We Were Turned Down By LendingClub.com. – Natasha

“Dear Steve,

I am married with two young children. We moved in with my mother with the hopes of purchasing a home to take advantage of the first time homebuyers credit. Once we were told that the requirements of the FHA were changed and we needed more down payment, we decided to put the house off. Now, we are doing our best to pay of our $25k credit card debt. All of our best efforts remain fruitless as once we get ahead, we have to take ten steps backwards. We considered the debt management programs, however, we do not want to destroy our credit by enrolling in one when we are hoping to purchase a home in the home coming years.

Although we cut our rent in half by moving in with my mother sharing the expenses and even paying off two credit cards. It feels like we are getting no where! We have 2 car payments which we cannot get rid of considering the miles we drive and the time limits we have (ie picking up kids, appointments). Unfortunately, we do not have health insurance and have a credit card as a back up if needed in this regard. We cannot loose this!

My husband and I make atleast $80k per year. In regards to our auto fees, it is about $1k per month, daycare at $450 per month, $750 in rent and misc expenses at about $1000- everything else goes to credit cards and still we get no where!

After reading a few of your advice columns, I decided to chack the lendingclub. However, we were declined credit. We have applied jointly at a few other places and declined. We are only able to make just a little over the minimum on the credit card payments. as we have about 5-6 cards totaling $25k,

Credit card companies are lowering our limits and increasing our fees. I know if we had one payment every month, we can pay about $1k-$1500 releaving of all worries in about 3 years.

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Any suggestions on how we can get out of debt faster?


Dear Natasha,

Thank you for writing to me. I do know that the LendingClub.com minimum credit score is 620 or 660. If you were declined that tells me there are some problems on your credit report that might be bringing your score down.

If you have not done so recently, I would suggest you get a copy of your consolidated 3 in 1 credit report and make sure all the accounts listed are yours. If you order the report with the credit score option you can see exactly what your credit score is and why it is that score.

What concerns me about the debt management approach is that it is not your interest rates which are killing you, but the amount of your payment. In a debt management plan your monthly payments are the same or even a little higher than they once were. Who cares what the interest rate become if you can’t afford the minimum payment to begin with.

Without a loan or bankruptcy, I think the best way to repay your debt us using the debt snowball approach.

Truly I’m more concerned by the lack of health insurance than anything else. Without health insurance, just one accident or illness can wipe you out. So let’s say you do enroll in a debt management plan and for the next three years you are just making it by each month and making your payment.

Suddenly one of your children becomes ill and before you know it a ton of medical bills have piled up. Without health insurance those bills will eventually cause your debt management plan to fail and all the years of hard effort to be mostly wasted.

I’d rather see you shop around for health insurance, find out what that payment is and let me know how much it will be and how much you are currently sending in on the credit cards.

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I suspect that getting health insurance but having to go bankrupt on your other debts is probably the way you’ll end up going here. Even if you go bankrupt you can rebuild your credit and buy a house in the next two to three years. A lot will depend on the size of your downpayment. Size matters. Bigger is better.

Please update me on your progress by

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P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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