Debt Consolidation

Not sure where to post this. A friend of mine has ridiculous amounts of unsecured debt (mostly credit cards). She told me that it is about $100k. She won't tell how she managed to take on so much debt in the first place but I suspect it has something to do with her ex-boyfriend.

In any case, she is on 6 figure income but obviously has poor money management skills. She was telling me how she got slugged with late fees when she missed a payment. My first suggestion was to cut-up and put a lock on all credit cards. Next step is put all of them on Direct Debit (where possible). The third step is debt consolidation to a lower rate. One big loan so it is easier to mange. Last step is start making extra payments.

I had a look around for debt consolidation loans but I didn't see any that offers such high amounts except for Lattitude.Is there such a thing as personal loan broker that can help her out?

Other than an old car, she doesn't have any other valuable assets.

 

Hi John, yes there is.

There's a lady I use for this, happy to get her to ring your friend if that helps?

Incidentally, your friend might also benefit from a course I've just released - it's a budgeting and money-management course, and it's completely free.

 

Just checked, you can potentially balance transfer $50k to :
Citi Rewards Platinum Card Balance Transfer Offer
0% p.a. for 26 months on balance transfers.
One-off 1.5% balance transfer fee applies.

So no interest for 26 months with one off fee for $750 (1.5% fee) and annual fee.

and remaining can be transferred to personal loan (PL) at lower rate.
Try and pay off balance transfer asap as it reverts to cash advance rate after 26 months or roll this over to another PL, if possible.

Not sure if she is approved $50K each (balance transfer & PL) and how it affects her credit rating.
not advice.

 

Id avoid debt consolidation stuff, its expensive, and its another form of bankruptcy

as you said cut up credit cards,

apply for balance transfers, if she can get most of it on balance transfers, then if she is smart and motivate, then in 12-24 months time, she will be so much further in front

6 figure income should mean she could be all paid off in 2 years

edit: been there done that, not s nice feeling

 

Good point

I interpreted as those debt consolidation services that also make you a bankrupt

 

Write down each of the debts, their balance and repayments. Volunteer a reasonable amount that could be paid extra, $50pw or something.

Then direct this amount to the smallest balance debt, along with the usual repayment to this debt and all the others. It’s important to not consider the interest rate. Just pick the smallest balance debt.

When it’s paid off, pat yourself on the back. Use that weeks $50 to buy yourself something nice. Then next week redirect the $50 and what the usual payment was on the paid out debt to the next smallest debt. Repeat until the last debt is taking all the payment ‘firepower’.

Once the last debt is paid off, consider starting a savings plan. After all the psychological ‘wins’ of paying off each of the debts train yourself to get a kick out of reaching savings goals.


Alternatively, get a consolidation loan. In a year or so prepare to freak out about having $200k in consumer debt. The consolidation loan takes the pressure off. The repayments are more manageable, so you can afford to put a couple more things on the credit card or afford a small PL for a holiday etc....

 

Thanks @Jess Peletier for the personal loan broker contact, I passed on the details to my friend. Interestingly she started doing this thing where after each monthly card payment she would call the bank to reduce the credit limit so even if she gets impulsive and orders a new card in the future to replace the cut-up cards, she won't have much money to spend.

I did the cashflow and debt spreadsheet for her and suggested that she move into a share house until the debt is paid off. With a modest living, she can knock it off in a bit over 2.5 years with 2 vacations of $5k each thrown in there at 50% paid off and 80% paid off so she has something to work towards and putting up with the hassle of a share house in her 30's

 

You're a good friend. Nice work.