I searched the boards for a situation similar to mine and while I have found some very helpful advice, I still am unclear on what approach fits my situation best. Currently I have a significant amount of debt. I have the following outstanding balances: 10 Credit Cards totaling $41,000 in balances (rates range from 11-21%) 1 Loan from my credit union for $13,000 Auto Loan for $14,000 Student Loan for $8,000 Loan against my 401K for $12,500 Mortgage Payment of $1,100/mo First off I understand how I got into this predicament and I am hopefully in a position where I can begin to move forward and not repeat these mistakes. Despite my large amount of debt I have been vigilant about paying all of my bills on time. Ultimately that is what I feel has got me into this position, I had such a good credit score that I was flooded with offers and huge credit limits and ultimately I had to rely on that during a period in between jobs. I am currently employed at a relatively good salary and have maintained making all of my payments on time. However my credit score has dropped significantly due to my high balances. By making the minimum payments on all my accounts I barely break even on the month and can no longer go on with situation. I am looking for a strategy that allows me to create some breathing room, start to build a emergency savings fund, and be able to make a dent into my balances. I do not want to stop paying my minimums and wind up with it on my credit report, but it seems from what I have read that is the only thing that gets the credit card companies to play ball. Any suggestions on how to proceed would be appreciated. Thanks!
Don't stop paying. Believe me, you don't want to take that route. For people in your situation, I see 2 simple (not easy) options, which are as follows: 1.) Cut expenses 2.) Increase income If you're ever going to make a dent in this debt, you need to either reduce your expenses or increase your top line. If you can do both at the same time, that's even better. Take on a 2nd job, start your own business on the side, sell things on ebay...do whatever is necessary to create some additional cash flow and then focus all that additional income on building a small EF and paying down your high-interest debt. At the same time, look over all your expenses and cut out everything you don't "really" need. For example, I used to pay $150/month for crappy cable service from Comcast, but now I watch shows on Hulu for free. I don't miss cable at all. Good luck, and have patience! It will take time and perseverance to wipe out all that debt, but it'll be worth it.
