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$25,000 at 19.99% Interest- What Can I do? – Elisabeth

“Dear Steve,

When I previously left my previous employer I took a Bank of America Loan out for 25,000 to pay off all of my credit cards so that i could get 1 payment. My understanding was that it was a loan at 5.5% in 2006 as it turned out the rate was 19.99%~

Now it is 29 months later and I have made faithful never late payments of 600.00 to 700.00 dollars a month… The original loan was 25,000 dollars and after 29 payments

I still show owning 20,000.!! I have faithfully paid back around 18,500 over the past 29 months and can go no further like this… I now clean homes and my husband is subject to layoff… i have called Bank of America and they will not budge in helping. What for god sake can I do???

PLEASE HELP and Thank you

Elisabeth”

I asked my friend Mike Killian to answer your question for you. I wanted to make sure you got an answer as quickly as possible as I’m a bit backed up at the moment. I’ll be watching the comments on this question and be around to help if you need me.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Dear Elisabeth,

My goodness you did get into a pickle barrel, didn’t you? You would think that having paid back nearly 75% of the original debt would gain you more than a debt reduction of only 20% but that is the nature of compound interest working against you. Albert Einstein once said the most powerful force he had ever witnessed was compound interest. I suspect you would now agree.

Your options are fairly limited. You have done the correct first thing in contacting the creditor and obviously that did not work. The second option is working through a debt counselor to try to get that interest down. Please do check and see if this can be done before making any commitment but I am very suspicious that the interest will not be reduced. But do try. The third option is debt negotiation in which you or a professional debt negotiator offers less than what you owe…. Say 50%. That sounds good on the surface but has some drawbacks. Debt negotiation usually requires a lump sum payment and completely destroys your credit. Additionally any debt forgiven above $600 will be taxable by the IRS as added income.

Your final option is bankruptcy and unfortunately, this maybe one of your few workable options. You can usually talk to a bankruptcy attorney for a free initial consultation and the attorney can tell you its affect on your personal situation. You gave no indication as to your assets or debt nor debt connection with your spouse. So your best alternative is to sort out a bankruptcy option with an attorney. Armed with that information you will then be able to make the best decision on your own behalf.

Good luck on your decision-making.

Sincerely,

Mike

If you have a credit or debt question you’d like to ask just use the online form. We are happy to help you totally for free.




About the author

Mike Killian

Mike Killian is founder of Learning Credit and Debt Management. He has been writing and teaching about credit and debt management issues for over 12 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years. He has an MS in counseling and is a nationally certified as a Personal Finance Counselor. Mike can be found at LearnCreditManagement.com/.

2 Comments

  • If you’ve been making those payments, you should have a good credit score. Look at a peer to peer lending site such as lendingclub. $20K 10% 5 years is a $425/mo payment. I’ve never borrowed or lent, and have no affiliation with any of them, but I’ve read good things in general about the concept. If you can get the loan, the risk is with the lender, you don’t put up any money to get the loan.

    Alternately, try going to a local credit union for a different card. The difference between 10% and 20% is huge. I’m very sorry you didn’t catch this sooner.

    (I’m not a big cyber hugger, but I do wish you well.)
    .-= JoeTaxpayer´s last blog ..My Financial Weekly Roundup =-.

    • Joe,

      Not a big cyber hugger. LOL!!!!

      I am a lender with LendingClub.com and have 33 loans I participated in and all are performing well. That’s good news since it will encourage more people to be lenders to peers in need. I think LendingClub announced yesterday they funded $7 Million in November. While that’s a drop in the bucket compared to a big bank it shows the system is making consolidation loans.

      Steve

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