[janak108]

Hi, I currently have five credit cards with approximately $25,00 in open debt. I also have a mortgage account and a few other open debt accounts.
Currently my credit rating is 689. Even though I am not presently in a bankruptcy situation, I am feeling I need to do something creative fairly soon before I get into an extremely challenged condition and I have to do something extreme.
I work in a retail jewelry store, and in general, I have a pretty good earning. However, these past six months sales have been considerably lower than in previous years and our overall earnings have been less.
As a result, I have had to go into my 401K account a few times to pull out enough funds to help pick up the slack from my lower income.
Even though I hate to withdraw early from my retirement account; this little cushion has saved me from taking more extreme measures.
By late November and December, our sales increase significantly and therefore our earnings go up considerably. However, I still am going to need to do something soon to help bring greater balance into my financial affairs.
So, I am looking for help and creative solutions.
I have contacted my mortgage company and have also talked with an independent rep for Primeamerica. Both have indicated that I could qualify for some type of a consolidation loan to help. But when I have looked at the interest rates it appears that I would actually, over the long haul, be adding more to my long term debt level than I really desire.
My next step is to talk with the Consumer Credit Counselling Service.
Does anyone have any other ideas?
Are there any tips for negotiating with credit card companies to lower interest rates?
Thanks for any idea or help.
Janak

[Duane in Japan]

I didn't read the whole thing but my sister went with a non profit organization to consolidate all her debt and she ended up paying about half the debt, they will work with you ,no doubt.

[ScottGem]

Withdrawing from your 401K was a BIG mistake. I'm assuming this was done during the current year so the consequences haven't hit you yet. When you file your return for 2007, you will have to pay a 10% penalty on that money as well as taxes on your income. Its possible the 20% withheld will cover that but it may not.

I would be more inclinded to look into a home equity line to consolidate your debts. But that will not help unless you get more discliplined in your spending. If you are racking up debt where your regular income can't cover it, then you need to get a handle on that and change your habits. Otherwise a consolidation won't help.

[jillianleab]

Some debt consolidation places are scams; you make monthly payments to them while they let your accounts fall past due and just before they go into collections, they call the creditor and say, "Hey! Let's make a deal!" This results in your credit being ruined, and at your current score, you don't want to do that. Plus, there's no reason you can't contact the credit card companies yourself and ask for a lower rate, a deferred payment, etc. If you have been a good customer and especially if you threaten to close the account, they will usually work with you. In the mean time, check what your interest rates on the cards are, and see if you can find a card which will let you do a balance transfer for a lower rate. This can lower your monthly payments significantly! As a tip, when you call the credit card companies, be assertive without being confrontational. Ask if there is anything they can do to lower your interest rate, because you have been a good customer and would like to remain with them. If the first person denies you, ask for a supervisor. If they deny you, ask for another one. If you continue to get denied, tell them you will be closing the account and seeking a new creditor who will be willing to offer you a more competitive rate.

Some people advise people with credit card debt to pay their card with the lowest balance off first, that way you get rid of one and feel motivated to work on the rest. Personally, I would pay off the card with the highest interest rate first. Whatever you do, pay the minimum on all cards but one (this only works if you stop using them), and put as much money as possible to the one with the highest rate (or lowest balance if you go that route). When it's paid off, put all the money you poured into that card each month into the next card down the line. Keep doing the same thing until they are all paid off. Then you can take all the money you've been using to pay off your debt (or a big chunk of it) and start putting it into a savings account, your 401(k), or other investments. That way you have a cushion for the future and won't need to rely on credit cards to get you through tough times.

I'll be honest, I don't know much about the consolidation loan from the mortgage companies you mention. But, if in the long run you pay more in interest, it's probably best to avoid that option!

Good luck!