advice paying off credit card debt/s
 

I am in a bit of a dilemma, my best friend has two credit cards, he did not pay the minimum payments for half a year because he was laid off and everything he made had to go towards medication, bills etc...He is asking to borrow 3000$ from me to pay off the bills which he did show me. Unfortunately I cannot provide him with the money right now.

What are the options he has in order to make his payments now with his new job and to bring his credit rating back up? He recently has been trying to catch up on the missed payments but its just not enough. Are there banks that will help with consolidation loan even for a person with bad credit?

I have no financial background so this is all I can do to help the guy. Any help pointing towards the right direction will help, thanks!

Is your friend named Clement?

^LOL
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nope, unfortunately not :fullofwin:

Unfortunately? You want your friend to be named clement??

I don't know about all those consolidating debt companies and stuff like that, but your buddy needs to find a way to pay back the CC company ASAP. Their interest rates are hell, even if it means borrowing money from elsewhere. Problem is it sounds like he waited a little too long before seeking help and he might not be able to get money from anywhere else.

Bottom line the only thing that will get him out of the hole is to spend less, and make more. So tell him to get like 8 jobs if that's what it takes, work 25 hours a day, etc.

It's quite simple. Takes less than 10 steps.

1) Tell your friend to go clubbing on the weekend (preferably Gossip, Pop Opera, or where ever LGs are now a days)
2) Arrive in a modified STI
3) Act baller and post selfies on Instagram
4) Pick up chicks and tell them you own ENVY / or in the process of buying it
5) Week later, treat them out to McDonald's or a cheap $5 lunch
6) Ask LG if you can borrow $3000 temporary and your mom will be wiring you the $$ very soon
7) Fled to HK
8) ????? Profit :D


:badpokerface:

First of all, don't lend him any money! That's just asking for trouble.

What do you mean by its not enough to catch up on the missed payments? There's nothing he can do other than diverting his income to pay off the debt as much as possible unless his family wants to help him. He has a damaged credit, no banks will consolidate his debt and turn it into a line of credit with a lower interest rate. Certainly, you shouldn't lend him money.

He would have been in much better situation if he sought financial aid before skipping 6 months of minimum payment.

All banks have a low-interest credit card option, interest rates are typically Prime+3% up to Prime+12%, depending on credit rating and relationship with the bank. Tell your friend to hit up his bank and request to switch the card to a low interest one. Assuming he has a regular card currently, the interest should be around 20% so he will save quite a bit on interest alone.

He can also apply for a consolidation loan at his bank that has the credit card. These loans are about 15% interest give or take but he can opt for a higher amortization period to lower monthly payments. However keep in mind that as part of the consolidation conditions is to payout and cancel the credit card. Also, in order to be eligible for this loan, he will need to have income. If he doesn't, he will need a cosignor or guarantor.

He absolutely cannot skip payments any longer because he has a high chance the card will be written off which has a detrimental effect on his credit. His credit is already fucked up as it is.
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I'm not sure if there's any institutions out there able to lend money with low or no interest, but have seen some ads from debt counselling BC and stuff. Maybe try giving them a call? There will be professionals there as opposed to a bunch of random people on a forum.

Best thing to do is to make as much money as possible and save as much as possible, to go towards the debts. Live way below his means until his debts are fully paid off.

Debt should be paid off in a snowball effect.
Start with the lowest one first, as much as possible every month, until it's gone, while maintaining all other minimum payments.
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He did cancel his credit card, I believe he made small payment this week or last week in order to keep in good standing with the credit company and from being sent off to the charge-off area. Do you know if every bank can provide a consolidation loan even with a bad credit history?

^It depends.

If he has bad credit, but has (and can prove) a steady income, they may say yes. It also helps if you know someone at the bank (actually working there, not teller level.)

And as someone said, it may also require a guarantor.

I'm far from a financial expert, but shouldn't the guy pay all of his high-interest accounts off first, and not just the lowest-value ones first? Those will be the accounts killing him with the extra interest being compounded every month.

^Mathematically, yes (just did the math lol)

But there is also the psychological effect/benefit of being able to close off debt accounts earlier.

Your argument is seriously that he should pay off the ones costing him the LEAST in interest to preserve the psychological benefits of feeling like a winner sooner by paying off the meaningless debt? Assuming he has 1 IQ point more than a potato, he should be able to skip that nonsense and focus on the ones that are COSTING him the most money, i.e. the ones accumulating interest faster than he is paying them down.

Think of the psychological benefit of paying off your most dangerous debt account first. Must be like a million times better than the small battles ;)

Friends don't lend friends money, especially true when there friends show a pattern of not being able to repay there debts.

He might want to try and sit down with his bank he owes the money to assuming he banks where his credit card is. You'd actually be surprised, banks do try and work with you most the time at the end of the day they want there money.

It will take a while for him to build up his credit. Why doesn't he ask his family for help? What's his minimum payment? What's the actual interest rate?

Has he talked to the credit card company...what did they say? If his total debt is only $3000 as he says, he should be able to talk to the credit card company and pay off this debt in instalments every month within a year.

If not, something is not adding up.

He does not have family to seek assistance from. Spoke to him earlier, he went to his bank for a loan which I am assuming they will approve since he is working full time. He showed me One of his credit card company letter. The account is considered a bad debt now. The account is closed. I'm guessing he is stuck with that on record for 5 years?
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During that time, will it affect his future purchasing a home? If he is approve of the loan, will that help build his credit after paying it off? What happened after his account was closed and how does it affect him? I do have money, but I feel bad not lending it to him. He did pay me back before. But this time it's a bit bigger of an amount.
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don't lend him the money. you might as well just save yourself the headache.

as for the account being closed, does that mean it is sent to collections or is he still paying the CC company? if its sent to collections, its another ball game. you still have to pay, but you can cut a deal with the agency. but i am sure that route will heavily damage whatever his credit standings are right now.

if this will affect his future purchasing a home, it depends how far into the future. if its immediate, definitely. if its long enough for him to build his credit back, it will be easier for him to apply and obtain a mortgage.

when he has his stuff under control and managed, i highly suggest he gets a super low limit credit card. use it for gas once a month, and then don't touch the card until it is paid off. that way, he can build his credit back.

Banks won't give people loans if they just started a new job recently. They would want to confirm that he'll have steady income before even considering a loan. However, depending how is credit history is now it could affect his ability to get a loan.

Banks do offer consultation loans, but it only if the customer's loans are already with that bank. If the bank doesn't have a vested interest in your loans then don't bother.

Your friend should just make monthly payments to his loan and set up a couple accounts so he can manage his finances. Make sure he puts away enough money each paycheque to pay his debts and whatever other bills he has and an account for spending. That way he can only spend whatever money he has in that account and nothing more.

It's not MY argument, it's arguments made by a lot of people who do this shit for a living.

And if he had more IQ than a potato (which I'm assuming is your way of expressing he had financial knowledge) then he wouldn't have put himself in this situation, so your argument is moot.

So MY argument, is that the difference in money between such interest rates are not that high - it's a few hundred a year at the most, when you're dealing with 10K in debt (ie. insignificant), so knowing, and seeing, that you're making progress IS actually important.

Since he's racked up debt, I assume he's not financially knowledgeable, and for people like that, their EQ will play just as big a role as their IQ when making decisions.

To put it in terms that maybe you can understand, it's like fighting two bosses at the same time in a video game. One is stronger, but will give you a better payout, the other, weaker but not as much. While it makes more sense to go after the one with the greater benefits (less interest paid in case you got lost), most people would choose to go after the weaker one first, so you have less of them to deal with.

ygpm