Boyfriend has 10+ credit cards & 60k in CC debt (consolidation loan?)

[LilMissMinimalist]

Hola Mustachians —

I've spent the past year getting my finances to a place I'm proud of. Now that my student loan is gone and my credit score is around 715, I'm tackling saving better + paying off my last CC. And, I want to help my boyfriend find a place of financial freedom.

Boyfriend, however, needs our help. Through some years of a failed business, he has has racked up about 60k in CC debt and his credit score is dropping every month as a result (around 675 currently). It's not the amount but the distribution that is the biggest challenge. It's spread across 10 cards, about half of which have 25%+ interest rates. He can't get ahead with this many many cards with high balances in play. He has already attempted to renegotiate interest rates + balance transfers which has been successful on a few of the cards but it's not a solution for long-term payoff success.

He seems like a prime candidate for a consolidation loan. Here are our questions:

1) Will applying for several at once (hoping one is approved) hurt anything (credit score, etc.)?
2) He very recently took out an auto loan as he needed a car for a new job. Will this affect his ability to be approved for a consolidation loan?
3) He was denied for SoFi but asked for the full amount 60k. Is there a debt percentage he should be asking for vs. the full amount to better his chances of approval?

He does not have a mortgage and getting a loan through his bank is not an option (as he already has two business loans). Any help is greatly appreciated! He is very motivated for change and I feel like we're so close to finding a solution, if we can just get the moving parts to click into place.

[Monkey Uncle]

I don't have any first-hand experience with consolidation loans, so I probably can't be of much help, but I do have a couple of thoughts to share.  Hopefully someone with more knowledge of debt consolidation will chime in also.

If a consolidation loan reduces the average interest rate that he's paying, and it doesn't come with high closing costs, then, yes, it sounds like a good idea to me.

1)  My understanding is that any hard credit pull will affect one's credit score, so it's possible that applying for several at once might ding his score a bit.  But given that he is in the midst of a full-scale, hair-on-fire debt emergency, I think that would be a small price to pay for a significant reduction in the interest rate.

2) Maybe.  Lenders generally look at a person's total debt burden when considering a loan application.  Again, I have no first-hand experience with consolidation loans vs. other types of loans, but given that one company has already denied him, it sounds like his total debt load is indeed working against him.

3) Can't help with this one.

Your OP didn't mention any steps that your boyfriend is taking to cut spending and apply the savings toward debt.  Can we presume that he has already tracked his spending, found and implemented every possible spending cut, and is already systematically applying the savings to the highest interest rate debt first?  If not, then those steps need to be taken right away.

[six-car-habit]

 I can't add much more info on a consolidation loan, except my opinion that if he can secure a c.l. for $15K or more, it should be worth it, regardless of the small credit hit. He shouldn't be applying for other types of loans in the meantime anyhow, and he should hunker down where he is and pay down some balance on these 10 cards [ in case he is thinking of moving, a new landlord may want to see a credit report]

 A suggestion if he has any savings or emergency fund, etc - My credit union and i'm sure others offer a "share secured " loan, where his collateral against the loan would be his actual savings account with them.  Here are the quoted percentages off the credit unions site --

  "Shares Secured Loan Payment Example: Share rate plus 2.00%. Loan amount of $3,000 at 2.25% APR for 60 months has a payment of $53."

   "Certificate Pledged Loan Payment Example: Certificate rate plus 2.00%. Loan amount of $3,000 at 4.05% APR for 60 months has a payment of $56."

   Those accounts providing collateral for the lender continue to accrue interest throughout the loan period.

[use2betrix]

Too bad loan sharking is frowned upon or I would gladly give him a $60k loan for a modest 15% interest rate!

[ixtap]

Has he spoken with a non profit credit counseling agency? They can sometimes negotiate reduced interest rates and other strategies that lower monthly payments and allow you to buy some breathing room to actually get it paid off, rather than digging deeper.

$60k is a HUGE loan, unlikely to get unsecured with that kind of debt outstanding.

[Parizade]

Your OP didn't mention any steps that your boyfriend is taking to cut spending and apply the savings toward debt.  Can we presume that he has already tracked his spending, found and implemented every possible spending cut, and is already systematically applying the savings to the highest interest rate debt first?  If not, then those steps need to be taken right away.

I think this is pretty important. Why isn't HE posting here asking these questions? You are ready and willing to help your boyfriend, and that's nice of you, but what is he doing to help himself? You might want to consider backing off and letting him seek out these answers since you say he is so motivated to change.

[ApacheStache]

Why isn't HE posting here asking these questions?

+1. The only time I've used loan consolidation was with student loans and that was less than $20K about ~15 years ago. Overall, it worked pretty well but I can only imagine the process is slightly different when you have $60K in loans each at or above 25%. As far as your boyfriend's credit score, honestly who cares at this point. He shouldn't even be considering taking out any more loans at this point until he's able to get his debt under control. Once he has that figured out, then he can work to improve his credit score.

[Gail2000]

Can he negotiate a balance transfer to one of the lower cost cc’s?

Can maby paying off the highest interest rates card first and gradually work his way down to attack the dept strategically?

[Prairie Stash]

1) yes - but why worry? his credit score will soon bottom out without any changes.
2) yes. Again, its too late, the damage is done.
3) SoFi denied him for a reason. He's on the brink of bankruptcy, has terrible credit and in the midst of it all bought a car with a loan.

Lets be frank, nothing in your post makes him sound responsible with money.
$60k in CC debt over 10 cards!
2 Business loans of undisclosed amounts
No Assets
If you can't even summarize his NW, something is wrong. If you can't define his debt, why should anyone give him another loan? Look at it from a banks view, right now I'd reject you because of your incomplete information.

If you want to help him, you need to summarize all his debts, not just CC. You can't make excuses or sugar coat. By saying its $60k you skirted the FACT he has more debt, its past the time to be embarassed and into the time to just own it so it can all be dealt with.

I get that you're trying to be helpful, in this case you're killing him with kindness. You need to stop playing nice and attack this with a vengeance. Start with the list of all CC names, interest rates and amounts; add the loans in as well. Make sure you include all his personal loans, student loans and any other debt. I would treat this as a relationship test, I expect he will be 100% honest with the girl he loves. If he isn't you can expect future surprises that you won't like.

We get numerous case studies similar to this, the sucessful ones are transparent and full of details. The fails generally withold information or try to ignore stuff because they're embarassed. I want you to succeed, thats why I didn't hold back. If you want the same, don't hold back either.

[radram]

Is bankruptcy on the table? Either personnel of the business?

Why does he have "business loans" yet 10 cards with 60k in debt, apparently in his name. Was the 60k for his business? Is the person holding up the business?

[haypug16]

I would have to agree with the others on here. He shouldn't be worrying about his credit score at this point. Focus should be on a plan of attack to pay down these credit cards and business loans. I used to have terrible credit and I was able to increase my score to 804 (just checked today) as a side affect of paying down my credit cards.

My suggestion would be to;
1. List out all CCs with balances, interest rates, and min payment amounts (in order of Interest rate, highest to lowest)
2. Take a look at monthly budget, cutting every corner he can, cancelling any and all subscriptions, cable, no dining out, etc.
3. Pay minimums on all credit cards and loans except highest interest rate.
4. On highest interest rate put all extra money towards paying this down as quickly as possible.
5. As the cards start to get paid off cancel them, especially if they have annual fees. I would only leave open the one with the longest history which will help his credit score.

[Proud Foot]

My suggestion would be to;
1. List out all CCs with balances, interest rates, and min payment amounts (in order of Interest rate, highest to lowest)
2. Take a look at monthly budget, cutting every corner he can, cancelling any and all subscriptions, cable, no dining out, etc.
3. Pay minimums on all credit cards and loans except highest interest rate.
4. On highest interest rate put all extra money towards paying this down as quickly as possible.
5. As the cards start to get paid off cancel them, especially if they have annual fees. I would only leave open the one with the longest history which will help his credit score.

Everyone has given you good ideas so far. This advice right here is spot on for getting things paid off and getting him on a good track. I would make a few additional suggestions though.

Item #2. Do this. After making the cuts what does his monthly cash flow look like? Is he barely breaking even after paying the minimums on the debts or does he have several hundred? If if is $100 or less then I would make a few changes to items #3 and #4. In addition to a list ranked by interest rate I would make a separate list ranked by balance. Compare the balances and rates and focus one loan which can be paid off quickly to improve cash flow. This may or may not be the highest interest rate loan. As you get the cards paid off then definitely close them if they have an annual fee or see if the bank will switch the account to a no fee account. Freeze or cut up the cards so you cannot use them but keep open no fee accounts which are paid off. This will help to lower his utilization rate which will help stabilize/raise his credit score which will lead to the opportunity to lower the interest rates on the current cards and potential to access 0%/Low interest rate balance transfer offers from the paid off cards.

[haypug16]

Item #2. Do this. After making the cuts what does his monthly cash flow look like? Is he barely breaking even after paying the minimums on the debts or does he have several hundred? If if is $100 or less then I would make a few changes to items #3 and #4. In addition to a list ranked by interest rate I would make a separate list ranked by balance. Compare the balances and rates and focus one loan which can be paid off quickly to improve cash flow. This may or may not be the highest interest rate loan. As you get the cards paid off then definitely close them if they have an annual fee or see if the bank will switch the account to a no fee account. Freeze or cut up the cards so you cannot use them but keep open no fee accounts which are paid off. This will help to lower his utilization rate which will help stabilize/raise his credit score which will lead to the opportunity to lower the interest rates on the current cards and potential to access 0%/Low interest rate balance transfer offers from the paid off cards.

Excellent suggestion.

[Hargrove]

A diving credit score, and that kind of debt, may tell lenders you're borrowing to keep the lights on today and are going to default anyway tomorrow.

You also said that negotiating rates was not a long-term solution, but that's what you're trying to do with a consolidation loan. That's confusing to me. Negotiated rates are the extent of outside help he's likely to get right now.

A friend of mine bit the bullet on his CC debt and took it seriously. He called the company and said look, I'm either going bankrupt, or we can close this account with an interest rate I can pay you and I'll make it whole. His credit was 600 something. 25% became 9.99% interest rate. Even if he could consolidate, he wouldn't get better than that with low credit. It doesn't matter if you have to write 4 checks or 10 - the balance is the balance.

The difficult conversation here is that it's not about whether someone will lend him more money. It's about whether he will treat his debt as a personal emergency.

[Metalcat]

This is a nightmare and absolutely not your nightmare to try and fix.

Why on earth are you the one here asking these questions? Why on earth doesn't your boyfriend have all of his facts lined up and all of his options well researched?

No one gets into his position over night. It's a long, nasty fall to get where he is and he should have been researching all along what his options are, well before this point.

The fact that he hasn't consulted with a credit counselor is ridiculous. That's something he should have done AGES ago.

You're his girlfriend, not his wife and definitely not his mother. This is not your job, and it's actually a VERY unhealthy thing for you to be doing.

He has to do this on his own. He has to clean up his own shit pile. Stay out of it other than providing the appropriate emotional support of a girlfriend.

[SnipTheDog]

Run Forest, run!  $60k is a lot of money that will spiral to a whole lot more.  He needs to tell you what he'll do to pay it off and then you can ensure that those steps are truly taken.  Otherwise, run!

[partgypsy]

Has he ever filed for bankruptcy before? If he hasn't, this might be the time (sounds like he is having difficulty keeping up with paying the interest let alone the principal).
I've heard the rule of thumb if your unsecured debts is 50% or more of your annual income, it might make sense to file for bankruptcy.
And it sounds like he has business loans on top of those. I don't really know the difference between business related bankruptcy and others.
I think he needs to take a hard look at his finances.

[Cassie]

Do not even consider marriage until he is completely out of debt. It sounds like you don’t even know the total of what he really owes.

[Rosy]

He is very motivated for change and I feel like we're so close to finding a solution, if we can just get the moving parts to click into place.

There is no magic "click" of all the moving parts neatly clicking into place.

The answer is for "him" to make a complete list of all debt owed - totals, interest, due dates - assess the potential for negotiation of due dates, interest rates, terms, etc.
Split by business and personal.

Can he currently afford the minimum payments on all his monthly bills?

A spreadsheet or a written list will tell him - there is no magic trick, this will be a long slog to settle and deal with. Does he have skills and work options, can he earn side income? That is all worth a discussion - as mustachians might see clearly what you both may not. Like you are hoping for a solution, there may well be different options/radical alternatives to tackle some of this debt.

A consolidation loan is generally nothing but an easy way out and statistically speaking most people end up in the same position again. Apparently, having to deal with the painful consequences of your past actions yourself on a monthly basis has a "financially" healing effect.

Nothing motivates one more than pain - there is a reason we say debt is crushing.

If you want some fresh eyes and good ideas - ask this question in the "Ask a mustachian" thread ... but only after he has done his home work and can present us with all the numbers and a complete picture of his financial obligations.
There are plenty of people here with enormous soul-crushing debt who've dealt with their situation or are still working on it - especially in the journals. He has to find his own way and do it in a way that makes sense to him so he can commit to a pay-off plan and find a way out of this mess. Unless he is a super earner it will take years, so you re-visit and re-evaluate your plans as you go and you find that eventually, things ease up a bit.
He isn't the only person with a failed business or money troubles. We live - we learn - we move on.

Congrats to you for paying off your own debt. I am pleased to see you want to help him, but speaking as an old lady with tons of life experience, I say, "This is his mess to fix". Nothing wrong with lending your support. You may well make the difference for him to be able to find his way out of this financial stranglehold.

[marty998]

OP hasn't read any of the replies guys - last time online was just after she posted the question.

My suggestion would be to;
1. List out all CCs with balances, interest rates, and min payment amounts (in order of Interest rate, highest to lowest)
2. Take a look at monthly budget, cutting every corner he can, cancelling any and all subscriptions, cable, no dining out, etc.
3. Pay minimums on all credit cards and loans except highest interest rate.
4. On highest interest rate put all extra money towards paying this down as quickly as possible.
5. As the cards start to get paid off cancel them, especially if they have annual fees. I would only leave open the one with the longest history which will help his credit score.

Everyone has given you good ideas so far. This advice right here is spot on for getting things paid off and getting him on a good track. I would make a few additional suggestions though.

Item #2. Do this. After making the cuts what does his monthly cash flow look like? Is he barely breaking even after paying the minimums on the debts or does he have several hundred? If if is $100 or less then I would make a few changes to items #3 and #4. In addition to a list ranked by interest rate I would make a separate list ranked by balance. Compare the balances and rates and focus one loan which can be paid off quickly to improve cash flow. This may or may not be the highest interest rate loan. As you get the cards paid off then definitely close them if they have an annual fee or see if the bank will switch the account to a no fee account. Freeze or cut up the cards so you cannot use them but keep open no fee accounts which are paid off. This will help to lower his utilization rate which will help stabilize/raise his credit score which will lead to the opportunity to lower the interest rates on the current cards and potential to access 0%/Low interest rate balance transfer offers from the paid off cards.

To add to this, in some cases a card's annual fee may be higher than the annual interest owed on others. For that situation, it's important to clear those high fee cards and cancel them before the annual fee kicks in.

[Parizade]

OP hasn't read any of the replies guys - last time online was just after she posted the question.

I was wondering if we scared her off. Some of these responses have delivered a dose of "tough love" which is always hard to hear. If she cares for this man she will want to help all she can, but I fear he sees her rescue efforts as his next easy way out.

speaking as an old lady with tons of life experience, I say, "This is his mess to fix".

+1 from another old lady with tons of life experience. Be loving, be supportive, but keep some firm boundaries in place. This is his problem, not yours.