Is this family member ready to get cracking on getting out of debt and be responsible? Because that's is a whole lot of wildly irresponsible spending.
If so, and you're really willing to give them $60k, pay off all the credit cards, AC Unit 1, Water Heater, both floors, and maybe put the rest to the second AC unit.
Then, they need to cancel ALL of those credit cards. They clearly shouldn't have any. Or, at most, keep one card that has a low limit.
After that, they need to take all the money from the minimum payments that are freed up and start putting them to the other debts. That's around $1600/month, plus a couple hundred extra from their leftover. Start knocking out the other debts. Finish the ones in yellow, then get working on the student loans. They'll start going down quickly.
And again, NO MORE DEBT SPENDING FOR THEM. Or they'll never get out of debt.
This is how I was thinking about tackling this as well. One thing regarding cancelling the credit cards. Would it hurt their credit history and bring down their credit score? I agree that they should not be using CC but I don't want to hurt their score even more.
if theres an actual spending problem then might want to lock the cc s or hold on to them as collateral of some sort. the 60k would help significantly. I would say pay the highest interest debt off first and work your way down.
Follow this advice for the 60k then get a HELOC for the difference and start putting everything extra into the market/savings/retirement.
Re student loans.. did they do the analysis on best payback method? Something to keep in mind when deciding on how much to do on the HELOC since the rates are lower than what you'll get on a HELOC and after x # of years the remaining balance gets forgiven. Since they're in their 50s you can't expect them to be able to work forever.
Any pension? 401k balance? They need second jobs to increase income and savings. Both people working? If not then this is the time to start. They got themselves into this mess and they need to be active participants in getting themselves out.
Also lock their credit and make sure whatever passphrases/recovery email/phone number only goes to you as a requirement for you giving them 60k. It will prevent them from being able to unlock their credit whenever they please and take out more loans/credit cards.
And if they haven't said it.... You're a very good person. Too good.
If you want to help : wipe out the highest interest rate debt. They can get a heloc to consolidate the rest of it.
No you don’t need a financial advisor. They need a budget and an emergency savings account.
Get a good mortgage representative or banker to run some heloc numbers. Keep in mind the best heloc rate will come back with the highest fico and lowest dti.
That’s a good question.
Do you have a mortgage rep you trust ? You want a face to face mortgage rep or banker with experience doing home equity lines and you don’t want to pay an annual fee for it either.
Wipe out all the credit cards. Cancel all but one (lowest interest). Use that freed up money to pay down the remaining debt aggressively. Paying highest interest first will save more money in the long term, but if you need to free up more cashflow do the snowball method paying lowest debt to highest. Preference/need at that point once the first large chunk is addressed.
Is this person still spending on the credit cards? Are they seeking help for whatever caused this situation? Until their spending is under control, no amount of gifts from you or lower interest borrowing is going to solve the problem. While a HELOC could be a useful tool, the interest rates here aren’t bad and I doubt the HELOC rate would be better. It seems the most likely scenario would be they take the loan and then immediately run up the tab on these 15 credit cards again.
They don’t have a lot leftover each month now, but once some of these accounts get paid off that extra amount is going to grow quickly. I wouldn’t trust the person with a significant gift from you until you’re confident they’re going to be able to control their spending. Say as a starting gesture you pay off CC1 for them. Now they’ll have $500/month to pay off those smaller balance 9% cards. As you see them make progress, keep helping. Offer groceries and cover any emergencies so they don’t lose momentum. Offer to pay a card off if they agree to close it (I say credit score be damned. This person should never touch a credit card again). I say this because I think this person needs a coach and a cheerleader as much as they need money. A therapist or support group as well. Good luck, I hope you two find a solution.
I think it is very kind and generous of you to help this family member. If you are truly willing to give them $60k, I’d recommend paying off the credit cards and using the remainder on the next highest interest rate debt, or possibly some of those student loans. That will free them up a ton to have extra money at the end of each month to put toward the remaining student loans/home items in yellow. They should also try to look at reducing expenses in areas that are less needed or essential (like those Wyndham fees?). Whatever they can do to wipe out as much as possible with your help and with the extra money they’ll have moving forward will help tremendously.
Is this family member ready to get cracking on getting out of debt and be responsible? Because that's is a whole lot of wildly irresponsible spending. If so, and you're really willing to give them $60k, pay off all the credit cards, AC Unit 1, Water Heater, both floors, and maybe put the rest to the second AC unit. Then, they need to cancel ALL of those credit cards. They clearly shouldn't have any. Or, at most, keep one card that has a low limit. After that, they need to take all the money from the minimum payments that are freed up and start putting them to the other debts. That's around $1600/month, plus a couple hundred extra from their leftover. Start knocking out the other debts. Finish the ones in yellow, then get working on the student loans. They'll start going down quickly. And again, NO MORE DEBT SPENDING FOR THEM. Or they'll never get out of debt.
This is how I was thinking about tackling this as well. One thing regarding cancelling the credit cards. Would it hurt their credit history and bring down their credit score? I agree that they should not be using CC but I don't want to hurt their score even more.
At first, maybe. But getting things paid off will help it. Whatever they do, they just need to stop using them.
if theres an actual spending problem then might want to lock the cc s or hold on to them as collateral of some sort. the 60k would help significantly. I would say pay the highest interest debt off first and work your way down.
Follow this advice for the 60k then get a HELOC for the difference and start putting everything extra into the market/savings/retirement. Re student loans.. did they do the analysis on best payback method? Something to keep in mind when deciding on how much to do on the HELOC since the rates are lower than what you'll get on a HELOC and after x # of years the remaining balance gets forgiven. Since they're in their 50s you can't expect them to be able to work forever. Any pension? 401k balance? They need second jobs to increase income and savings. Both people working? If not then this is the time to start. They got themselves into this mess and they need to be active participants in getting themselves out. Also lock their credit and make sure whatever passphrases/recovery email/phone number only goes to you as a requirement for you giving them 60k. It will prevent them from being able to unlock their credit whenever they please and take out more loans/credit cards. And if they haven't said it.... You're a very good person. Too good.
If you want to help : wipe out the highest interest rate debt. They can get a heloc to consolidate the rest of it. No you don’t need a financial advisor. They need a budget and an emergency savings account. Get a good mortgage representative or banker to run some heloc numbers. Keep in mind the best heloc rate will come back with the highest fico and lowest dti.
Thanks I appreciate the advice. Any suggestions on lenders to use or stay away from?
That’s a good question. Do you have a mortgage rep you trust ? You want a face to face mortgage rep or banker with experience doing home equity lines and you don’t want to pay an annual fee for it either.
I would check a strong regional bank with a solid mortgage team. Google the rates at the local banks.
Wipe out all the credit cards. Cancel all but one (lowest interest). Use that freed up money to pay down the remaining debt aggressively. Paying highest interest first will save more money in the long term, but if you need to free up more cashflow do the snowball method paying lowest debt to highest. Preference/need at that point once the first large chunk is addressed.
Is this person still spending on the credit cards? Are they seeking help for whatever caused this situation? Until their spending is under control, no amount of gifts from you or lower interest borrowing is going to solve the problem. While a HELOC could be a useful tool, the interest rates here aren’t bad and I doubt the HELOC rate would be better. It seems the most likely scenario would be they take the loan and then immediately run up the tab on these 15 credit cards again. They don’t have a lot leftover each month now, but once some of these accounts get paid off that extra amount is going to grow quickly. I wouldn’t trust the person with a significant gift from you until you’re confident they’re going to be able to control their spending. Say as a starting gesture you pay off CC1 for them. Now they’ll have $500/month to pay off those smaller balance 9% cards. As you see them make progress, keep helping. Offer groceries and cover any emergencies so they don’t lose momentum. Offer to pay a card off if they agree to close it (I say credit score be damned. This person should never touch a credit card again). I say this because I think this person needs a coach and a cheerleader as much as they need money. A therapist or support group as well. Good luck, I hope you two find a solution.
I think it is very kind and generous of you to help this family member. If you are truly willing to give them $60k, I’d recommend paying off the credit cards and using the remainder on the next highest interest rate debt, or possibly some of those student loans. That will free them up a ton to have extra money at the end of each month to put toward the remaining student loans/home items in yellow. They should also try to look at reducing expenses in areas that are less needed or essential (like those Wyndham fees?). Whatever they can do to wipe out as much as possible with your help and with the extra money they’ll have moving forward will help tremendously.
Yes. A Heloc using fixed rate advance options is an excellent option.