50k in CC debt =(

[lvscor]

I left the corporate world as an IT Director back in 2006 to invest full time into my own IT Consulting and Web Services company. I had been doing it part time since 2001 and had pulled together a solid client base. Things have gone pretty well and I have grown an average of 23% each year, but the I have incurred a decent amount of credit card debt that I used to supplement my income during the growing time. I have since then gotten married and we have pooled our funds to pay off the debt as soon as possible. We both make enough to pay our current bills and are throwing about $1400 a month at the credit card bills, but unfortunately with an average interest rate of 14%, it makes it a bit tougher to pay it off. Especially when emergencies come up, such as medical or car problems. One that note, my car has been paid off since 2003 (I completely paid it off in 18 months) and my wife's car is fully owned as well. We are homeowners, but the house purchased in 2004 and unfortunately then do not have enough equity to get consolidation loan with that equity.

I have a solid history of making payments on time and I would love to pay this debt off as soon as possible so that I can start putting money into savings and retirement again, plus be financially stable enough to start planning a family. Unfortunately my debt to income is so high that i cant seem to qualify for a consolidation loan even though my credit score is a 721. My wife and I have a combined $40k in our 401k's, but at our age of 29, it seems there would just to many penalties, etc, for withdrawing the money that it doesnt seem like its an option. We have a budget in place and cut every extra thing we could off our monthly expenses.

Any advice on what I could do would be sincerely appreciated as the only thing I feel i can do now is just try to make more money to pay off more debt. =/

[Xin Lu]

If the credit cards are charging high rates I would suggesting using Lending Club or Prosper to consolidate your credit card debt. If you have a good credit history you may be able to get better rates on these sites. If your debt to income is high then Prosper would be the better place to get your loan because Lending Club only allows debt to income ratio of 20% or so. I think you should definitely leave your 401k alone.

Another thing you can do is to find some 0% or low APR credit card offers and transfer the balance. Then whatever you pay would go towards principal.

[lvscor]

Thats the problem that i mentioned earlier, my debt to income is way way to high for any of those solutions. Its around 40 to 50%. Prosper used to be pretty good back before they turned into more of a bank, i havent tried them for probably 18 months though. Just tried lending club a couple days ago and got denied because of my DTI being so high. Obviously im not going to be able to get a new credit card for the same issue. =(

[hermione]

I don't have any experience with cc debt so this is just a suggestion for something to try.

If you have been with your current bank for a while and have a good relationship/account history with it - a credit union would probably be even better - maybe you can talk to someone there about a personal loan? A bank that knows you might be more willing to give you a chance than the above mentioned companies.

I belong to a credit union and it has good, low-interest loans for its members. Even if you aren't currently with a credit union, it might be worth it to look into opening an account and seeing what options they can offer you.

[Paul Van Lierop]

Honestly the best way to dig yourself out is to do exactly what you are doing. There aren't any shortcuts, and taking on loans to move credit card debt sometimes masks the problem. Not saying that's what you're doing at all, but for me that was one of my mistakes. I lumped about $40,000 in credit card debt into a home equity line without actually changing my behavior. The most powerful way to dig yourself out is to budget, reduce costs, and bring up your income whether by a new job or an additional job. I would also highly recommend that you snowball that debt I've written a fair amount on this topic and will continue to over at Fiscalgeek.com. If you would like to talk more you can find my contact info over there and shoot me an email I'd love to help as a fellow debt buster.

[moneymatters]

I'd have to agree with Paul. There are no shortcuts - you don't usually get into this much debt overnight, and it's usually going to take a while to get back out. Just take it one debt at a time, and use a program like the debt snowball in Dave Ramsey's 7 Baby Steps to work your way out of debt. Set up a budget, cut spending, and if you can find a way to create new income.

Good luck!

[optwizard]

I was in the same situation I had 50K in debt and went through a debt consolidation / Credit counseling services and within 4 yrs I was out of debt. All my credit cards were paid off.

This might be an option that you may be interested in. Any questions feel free to contact me as well.

[TheDebtHawk.com]

Paul and MoneyMatters hit the nail on the head. Just keep doing what you are doing, but see if you can cut expenses even more so that you can pay more than $1400 a month.

Taking out debt to pay off debt is rarely wise. If you can get a consolidation loan with a lower interest rate great, but don't stress over not being able to. Just pay off that debt.

I never recommend borrowing money from your 401(k) to pay off debt. This is not paying off debt. You are just robbing Peter to pay Paul. Getting out of debt is tough, but through disciplined personal finance you will pay this off.

One thing to look forward to is being able to pay 23% more next year (the amount your business is growing per year). Also, don't overlook getting a second job. Find something fun that is more social than work. It will earn you more and keep you busy so you are not spending money.

-TheDebtHawk.com

[FinanciallySMART]

Since you are not entitled to debt consolidation I would suggest that you continue to do what you are doing. Sticking to the budget is first and foremost. You can also see if there are any where away from your company that you can also earn from. There are MLM's that you can be associate with as an affiliate. Discuss it with your wife every cents add up.

[myridann]

I understand it is good to pay debts and/or declare bankruptcy. It's good to "start over." I don't want to start over. I'm 73 years old, and I can't declare bankruptcy. I have only Social Security money in my checking account. Can creditors take money from my safe deposit box?