$20,000 in credit card debt!!?! :|

[optimistic]

I didn't even know that number could exist! How irresponsible is that!?. Anyone ever heard of anything like this?

The people in question just decided to refinance their house (but I don't even know how long they owed that money -letting the interest accumulate) and on top of that they plan to remodel their home for $30k and take another $30k to put down on a condo (an investment scheme they thought up instead of paying rent).

The loan 175k 6.8% fixed 30 year
Remaining on house 70k
Credit card bills 20k
Down on condo 30k
Pay off cars 25k (cars are already on 5.6% fixed 5 year)
Remodel house 30k

Gosh, what do you do in a situation like this?

Their age: 50 (with two kids in college)
Income: ~$100k

I say:
They shouldn't have bought the cars. (too late)
Don't buy a condo just rent.
Don't remodel anymore.
Take the lowest possible amount loan, with 10-15 years to pay. NOT 30! (My god, won't someone think of the interest!!)

They say:
Cars are old.
Condo is a good investment instead of throwing away on rent.
House is ugly.
Monthly payment is much cheaper this way (6.8% 30year).

I need your opinion on this:disgust:

 

[GasX]

Without any knowledge of the rest of their financial situation it is impossible to tell...

 

[optimistic]

Ahh, just looking for some general advice. But what other financial information do you need??

 

[Lucky]

20K in credit card debt isnt even unusual. I've got ~8k and am 22. Before my father recovered from a near-bankruptcy, I think he had upwards of 50K in cc debt.

 

[GasX]

income
local property values
recent local changes in real estate prices, etc

 

[optimistic]

Originally posted by: Lucky
20K in credit card debt isnt even unusual. I've got ~8k and am 22. Before my father recovered from a near-bankruptcy, I think he had upwards of 50K in cc debt.

Thanks. I was having serious trouble swallowing this number, I had no idea if this number is 1) horrifyingly outrageous or 2) more common than you think.

But as you say, I guess it's more common that you think. Or do you guys still think this is horrifyingly outrageous?

 

[aphex]

I work in Debt Consolidation...

Heh, $20,000 is pretty much pocket change compared to some of the applications we get... Just the other day we had a guy with over $475,000 in debt.....

 

[etalns]

About 7 or 8 years ago now, my parents had a debt of over $100k in credit cards, although as a family we were earning over 200k/year and were in pretty good shape. They did it becuase they'd invest what they made, and what they made off their investments was far larger then the interest they paid on their credit cards.

So, you need all financial information before you make an assumption.

 

[sharkeeper]

Owning is always better than renting since you qualify for a tax break.

Too bad other interest is no longer tax deductible! At one time, all interest was tax deductible!

Cheers!

 

[GasX]

20K is a serious problem and either points to gross irresponsibility or financial problems like extended unemployment...

actually a home ewquity loan can be a great way to 1. pay it down quickly or 2. get yourself in worse debt

 

[optimistic]

Originally posted by: Mwilding
20K is a serious problem and either points to gross irresponsibility or financial problems like extended unemployment...

actually a home ewquity loan can be a great way to 1. pay it down quickly or 2. get yourself in worse debt

My thoughts exactly.

 

[Lucky]

Originally posted by: optimistic

Originally posted by: Lucky
20K in credit card debt isnt even unusual. I've got ~8k and am 22. Before my father recovered from a near-bankruptcy, I think he had upwards of 50K in cc debt.

Thanks. I was having serious trouble swallowing this number, I had no idea if this number is 1) horrifyingly outrageous or 2) more common than you think.

But as you say, I guess it's more common that you think. Or do you guys still think this is horrifyingly outrageous?

It still depends on a number of things that you havent provided.

If they make 200K a year, the numbers wouldnt be a problem. at 30K a year, I'd be worried. Putting 30K into the house could be a wise decision later on if property values around them are increasing and the money is spent properly (i.e., new kitchen, roof instead of landscaping).

As for the condo, thats impossible to say without some sort of information of the market its in and what kind of "investment" it is (rental?) and how they expect to make some money from it.

New cars can also be a wise decision in the long term if the older cars are costing $$$ in repair bills.

And certainly paying 6.8% on 20K of CC debt is far better than paying whatever the CC company is charging, probably 12-20%.

You really need to give more info, and who are these people and what is your relation to them?

 

[Spudd]

Sucks to be you.

 

[optimistic]

<<It still depends on a number of things that you havent provided. If they make 200K a year, the numbers wouldnt be a problem. at 30K a year, I'd be worried. Putting 30K into the house could be a wise decision later on if property values around them are increasing and the money is spent properly (i.e., new kitchen, roof instead of landscaping). >>
100k a year

<<As for the condo, thats impossible to say without some sort of information of the market its in>>
I know this is kinda vague but: It's in Riverside, CA close to the University.

<<and what kind of "investment" it is (rental?) and how they expect to make some money from it. >>
They plan to buy (through 30k down and monthly payements of 700. Condo total is 100k), so they can rent out (to college students).

<<And certainly paying 6.8% on 20K of CC debt is far better than paying whatever the CC company is charging, probably 12-20%.>>
Of course

<<You really need to give more info, and who are these people and what is your relation to them?>>
Close relation

 

[optimistic]

Originally posted by: Spudd
Sucks to be you.

Oh the 20k in debt? Yeah it does suck.

 

[charrison]

Originally posted by: Mwilding
20K is a serious problem and either points to gross irresponsibility or financial problems like extended unemployment...

actually a home ewquity loan can be a great way to 1. pay it down quickly or 2. get yourself in worse debt

Somewhat of a double edge sword.

One edge will let you save money on interest.

The other edge will make you lose the house if you default on the loan to pay off credit cards.

 

[JellyBaby]

Just the other day we had a guy with over $475,000 in debt.....

Were you able to roll that into low, affordable monthly payments that got them back on track for success?

 

[Vic]

I'm a mortgage loan officer and I do refi's like that all the time, except that I would recommend against any of my clients including a low-interest short-term debt like those car loans inside a long-term mortgage. That's a terrible strategy. Plus, at the age of 50, they should take out a 15 or a 20 year mortgage, not a 30. Who is this? Your parents? Sounds to me like they're getting suckered by one of those cheezy "make your payments as low as possible by re-amortizing your debt until after you die" loan officers. Very poor financial planning...

As for the $20k in CC debt, that's pocket change for a lot of people. I hate CC debt myself and never carry any, but I've seen customers with more than $300k in credit card debt. Some of them are self-employed or investors and just use CC's as short-term debt to finance their business investments, but many of them are people who just live way, way, way beyond their means.

 

[kranky]

My gut feeling is these people need to get their financial house in order. I bet in under 5 years they are buying different cars and they'll be paying for new ones at the same time they are still paying for the old ones (since it's rolled into their mortgage).

The monthly payment may be cheaper (in fact, it's about $1141/month) than the individual separate payments, but that's about $14K a year that they will still be paying for years after they are retired when their income is likely to be less - possibly much less - than $100K/year. (Of course, they may have to sell the house and move into the condo at retirement, which would probably help financially.)

I think $20K in credit card debt is not common at that income level. Owing 20% of your yearly income on credit cards seems excessive to me. If their income was $200K, that wouldn't be as bad.

 

[aphex]

Originally posted by: JellyBaby

Just the other day we had a guy with over $475,000 in debt.....

Were you able to roll that into low, affordable monthly payments that got them back on track for success?

Dunno, i can find out though...

 

[RossMAN]

cc debt = bad

Trust me.

 

[Kadarin]

Originally posted by: RossMAN
cc debt = bad

Trust me.

Hehe.. I was wondering when you would show up in this thread

 

[RossMAN]

Originally posted by: Astaroth33

Originally posted by: RossMAN
cc debt = bad

Trust me.

Hehe.. I was wondering when you would show up in this thread

I was out for most of today at the car dealership, went and saw a movie then went out for dinner ... just got back.

This thread was summoning me for some strange odd reason

 

[PsychoAndy]

the AT scale of debt for how much you owe:

A:$1-$1000
B: $1000-$5000
C: $5000-$10000
D: I'm RossMAN

 

[bonk102]

yeah, i've been hovering at about $3000 cc debt since i was 18, and i'm 22 now, so i dont think $20,000 for a family is that much