Share your consumer debt success stories!

[pingem]

This is the first year in my life I've been able to pay off all of my Christmas purchases in December.

It has been a long, strange journey since college. 14 credit cards, 6 years, 2 boyfriends, 4 jobs, and 2 brushes with bankruptcy later, I'm back baby!

I made a lot of changes. No more eating out, obviously. No cable, no toys, no latest cell phones. Making birthday presents instead of buying them. Doing overtime every single time it is offered and then doing tutoring on weekends.

Sorry for this rambling post. I'm just so excited!

Tessa - a loyal Wisebread reader!

[Will]

Congratulations Tessa.

Thanks for sharing your story with us! I love hearing success stories where people's hard work and sacrifice eventually pays off. It is as thrilling as any Rocky movie.

Go Tessa!

[Linsey Knerl]

Wow! You should be proud! I also have a super-fabulous debt success story.

I was married once as a youngster (19 year old), and let's just say it wasn't my most shining moment. The brief marriage and divorce left me with a lovely daughter and $30,000 in credit card debt (all in my name) but no material items to show for it.

When I met my now hubby, he encouraged me to enroll in a debt consolidation program from our church association. He was also in the same program with $25,000 in debt from a failed business. Together we paid off over $55,000 in less than five years! With many of our cards at an original interest rate of over 24 percent, the program was able to reduce to 0 percent in some instances. Every time we got a large income tax refund, we would put it directly towards out debt, enabling us to repay the entire debt years earlier than anticipated.

We are now debt-free, with the exception of school loans (which we are hoping to have forgiven as part of a program for teaching in low-income school districts.) We live in a family-owned home, so no mortgage payments at this time, either.

I am so glad we stuck to it. Our monthly income requirements are quite low, and we have freedom in knowing that we are no longer working to pay off past mistakes! I would encourage anyone to participate in a similar program if they are struggling with debt repayment.

[kav122]

Congrats Tessa!

I never had a crazy credit card debt, but I started my quest to be debt free with $6357 in car debt, $21000 in school debt, and we bought a house last year with a $217,500 mortgage. I also want to mention that even though we could have gotten a 30 or 15 year fixed, we didn't insist on it, and got an 80/20, with the 80% a 7/1 arm at 7.5% and the 20% a 15 year balloon at 11.625%. Big mistake, I know, but I can't take it back now.
Since last August, we have paid off the car, paid the student loans down to $19,927, and the house down to $210,162. Along with some store cards that we have since gotten rid of, we have paid about $21,000 off in 18 months, and in the meantime, we had a kid and I am in school.

Our goal is to get the 2nd mortgage paid off in the next couple of years, then because we will have 20% of the house paid for, we would like to refinance before we reach the 7-year mark, and if we can't we will just pound away at it until it is gone. After we get that gone, then we will get rid of the student loan (it is in deferrment now, but we make $160 payments--when it is not in deferrment, it is at 3.5% interest).

If anyone has any suggestions, I would appreciate it. Right now we are just not spending and getting rid of that second mortgage.

[Greg]

Congratulations Tessa! That's super exciting. I remember how happy I was when I paid off my last credit card. It was a long tough road... which makes the end so much sweeter!

My get-out-of-debt story is not as dramatic as the others here, but I'm pretty proud of it nonetheless.

The key for me was taking baby steps, and not making unreasonable demands on myself. Over 4 or 5 years, I was able to pay down a 5 figure credit card balance that had crept up on me at college. I tried to focus on small tangible goals instead of continuing to let the enormity of the debt paralyze me.

Here are the tiny incremental baby steps I took to become credit card debt free:

• No more late payments -- before getting on the get-out-of-debt road, I routinely ignored my credit card statements. Partly out of fear, partly out of poverty. Of course I knew I would accrue a late fee which was only hurting myself. That self-defeating behavior was a sign of how bad my personal finances were. So the very first step I took was vowing there would no more late payments. I setup online bill pay so I could pay electronically immediately instead of having to find my checkbook. Those first few months, I could only pay the minimum... but no more late payments! Baby steps....
• No new debt -- I also decided to not put more debt on my credit cards without having the cash to pay off the new balance at the end of the month. At least the principle owed wasn't going up, though I was still getting charged an interest on my previous balance. This move required discipline at the cash register. Instead of using plastic, I started using cash and checks. If I didn't have enough cash to cover the purchase, it stays on the shelf. It's hard to remember "spend less than you earn" when the only cost of buying crap was swiping a plastic card. The "cash-only" thinking made me really look at the value (or lack of value) of the crap I was buying!
• Pay myself first -- Once I could afford it and still cover my fixed costs (eg., rent, insurance) I started allocating $50 out of my bi-weekly paycheck to pay down the credit card. It became a fixed expense, a line item in my back-of-the-napkin budget.
• Slow and steady wins the race -- I slowly bumped up the income allocated to pay off credit card debt. After a year at $50, I was able to bump that up to $100 every paycheck. Then $200. At this stage of the process, I became obsessed with the total balance I owed. When that number started going down (ie., my payments were actually more than the interest accrued), that's when I really bought into the goal. I could see the end in sight! For the next 3 years or so, I slowly chipped away at that balance. One of my happiest memories is of the day my credit card statement came with a $0 owed.

It was like a heavy yoke was lifted off my shoulders that day I got the zero balance statement. It's something everyone should get to experience at least once in their lives.

Good luck out there!

[Greg]

Originally Posted by kav122

we have paid about $21,000 off in 18 months, and in the meantime, we had a kid and I am in school.

Wow! That's pretty impressive. Could you share some of your secrets? I mean, other than...

Right now we are just not spending...

I think I missed that lesson at school.

[kav122]

Originally Posted by Greg

Wow! That's pretty impressive. Could you share some of your secrets? I mean, other than...



I think I missed that lesson at school.

Haha! Yeah, that's about the only secret I know. I write out how much we take in, subtract all the bills and then what is left is what we have to spend. In the beginning, it wasn't much, but now we have more left over, and we try to cut as many things out as we can. We know that the more we don't spend the more we can add onto the house. I think our key was having a specific and attainable goal. At first it was getting the car paid off. Now it is getting the second mortgage paid off. If you just think "I have XX debt", then it seems so useless to save money here and there. But when you say, If I don't buy these clothes, then I have $50 more dollars to add to the payment. Then I put it away!!! Literally. At the beginning of the pay period I take out all of the money out of the bank that won't be used on bills. Then it hurts more when I spend it. If I have money left at the end of the pay period, then that goes back into the bank and (to the dollar) added to the payment. That way I see: "wow, we didn't spend a lot, and I got to add XX to the house payment extra". I don't know, I have to SEE it, and that is what makes me work harder for it.

[chankya]

That is a good thing tessa as the debt just get into the mind of the person, people just take the loans and from the bankk and other finance companies and unable to pay back that leads to the threats and threatening calls from the debt collectors, and people search the debt consolidators. I know this as ia m working at the place where the person came with the problems of the debt.

[pingem]

You guys are like debt-fighting superheroes.

the program was able to reduce to 0 percent in some instances

Is that because the church financed some of it or because the church negotiated your rates on your behalf? Either way, you are blessed to have such a wonderful support group.

I think our key was having a specific and attainable goal.

That's my "secret" as well. Like Greg said, you have to take baby steps. Those steps are a lot easier to take when there is a tiny carrot dangling in front of you. Every little goal I achieve I feel like a slightly better person.

[Julie Rains]

Originally Posted by kav122

Congrats Tessa!

I never had a crazy credit card debt, but I started my quest to be debt free with $6357 in car debt, $21000 in school debt, and we bought a house last year with a $217,500 mortgage. I also want to mention that even though we could have gotten a 30 or 15 year fixed, we didn't insist on it, and got an 80/20, with the 80% a 7/1 arm at 7.5% and the 20% a 15 year balloon at 11.625%. Big mistake, I know, but I can't take it back now.
Since last August, we have paid off the car, paid the student loans down to $19,927, and the house down to $210,162. Along with some store cards that we have since gotten rid of, we have paid about $21,000 off in 18 months, and in the meantime, we had a kid and I am in school.

Our goal is to get the 2nd mortgage paid off in the next couple of years, then because we will have 20% of the house paid for, we would like to refinance before we reach the 7-year mark, and if we can't we will just pound away at it until it is gone. After we get that gone, then we will get rid of the student loan (it is in deferrment now, but we make $160 payments--when it is not in deferrment, it is at 3.5% interest).

If anyone has any suggestions, I would appreciate it. Right now we are just not spending and getting rid of that second mortgage.

I have a question, which may lead to an idea. Why do you need to wait to get the traditional fixed rate mortgage? I know you have to pay PMI if you don't have 20% down but that's not the end of the world (though some finance publications make it sound like it is), and there is the possibility that your house has gone up some in value, again despite the press warnings. You may have already calculated the numbers and found that you are better off waiting.

The second mortgage is bothersome but it may be better than paying the PMI; but what I am wondering about is the 7.5% adjustable rate. ARMs were supposed to be created so that you could enjoy a below-market rate with the risk of having the rate rise when you refinance; but the rate seems high and yet the risk of higher rates is still there. So I am wondering if you could get a lower fixed rate mortgage, pay the PMI, and see if that lowers your payment. Like I said you may have already done that and the calculations just wouldn't work.

Also, you might be able to get a home equity loan at a lower rate to pay off the second mortgage. I hate to advocate more debt but if you can refinance at a lower rate it might work for you, especially since it sounds as if you are very disciplined.