I entered a debt consolidation program a year ago, and I’m wondering if its really the best option for me. I did a lot of calculating, and between the interest I’m still paying to the credit card companies, and the monthly fee I’m paying to the debt program, only about 55% of my money is actually going to pay off my debt.
I called one of my credit card companies, and asked them what my interest rate would be if I opted out of the program and paid on my own, and I was told it would go up from 7% to 32%.
So basically either way, a ton of my money is not going to pay off my debt. Are there any other options?
Thanks for helping me look at it a different way. I’m just really pissed at myself for being so stupid when I was younger, cause there are so many things I could be doing if I didn’t have all this freaking debt
No offense, but seriously, if I had more money, I would pay more toward the debt. Its not as simple as paying more when you don’t have anymore. I can barely even afford gas for pete’s sake.
First sentence: I entered into a debt consolidation program a year ago. It goes like this… all the payments I will make this year, less the difference in my balance by the end of the year, plus the monthly fee for a year. So I can either pay this fee, or go back to super high interest rates.
And I am paying more than my minimums.
That’s not necessarily bad. When you think of credit cards and how they normally work, they have a minimum payment on an amount, and then monthly finance charges. Often the minimum payment will not cover much more than the finance charge, with maybe 20% or 30% of the payment being applied to principal.
Here’s an example. If you had a credit card with a $10,000 balance at 19%, the monthly finance charge would be $158. A typical minimum payment would be 2%, or $200. In that case less than 25% is going to pay off debt, with the rest going to pay interest charges.
I guess it just depends on how much above and beyond you are paying beyond what would be the minimum payment on these.
To figure it out, you’d need to do some number crunching. What’s your monthly payment vs. total debt at that point? If the payment is 3% or less, then that would explain why, and I would say no, you aren’t getting a raw deal.
7% interest is actually pretty good for unsecured credit. However, it sounds like you need to bump up the amount of your monthly payments to pay down some of that principal. This will reduce the total amount of interest you end up paying on your debt, and you will be debt free sooner!