Credit Cards to the Max

Q: My credit cards are maxed out. I need $25,000 for five years to pay everything off and have one payment that would be considerably less than what I am paying right now. Is there a loan I can get equaling this amount to help me out of this bind? I am a veteran, so I am wondering if there are any benefits that can help me.

-John, Bellefont, PA

A: A lot of folks are in your exact position; and lowering your monthly payment may seem to be an attractive alternative. This may seem lame, but the first place to start is with a close examination of your finances and understanding why your cards are maxed out. There –may have been a good reason: unexpected health expenses, helping out a family member, adopting a child, et cetera. But if your spending has simply been over the top, then a behavior change is required to keep from maxing out your cards again.

You need to know what comes in on a monthly basis, how it is spent and how can you change the underlying habits that have resulted in $25,000 of credit card debt! There are a number of tools you can use to consolidate your debt - but if you continue to spend out of control, you may end up having more problems. So, before consolidating, my advice is to put a budget in place and commit to living within your means.

To consolidate your debt, you may be able to find a bank that will offer you a five-year unsecured consolidation loan. Interest rates are usually high (especially with maxed out cards – they lead to a lower credit score), and it may be hard to find a loan for $25,000. If you own your home, you might be able to secure a home equity loan to consolidate your credit card debt. But, if you are consistently overspending, borrowing against your home equity can compound the problem to the point where you could actually lose your home. There is another -option, but it’s one that I don’t typically recommend.  It involves taking a loan from your retirement plan at work. All of these are viable options, but none will help you if you don’t first help yourself! Good luck!

Comments

[John]

June,
I have read both articles in ref. to maxed out credit cards $25k plus...I believe the question was missed........Does the VA/FEDS have anything to HELP Vets out of Debt?....I know Disabled Vets are protected from harrassing debt collectors phone calls?!However, in times such as present..many of our Vets are in debt with the income to get out...without paying 20-30% apr's..are banks reconizing Vets with pref. treatment?! Thank you in advance.