right. There was no way to save enough to get the business going without debt. In fact, having debt really helps focus business decisions. Having debt doesn’t make a business successful, but it is an element in most successful businesses.

Not sure what Ramsey would say, but I can believe that he built his business without debt since the margins in self-help are huge.
 
Keep the black magic of your credit score in mind too; paying off too much too quickly can knock it pretty good.
 
dman24 said:
What doesn’t make sense about it. I don’t understand how debt helps you move up economically and why it will keep you from owning a home. Using his method mortgages are ok, not recommended though. If you have no debt related bills it should be easy to quickly build wealth with cash and investments.
Click to expand...

Unless one has a benefactor, in order to accumulate some even modest assets or wealth you have have to take on debt as a younger person in this economy. No one has cash to pay for the foundations of true participation in the current economy. Education and or skill training is expensive. Owning a reliable car is expensive. If you are starting a business you need capital, most of the time that does not come from cash on hand, it comes from a lending source. Younger people are not buying houses today not because they don't want to buy a house but because they cannot afford it. They cannot even afford the down payment required to get a mortgage. Now a lot of people are in over their heads in debt from education, transportation and housing but that does not make debt or credit bad. It makes peoples use of that tool bad. Kind of just like guns. I don't blame guns for the violence that people use them for anymore than I blame credit or debt for the havoc they create. People wreck their financial lives credit doesn't. Credit is neutral. It is just a tool like a gun which can be used for good or for bad ends.

Again the system that Ramsey is peddling will help you get out of debt using some pretty basic concepts but the aversion to all debt is detrimental. Treating all debt the same is also a flawed way of looking at debt. You need to take on some reasonable debt in order to set yourself up for the future. The idea that all debt is bad is a false narrative. If you are disciplined and understand how credit and debt works it actually increase your ability to make money with your money.

In 2014 I bought the first new car. Up until that point I had always bought used cars. I could have paid cash for the car but I didn't. Here is why. I could get a 1.99% car loan via USAA. That loan over the course of 5 years was going to cost me about $3,000. Instead of paying it to the dealer I took the money put the bulk of the money into a S&P index fund and then dollar cost averaged the rest. Since May of 2014 my rate of return is about 10% before adjusting for inflation. By taking the loan and paying 1.99% in interest I made 8%. Truck is now paid for and the cash I would have put into it is now an asset making me money. Even if I took the money that I pay to USAA and dollar cost averaged it over the same period of time I am ahead by taking the loan but about 5%.

I own a rental property which used to be my primary residence. It has a note. I have positive cash flow vs the mortgage taking into account, property management, repairs and upkeep. I could not have paid this property in cash. I had take a mortgage to purchase it. When I moved out I could have sold it and if I was following Ramsey's advice I would have. I would have made some cash as the time but not a ton. Instead I kept the debt and have rented the house. I refinanced it to a 15 year mortgage at a historically low rate and it will be paid off in less than 7 years. Paying it down faster would greatly reduce the tax break I receive. Along the way it has generated income and a tax break. In 7 years I will own it outright and I will not have paid for the majority of it. My tenants have. By holding on to the asset and its debt I will have an income generating property in excess of $20,000 a year plus the asset which can be sold for a profit at anytime. By not eliminating this debt I used someone else'e money to create wealth.

These are just two examples of where taking on new debt or keeping existing debt made me more money than if I had paid cash or gotten rid of all my debt.
 
Last edited:
JimB said:
My business has had its ups and downs, and while it is more than a little stressful to sign for a $18mm loan at 14%, I felt good about growing the business fast enough to stay ahead of it, and I was mostly right. There was no way to save enough to get the business going without debt. In fact, having debt really helps focus business decisions. Having debt doesn’t make a business successful, but it is an element in most successful businesses.

Not sure what Ramsey would say, but I can believe that he built his business without debt since the margins in self-help are huge.
Click to expand...

100% spot on. If you had not taken on the debt you most likely would have missed a growth opportunity. Ramsey in his first business life went bankrupt but then found God and now sells basic generic financial from which he as greatly profited from.
 
You must log in or register to reply here.
Back
Top Bottom