I Am Looking to Consolidate My Debt And Then Form a Plan to Get Rid of It. – Drowning In Debt

Drowning In Debt

“Dear Steve,

In a TON of debt…looking for a way out.

I am looking first to consolidate my debt, then form a plan to get rid of it.

I have a $235,000 mortgage at 5%, a $65,000 interest-only second mortgage at 3.75% and about $47,000 worth of credit card bills.

I was one of the millions of idiots that bought a house with no way to pay for it. $30,000 of the interest-only second mortgage was an “instant-loan” at the time of my house purchase, used as a “down payment”, the rest was a car + car repairs over the years. The $47,000 of credit card bills was racked up from the years of having to live off of credit cards when I had no money to pay the bills.

At the housing peak, my house was valued at $295,000, but it could be as low as $195,000 now. I have a 640 average credit score with NO late payments EVER.

I tried applying for a debt-consolidation loan when Bank of America offered it a few months ago. They were offering up to $50,000. They denied me because of…get this…too much debt.

Is there any way out? Do I just attempt to open more credit cards to spread the debt out and hope for low-interest rate cards?

ANY advice would be GREATLY appreciated!!!! Thanks!

Drowning in Debt”

Dear Drowning in Debt,

I noticed you mentioned that Bank of America debt consolidation product they’ve been marketing. It is actually called their CleanSweep loan. I reviewed and wrote about the offer in detail. You can read more about it here.

It seems to me that the issue here is not about moving your debt around but the fact that you can’t afford to pay the debt you’ve got now. The interest rates you are paying now don’t seem so bad but as long as you don’t earn enough to pay for it.

And this is not a problem that raised its ugly head yesterday. You yourself said “The $47,000 of credit card bills was racked up from the years of having to live off of credit cards when I had no money to pay the bills.” More credit, more interest free credit, and more debt of any kind is not going to free you.

To break free from your debt you’ll either need to accelerate your debt pay off or consider bankruptcy. I realize that bankruptcy might seem like an extreme reaction to your current situation but you are so buried in debt, that without increasing your income, I don’t see much chance of a successful outcome.

If you don’t think that you can increase your income and you are not mentally prepared to face bankruptcy, then consider a debt management solution (click here for debt management information) to wrap your debt into one monthly payment. Credit counseling and debt management is not a consolidation loan but you do make just one payment to the debt management company.

I am not optimistic that a debt management approach is going to eliminate your debt but if you want to try, go right ahead, and then when you are ready to consider bankruptcy, do it.


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.
Steve Rhode
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