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Posts Tagged ‘credit’

 

What’s your magic number? (I am not talking abracadabra here.)

What I mean is, if you won the lottery today, what is the dollar amount it would take to buy your freedom from debt?

As I sat down to do some bill paying last night, that was the question I posed to myself. The current price of my freedom amounts to $20,863.21 to be precise. *Deep sigh*

I firmly believe the road to debt hell is most often paved with credit cards and good intentions.

How did I get in this deep? Let’s break it down:

Various credit card debt (i.e. store cards, etc.) = $2,613.34

Old student loans (years later and they are still moaning like zombies on the hunt) =$4,640

Consolidation loan from previous debt = $9,975.85

Loan for kid’s graduation and college trip costs = $2,028.78

401k loan =$1,605.24

Since I don’t anticipate winning the lottery any time soon, I will have to find alternative means of obtaining my magic number. Will it be from a second job, thrifty e-bay sales, or the sudden appearance of a genie in a bottle?

I will keep you posted. 🙂

 

 

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If you’re like me, you have found yourself in seriously tough financial times. You are barely getting by from paycheck to paycheck (and in some cases, that’s not enough).  You can no longer make the monstrous minimum payments on your debts without robbing Peter to pay Paul.  Eventually, you can’t even do that.

Then the collection calls begin to roll in.  At first, it is just like one or two a month, then a week, than pretty soon they can come on a daily basis, and multiple times in a day.  It is like being lost in a money desert with no cash in sight, while the creditor buzzards are breathing down your neck.  You want to escape, but they just keep hunting you down.

What do you do now?

The magic words

For me, I needed to stop the calls.  This wasn’t going to happen just by wishing for it.  I had to stop dodging the phone when it rang and take some control.  At this point I said the magic words.  Are you ready for them?

“Hardship plan.”

These magic words immediately told the creditor that I was seriously in debt and unable to pay the huge minimum payment. (Please! Minimum payment? There’s nothing minimum about them.)  At this point the creditor asked what amount I would be able to pay, so I threw out a number that I could handle. In this case it was a little less than half the minimum payment but an amount I felt confident I could pay on a monthly basis.  I also said that the APR was way too high for me at 21% and he told me that with the Hardship Plan that he could offer me, the APR would temporarily go down to 11% for the duration of the payment plan.  In this case, we agreed on a twelve month plan, during which time they would no longer assess late fees to the account as well.

Now the interesting thing is, this same creditor who I just negotiated the Hardship plan with, had told me a year ago that they don’t negotiate at all, that APR’s were permanently fixed, as were minimum payments.  They had denied any possibility to work out a deal with me at all.  Oh what a difference a year of economic hardship for the country has made!

“Final Payoff Plan”

If things were so dire for me that I couldn’t have handled the terms of the Hardship Plan, I could have requested what is called a “Final Payoff Plan”.  But this is a permanent termination of the account and set up with terms that will allow for the eventual payoff of the remaining debt.  I believe (though I haven’t confirmed this) that the Final Payoff Plan is more detrimental to my credit standing than the Hardship Plan. Although, when your credit is already shot and you just want to get out from under, this may be the way to go.

Ugly truth about creditors

The thing that angers me most is that many creditors will not come out and tell you about these plans.  You have to say the actual magic words, “Hardship plan” or “Final Payoff”, in order for them to discuss it with you.  So don’t be afraid to ask about negotiating terms of your account with them.  The worst case scenario is that they say “NO” and you have to consider going through a credit counseling agency, (no, not debt reduction agency – because I have heard only horror stories about them), or perhaps a bankruptcy attorney.  There are some highly reputable credit counseling agencies and they can really help with negotiating when the creditors are unwilling to work with you directly.  For more information on them: NFCC.

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Money has always seemed to run through my fingers like water; I don’t mean a slow trickle either. We are talking full throttle, Niagra falls style! J. Money’s blog this morning compared savings to a ball of rubber bands, and I can tell you that mine keeps falling apart!

Breaking It Down For You
To illustrate my point about the money flowing out faster than it will ever flow back in, let me give you a few details.

1) Today is payday! (That’s always awesome.) So as of this morning I had $968.27 deposited into my account.
2) Immediately my loan payment was taken out which reduced it by $75.33.
3) My department store credit card payment was automatically taken out $20.
4) I had to take money from the ATM this morning for school/kid costs of $10.
5) I bought groceries totaling $32.01.
6) Gas in the vehicle cost me $29.53.
7) Lastly, repayment of a loan from a friend was $50.

Okay, so to recap, this morning I had $968.27 to the good. I am now $216.18 dollars poorer for a total of $752.09 remaining less than 12 hours later! OUCH! Considering I have yet to pay the big bills for the month, maybe I will be able to afford to eat the rest of the month, maybe I won’t. Good thing rice is still cheap!

My Master Plan
My master plan is to do what all the truly good personal finance bloggers suggest:

a) Plan ahead. Scan the local paper, find the grocery sale items, plan my next week of meals around the sale items, and scan the internet for applicable coupons to coincide with the sale items. Then try to avoid temptation from the non-sale items that will be calling my name (Oreos, Chocolate, Twinkies, etc.) – easier said than done.

b) Fix my budget. I currently don’t have a real budget; it is more like a poker hand. I take what I think I can do the best with and throw the rest back for the next paycheck/month. LMAO! It is not a “genius taking over the world” kind of master plan, but it has been a hard habit to break.

c) Negotiate. By trying to negotiate lower payments and APR’s with my creditors, I may be able to save myself some serious troubles later on. At this point, my credit score is shot with many bad credit bullet holes.  It won’t do any more damage to get some help. If need be, I may have to enlist the help of a reputable credit counselor. But I will take this one step at a time. I prefer to negotiate for myself, rather than leaving my fate in the hands of someone else.

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