Anybody been in debt and got out?

posts from hell said:
yup - I actually watched this guy with the score of 850 walk into a bank and ask for a $100k credit card, unsecured. No questions asked he got it.

He's in my family.
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Have you seen "Inside Job"?

Banks were pretty liberal about giving credit.
 
posts from hell said:
Yup.

And its actually better for your credit score to have 30% debt to credit ratio.
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Yep, to prove you have a solid record of repaying loans. Until you've paid your bills, you're considered in debt. When you pay the bills, you're considered debt free so in actuality, no one is really 100% debt free as long as they continue to be billed for services used. From the time they received the bill to the time they pay the bill, that's their debt.

so a history of paying your debts (bills) on time works well in your favour when you ask the bank for a mortgage or a business loan. They would consider you lower risk and give you more favourable interest rates.
 
DeafCaroline said:
And all it takes to improve your credit rating is to either pay the debt or have it dismissed. It's not like my credit gets ruined because of some debt collection agents.

Credit rating is based on your performance financially. It's dependent on statistics and facts.

Credit rating departments know that by default, when one is in arrears, creditors will demand payment.

So, you credit rating is not dependent on what creditors put out about you, they observe how you spend your money and what debts you've incurred.
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in here - if you don't pay up, your point drops. simple as that.
 
Jiro said:
so that means I was right in the first place. Your credit rating will take a hit while you have a legal battle with creditors.
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not really.

the "legal battle" is 30 days long. And if they can't prove it. the record is swiped from your report, which means your rating goes up.
 
Jiro said:
so that means I was right in the first place. Your credit rating will take a hit while you have a legal battle with creditors.
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well yes, as long as the debt is not paid, your credit rating is affected and the longer you don't pay it, the worse the rating gets. I thought you were asking if a legal battle with collection agents would affect credit rating.

Legal battles don't. Your financial records do.
 
Supposedly you buy something like new HDTV on 18 or 24 months based no payment and no interest, the best way is to pay it off before the interest rate kicks in. The interest rate is usually high as much as 30 percent.

A few months ago, I bought a new HDTV and furniture based on 18 months and 15 months based payment plan with no interest rate respectively. I have already started paying them $75 each on monthly basis until I get a bonus check in December. I will use it to pay them off way BEFORE the combination of 60 percent interest rate kick in.
 
Royale said:
Supposedly you buy something like new HDTV on 18 or 24 months based no payment and no interest, the best way is to pay it off before the interest rate kicks in. The interest rate is usually high as much as 30 percent.

A few months ago, I bought a new HDTV and furniture based on 18 months and 15 months based payment plan with no interest rate respectively. I have already started paying them $75 each on monthly basis until I get a bonus check in December. I will use it to pay them off way BEFORE the combination of 60 percent interest rate kick in.
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I've heard they set it up so the interest rates kick in 18 months (or however many months) to the _day_ after a purchase, but the payment schedule is set up so the last payment comes after that date so it's not quite paid off and then the interest is due. yikes, tricky fine-print!
 
I forgot to mention that the best way to pay down debts faster is to pay off small debts before moving on to larger credits. That is what I have been doing in dealing with my debt.
 
Royale said:
I forgot to mention that the best way to pay down debts faster is to pay off small debts before moving on to larger credits. That is what I have been doing in dealing with my debt.
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really? why is that better? bigger debts entail bigger repayments and the more you put off paying them, the more interest you collect on the balance and the more debt you've accumulated.
 
DeafCaroline said:
really? why is that better? bigger debts entail bigger repayments and the more you put off paying them, the more interest you collect on the balance and the more debt you've accumulated.
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it's bit tricky but depending on your financial situation... that way - you get to have more money in your pocket and also to give you an ability to make more money. When the time comes to pay off big debt, you're in good shape to do so.

Paying off bigger debt first will make you live on paycheck-to-paycheck. It's unproductive and depressing. What you can do is balance transfer your big debt to CC with 0% interest rate for say.... 12 months or so. You'll bite balance transfer fee but it's better than paying monthly interest rate accrued from big debt.
 
Jiro said:
it's bit tricky but depending on your financial situation... that way - you get to have more money in your pocket and also to give you an ability to make more money. When the time comes to pay off big debt, you're in good shape to do so.

Paying off bigger debt first will make you live on paycheck-to-paycheck. It's unproductive and depressing. What you can do is balance transfer your big debt to CC with 0% interest rate for say.... 12 months or so. You'll bite balance transfer fee but it's better than paying monthly interest rate accrued from big debt.
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I actually did this recently. Took my biggest debt and transferred it to a new CC with Zero interest for 12 month, and Zero transfer fee. :D this is my last debt and I will be debt free once again! I have divided my debt by 11 and am paying it off easily. Whew.

Going into debt is easy, getting out of it... not so easy.
 
Jiro said:
it's bit tricky but depending on your financial situation... that way - you get to have more money in your pocket and also to give you an ability to make more money. When the time comes to pay off big debt, you're in good shape to do so.

Paying off bigger debt first will make you live on paycheck-to-paycheck. It's unproductive and depressing. What you can do is balance transfer your big debt to CC with 0% interest rate for say.... 12 months or so. You'll bite balance transfer fee but it's better than paying monthly interest rate accrued from big debt.
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There are no credit cards that offer 0% interest rates for 12 months. Six months, yes, 12 months, no. It definitely helps to transfer a debt to a zero interest rate card but if you're not really making significant payments then the grace period ends, you're slammed with a high interest.

0% interest cards look good but how high is their interest when the grace period ends? you can be in a bigger mess than before if you didn't take advantage of the 0% period to make big payments without the added cost of interest. Secondly, if you don't make your payments or you are making late payments, that 0% interest rate gets cancelled.

The thing is, you think you have more money in your pocket if you dont make payments to your bigger debts but in actuality that's untrue - the banks want you to believe that but it's far from the truth.

Say you have a debt of $5000 and your annual interest rate is 12%

Your minimum payment is calculated at 2.5% (again, i'm just throwing in variables here) which means your first minimum payment would be $125.

At this rate, it would take you 219 months (18 and a half years)to pay off the debt and you would have paid $3, 180.55 in interest fees alone.

So, in total, you actually paid the bank $8,180.55 for a $5000 debt. That is not money in your pocket.


Now, most 0% interest cards I've heard of - they have high interest rates after the six month grace period ended.

So, let's say you decide to transfer your $5,000 debt onto a zero rate credit card and decided that you will pay the minimum for six months reducing your debt down to $4, 250.

Sounds great! you paid off $750 and $0 in interest.

Grace period ends. You're now dealing with 18% interest rate.

Let's say that because you believe it's better to pay off smaller debts first and deal with the bigger ones when you have money in your pocket, you opt for the minimum payments.

$4,250 + 2.5% minimum payments per month + 18% annual interest

It would take you 297 months (almost 25 years) to pay off debt in full and you would have paid back the bank in addition to your $4,250 dollars, $5,990.44 in interest.

This means you paid back the bank $10, 240.44 for a $4,250 loan.

So, if you cannot afford to pay off your balance in full or in part before the six month 0% interest grace period ends, you're back to the same old problem.

Assuming you were making only the minimum payments per month:

A $5000 debt on a credit card with 12% annual interest rate would take you 18.5 years to pay off and cost you $3,180.55 in interest fees.

$4,250 debt on a credit card that has 18% annual interest rate would take you nearly 25 years to pay off and cost you $5,990.44 in interest fees.

Honestly, the 0% interest card is a very very good idea if you intend to take advantage of it by paying off the bigger debt as much as possible rather than prioritzing paying back smaller debts first.
 
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