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Trying to get our ***** together - Will we be denied?

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[OP]
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Jan 28, 2015
87 posts
350 upvotes

Trying to get our ***** together - Will we be denied?

My SO and I are trying to get our financial business in order after nearly a decade of a combination of bad decisions and bad luck. This is our current situation:


Me:
Income: $73k
Debts:
High interest MC: $5000
High interest Visa: $750
High interest store card: $2600
High interest store card: $500
Lower interest Visa: $7000
High interest (32%!) unsecured loan: $3900
0% secured car loan: $1000 (2 months left)
Cosigned on hubbys secured auto loan: $20k (3 years left)
Cosigned on secured ATV loan: $4200

Total of about $46k - All revolving cards are very close to their limits but slowly declining.

Hubby:
Income: $54k
Debt:
2 cosigned items above
High interest MC $14k (near max limit)

Also we have a mortgage of about $205k on a house that is about $250k

Total income between the two of us: $127k
Total debt between the two of us: $60k plus mortgage.

We had applied for a consolidation loan about a year ago; however, hubby had a very old collection item on his report and we were told we were denied for that reason. Since then we have paid that off and on last check online it has totally disappeared from his equifax report and his score has jumped up to 720. Mine is sitting around 645; however, both are so low because of high utilization - Neither one of us has any collections or late payments on our reports at all. Since our previous denial we have also increased our incomes by about $10k between the two of us. Not that it matters now, but we got into this mess over years of being laid off/going on maternity leave/working minimum wage jobs/occasionally making a crappy decision/etc, but now that we are both in good, stable jobs we really want to deal with this and then start saving so the next big crisis doesn't drive us back to where we started.

I've done the math and if we consolidate everything but the secured loans (so a new loan of about $34k) we would be more than onside with debt service ratios with a loan at 15% over 36 months (about 35%, I'm given to understand 40% is the max) - We would be even better off in that respect with a longer term, but I think we'd be more than comfortable at that rate and it would put us in position to be done with everything but the mortgage in 3 years which would be a huge relief.

We have an appointment with the bank again this afternoon, and I was just wondering if anyone who may have been in this position before or who works with a bank can give us a sense of what the answer will be given that our credit isn't fabulous and it's such a large unsecured loan - If it matters, $7k of what we want to consolidate is with the bank we are going to talk to.

If it doesn't work, we're still going to plug away at it and fix this mess, but it would make life about 1000 times easier if we could drop those crazy interest rates.

Thanks all!
44 replies
Deal Fanatic
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Apr 20, 2011
5310 posts
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snlev367 wrote: My SO and I are trying to get our financial business in order after nearly a decade of a combination of bad decisions and bad luck. This is our current situation:


Me:
Income: $73k
Debts:
High interest MC: $5000
High interest Visa: $750
High interest store card: $2600
High interest store card: $500
Lower interest Visa: $7000
High interest (32%!) unsecured loan: $3900
Most of the big 5 banks in Canada offer a low interest rate card for an annual fee of $25 with rates between 5 to 13% depending on your credit history.
Deal Addict
Mar 2, 2005
2032 posts
333 upvotes
1. Get rid of items you do not need. Everyone can live without an ATV.
2. Consolidate your high interest debt like credit cards and stop using them. Live on cash only.
3. Call Gail, I am sure she will start with the above two items.
[OP]
Newbie
Jan 28, 2015
87 posts
350 upvotes
Deal Grabber wrote: 1. Get rid of items you do not need. Everyone can live without an ATV.
2. Consolidate your high interest debt like credit cards and stop using them. Live on cash only.
3. Call Gail, I am sure she will start with the above two items.
Thank you for your advice. We have certainly considered that; however, the ATV was purchased for the purposes of plowing our kilometer long driveway. The costs to hire someone exceed the loan and maintenance payments. Regrettably, doing it by hand would require one of is quitting our jobs for the winter. Could we have gotten a better deal? Absolutely. But as I admitted, we've made some poor financial moves. In the meantime, we've cut back on other non-essentials (TV, cell service, traded a pricier car for a cheaper, more economical one, etc).

As for point number 2, that's exactly what we are trying to do - The question is more what institution will assist with the loan, or if no one will now, how much more do we have to improve before we try again.

I guess I should clarify - We know exactly what we need to do. This isn't a "Ahhh! Help me! I have so much debt I don't know what to do!" post - We know what to do. Whether we get a loan or not, this will get fixed - We've already dropped our debt significantly over the last year. We'd just like to do it faster with a consolidation loan, but our previous denial doesn't have us excited about our prospects for approval and would love some insight into our chances.
Deal Addict
Sep 21, 2007
1731 posts
52 upvotes
Toronto
First off, you should try getting the MBNA card with 0% interest and move the high-interest loans onto those ones. Both of you can apply for a card. It will help until next year, when you need to pay them in full. You should move fast, since they will change the transfer fee from 1% to 3% in August or September, which won't be such a good deal any more.

Then you should see if you can get other type of loan to consolidate everything else. Some unsecured LOC or some other type of consolidation loan (I'm not familiar with the latter, to be honest).
But most unsecured LOCs have pretty decent interest rates (5%-8%) compared to credit cards. For example I got P+2.7% with Scotia recently, and I have an older CIBC LOC at P+2%. Your results may vary, but you won't know until you try.
I'd say try to apply for unsecured LOC at a few banks, see what offers you receive. If you get unsecured LOC from 3 banks for ~$20K each credit limit, may be enough to move all those credit card debts.
Since you won't get same interest rate on all of them, I'd say make minimum payment on those with low interest, and try to pay off as quick as you can those LOC with high interest.
I hope it helps.
Good luck!
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Deal Addict
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Dec 14, 2007
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127,000 in income. $10,000 / month gross.

Your mortgage payment is probably about $1000 / month.
your debt, my guess, drains $700 / month in interest

If you automatically put $5000/month towards debt before any other payments then even with interest, you should be able to pay it off in 8 months. A consolidated loan would pay it off 1 month sooner at $5000 / month.

Cancel all RRSP or retirement savings until you've paid off the debt.
[OP]
Newbie
Jan 28, 2015
87 posts
350 upvotes
atomiton wrote: 127,000 in income. $10,000 / month gross.

Your mortgage payment is probably about $1000 / month.
your debt, my guess, drains $700 / month in interest

If you automatically put $5000/month towards debt before any other payments then even with interest, you should be able to pay it off in 8 months. A consolidated loan would pay it off 1 month sooner at $5000 / month.

Cancel all RRSP or retirement savings until you've paid off the debt.
I appreciate your efforts to help, but I truly fail to understand your math. After taxes and mandatory pension contributions (once you're in the plan, you can't get out without quitting) - That's just over $7000 net. Mortgage payments are $1300 (we made a decision to pay extra at a time when that made sense, and now we can't back out of it). Taxes are $200. Insurance (home and auto) and vehicle related expenses are about $700 (using transit or being a single vehicle family are not an option given our location and schedules, and moving would cost more in the long run than staying put). Hydro is about $300 (with the flip side being we don't pay for water or gas). Daycare is $1000. Your math appears to only be for the consolidation loan being discussed and excludes the remaining secured vehicle loans, which we can fast forward two months when one is paid off which leaves about $700. We are now down to $2800. Our food bill is actually surprisingly small (like $200 for a month for 4 people), and we have very basic phone packages but just to make it a round number we're down to $2500. With absolutely $0 in other, non-essential purchases, that's what we're looking at in available excess money to pay things off.

While I would love to claim I'm self disciplined enough to deny my entire family any purchase of any kind for the next 16 months (roughly), that just isn't sustainable. So let's be nice to me and call it $2100 - So each of the 4 of us can have $100 a month for things like basic hygiene products, school trips, etc. But then let's be honest that's about a year and a half of assuming absolutely nothing will go wrong whatsoever and there will be no mechanical failures, emergency house repairs, etc, etc - Because planning life like nothing will go wrong is pretty much a huge component of what got us here to start with, I'm not really prepared to make that assumption again.

But either way, at the end of the day, that's pretty much the existing plan (throw every spare dollar at it) whether we get approved or denied. And we will climb out of the hole. It'd be super awesome if we could get a loan that gave us a little more breathing room to put the difference in savings and maybe live a little, but if we can't, that's fine too.

The question still remains whether anyone is familiar enough with bank criteria to really know what they might say, or where might be the best place to ask, but we only have to wait a little longer to find out the answer to the first part anyways.
Deal Expert
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Sep 19, 2004
26118 posts
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where I belong
No questions, same as above

ATTACK the $$$$ high % debts first!!!
Use your mortgage/HELOC, get 0% Balance Transfer from MBNA, talk to banks for a cheaper LOC/Loan, borrow from family for 5% interest - whatever you can do to remove the BAD debts!!!
Which Credit Cards to sign up? >> Jerry's Mega Thread of Credit Cards Q&A
Deal Addict
Sep 21, 2007
1731 posts
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Toronto
See my previous post..
Get MBNA with 0% (pay only 1% transfer fee when you get the money). The actual amount they may give you may vary, but it may be about $10K for each of you (give or take). This would save you interest for about $20K in loans until next year when you need to pay it back (you can use a line of credit to pay it back when the time comes, then apply for a new card with 0% again).
Shop around at the major banks for lines of credit. Some of them may deny, some of them may give you. Start with Scotia, CIBC. Then TD, RBC, BMO, NBC. Ideally, take a day off and apply at all of them same day (so they won't see on your credit report that you applied somewhere else). NBC has an offer for engineers, they give better interest rate for LOC. See if you qualify for that.
The order to pay off the cards/lines of credit: always pay off the one with highest interest first, and make just minimum payments on the others. After you finish paying off the one with highest interest rate, move on to pay off the next one after (in terms of interest rate).
Please use "Reply with Quote" when replying back to my PMs.
Deal Expert
Feb 29, 2008
29094 posts
4782 upvotes
Montreal
The sum total of your non mortgage debt is not that bad.

1. Stop the operating deficits. No more credit card spending. Cut them up and use cash or interac. Keep one for emergencies in vault. This will immediately reveal if your debt is subsidizing your lifestyle.

2. Stop saving money, if any. No more TFSA or RRSP. Sounds awful, but it's needed.

3. Rationalize your spending to the bone. Cut out things you want but don't need. Easier said than done.

4. Attack the highest interest debts in order: the 32% loan and the store credit card are just awful. Make a concerted effort to put as much money as possible towards these debts.

Your debt load isn't that bad. I've seen worse.
Banned
Jul 2, 2015
395 posts
66 upvotes
Canada
You guys actually have a very good income, combined together. With strict discipline , you can definitely take care of it.

Try to get a low interest consolidated loan if you can ..otherwise start paying of the high interest CC first..one by one.
Try to transfer it on some low interest CC if you can.
Till then just pay by cash or debit for all your purchases including gas, groceries etc.
If you don't need a car for your job etc, try taking public transit etc to save on gas, insurance etc.
Shop around for just about anything including groceries, cell phone rates , insurance etc.
Stop eating out , vacations , entertainment etc ..it all adds up.
Deal Addict
Jun 6, 2015
1435 posts
233 upvotes
Good income, low debt (relatively speaking) what is the problem? The only issue is the rates, and everyone has advised ad nauseum on that.

Um...will the bank reject you? You will find out but there is usually one bank who is willing to play ball..let us know.
Deal Guru
Apr 11, 2006
11402 posts
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I know you're obviously required to make minimum monthly payments on each of the revolving loans, as well as, your car payments, but I would actually try to knock off some of the smaller ones ASAP. Like the $500 and $750 balances...clear them out in one to two months and cancel the cards and cut them up. All those cards are high-interest to different degrees, but still high interest - sometimes just seeing progress of two balances gone, is a great boost!
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Jun 11, 2001
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Go talk to you bank for a consolidation loan... if they won't budge tell them you are taking all your services elsewhere to a competitor... trust me they'll play along as they know you "love" credit currently.

Your numbers look bad not in terms of size but in terms of interest rate... sorry to say this, but you guys can't afford your current living lifestyle... things need to change or after this 'cleanup', you'll end up at square one again.

That said, don't delay, go talk to your bank.
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Jun 11, 2001
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Agreed, mathematically it makes no sense but it gives the human mind a small "win" and you feel it isn't such an uphill battle.
kenchau wrote: I know you're obviously required to make minimum monthly payments on each of the revolving loans, as well as, your car payments, but I would actually try to knock off some of the smaller ones ASAP. Like the $500 and $750 balances...clear them out in one to two months and cancel the cards and cut them up. All those cards are high-interest to different degrees, but still high interest - sometimes just seeing progress of two balances gone, is a great boost!
...zzz...zzz...zzz...

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Dec 14, 2007
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snlev367 wrote: I appreciate your efforts to help, but I truly fail to understand your math.
After taxes and mandatory pension contributions (once you're in the plan, you can't get out without quitting) -
That's just over $7000 net.
Mortgage payments are $1300 (we made a decision to pay extra at a time when that made sense, and now we can't back out of it).
Taxes are $200. Insurance (home and auto) and vehicle related expenses are about $700 (using transit or being a single vehicle family are not an option given our location and schedules, and moving would cost more in the long run than staying put).
Hydro is about $300 (with the flip side being we don't pay for water or gas).
Daycare is $1000.

Your math appears to only be for the consolidation loan being discussed and excludes the remaining secured vehicle loans, which we can fast forward two months when one is paid off which leaves about $700.

We are now down to $2800.
Our food bill is actually surprisingly small (like $200 for a month for 4 people), and we have very basic phone packages but just to make it a round number we're down to $2500.

With absolutely $0 in other, non-essential purchases, that's what we're looking at in available excess money to pay things off.

While I would love to claim I'm self disciplined enough to deny my entire family any purchase of any kind for the next 16 months (roughly), that just isn't sustainable.

So let's be nice to me and call it $2100 -

So each of the 4 of us can have $100 a month for things like basic hygiene products, school trips, etc. But then let's be honest that's about a year and a half of assuming absolutely nothing will go wrong whatsoever and there will be no mechanical failures, emergency house repairs, etc, etc -
Yep. My numbers excluded expenses as they weren't mentioned. I'm assuming you're using round numbers, but remember a lower-interest line of credit will only save you about 1 month. 46k is ~$4600 of interest if paid off in one year. I realize that will probably be a challenge with your expenses.

1st of all. Think about selling your car and buying and old beater unless it's providing income. You could alternatively sell your husband's car and retire 20k in debt, but his loan is over the next 3 years, so there's less of a rush. If you can net 10k on your car, your debt is down to 36k. Your insurance and related costs may go down as well depending on what vehicles you are changing up.

That 10k could pay off the $3900 secured loan and a couple of high interest credit cards.

High interest MC: $5000
High interest Visa: $750
High interest store card: $2600
High interest store card: $500
Lower interest Visa: $7000
High interest (32%!) unsecured loan: $3900

You now have just over 11000 of debt on cards
$4,600 on an ATV.
$20,000 on a car loan

I'd still sell the ATV. I don't know how much the loan is, but selling it would immediately retire your store cards assuming you get at least $3100 for it.
High interest store card: $2600
High interest store card: $500
Lower interest Visa: $7000

That $3100 becomes worth $3800 in the space of a year on high interest store cards. It's like paying yourself $700 to sell the ATV.

The $7000 Visa should be able to be taken care of in the space of 4–5 months.

Once it's all paid off, buy a used ATV, or use your newfound monthly $2000 to pay someone to plow it for you for this winter and buy an ATV in the spring.

With some effort, you might be able to get all greek on the family and put austerity measures into place, putting $2500 towards debt per month, but even if your can't. Take $1000 from your paycheck every two weeks and auto-transfer a payment to a card. Pay off one card at a time and have a card-shredding party each time you succeed. Make a game of it. Make it fun. Debt is NO fun.
The question still remains whether anyone is familiar enough with bank criteria to really know what they might say, or where might be the best place to ask, but we only have to wait a little longer to find out the answer to the first part anyways.
Obviously it would be great to consolidate your loan and get a lower interest rate of 13% or 15% but there are probably quicker and effective ways to quickly retire some of that debt in short order. You have 20k in CC debt and the rest is auto loans. RFDers usually don't have auto-loans, but it's not uncommon for people to have a monthly loan or lease payment so it's more of an expense than a debt.

Paying off $20,000 in cc is doable in a year on your salaries and with the amount of disposable you have. $1800 / month @ 20% interest. It would be around $1750 if you reduce that to 15% and still $1666 if you had 0% interest.
[OP]
Newbie
Jan 28, 2015
87 posts
350 upvotes
You know, I wasn't going to bother, but...

My car is not worth $10k. It is practically a beater in its current state. At best I could get maybe $5k, if I really put forth an effort. I have to commute to work every day on really terrible roads, I'm not betting my life for any kind of minimal gain I might get on what I've already stated is very much manageable, we'd just like to expedite it if possible. To add a point not previously mentioned, hubby's car is worth far less than what is owed as we already traded in a more expensive sedan with negative equity to save money in the longer term on insurance & interest payments. For anyone joining the party late, transit or single vehicles are not viable options.
atomiton wrote:
You now have just over 11000 of debt on cards
$4,600 on an ATV.
$20,000 on a car loan

I'd still sell the ATV. I don't know how much the loan is, but selling it would immediately retire your store cards assuming you get at least $3100 for it.
High interest store card: $2600
High interest store card: $500
Lower interest Visa: $7000

That $3100 becomes worth $3800 in the space of a year on high interest store cards. It's like paying yourself $700 to sell the ATV.
You listed the loan and then said you don't know how much it is. No one wants to but an ATV with a lien on it. Therefore, to discharge the lien we'd need to sell it for $4600, the amount owing as listed two lines above your statement that you don't know how much the loan is. Realistically we could probably get $6k. That's $1400. Fine and dandy - Doesn't rectify the situation before winter, and would put us further behind by the time we paid to address the driveway situation.
Obviously it would be great to consolidate your loan and get a lower interest rate of 13% or 15% but there are probably quicker and effective ways to quickly retire some of that debt in short order. You have 20k in CC debt and the rest is auto loans. RFDers usually don't have auto-loans, but it's not uncommon for people to have a monthly loan or lease payment so it's more of an expense than a debt.
$34k. We have $34k.

I don't want to sound ungrateful for all the time and effort everyone is taking to try to come up with a detailed plan, but I just want to repeat one more time - We know what needs doing. We've looked under every rock and cut every non-essential expense we've got. Some may not agree with what we've termed essential (even though it's pretty much just a roof over our heads, modest cars to get to work, and an ATV that for aforementioned reasons it makes more sense to keep now even if it was stupid to start with); however, it all fits well within an amount that balances what we need to live and what gets our debt paid off - Could we do more? Sure, we probably could if we tried even harder, but after some soul seeking a gain of a month or two isn't worth it to us. We are very much following the common sense plan to pay off the highest debt first (hence why every balance we have remaining is maxed for the moment, because we just finished off another one and our minimum payments are interest only). We've already paid off thousands. We will pay off the remainder within a time frame we are comfortable with. Does it suck to pay that much in interest? Absolutely! But we made that bed and will lie in it. We're just looking at ways to cut the interest and make it faster.

I said I did the math on a 3 year loan, but that was basically to ensure that we had a generous buffer left to save for future emergencies. We'd very much like a deal with an option to pay more without penalty so we can make it even faster than that because as has been pointed out, debt is no fun. Up until recently when all the work we've done to repair credit scores started to pay off most options to reduce interest were not even in the realm of viable options - Now I think those shortcuts might be coming within reach, and I provided all that detailed information just to see if anyone with a good working knowledge of lending criteria thought we were in the ballpark for a good shot at approval or if it still looks more like a real hail mary. Based on some of the more sensible answers, I gather the consensus is that it might still be tough to get approved, but by shopping around we might be able to get somebody to play ball. MarcusXP's suggestions regarding 0% balance transfers is great, and that's what we'll be looking at that as well.

So again, thank you all for your input and taking time out of your days to try to assist - But in terms of a plan of attack if the banks say no, we've still got that part under control. In case it helps someone in the future in our position, I will be sure to report back in the coming days regarding the answers we were given.
Deal Addict
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Dec 14, 2007
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snlev367 wrote:
So again, thank you all for your input and taking time out of your days to try to assist - But in terms of a plan of attack if the banks say no, we've still got that part under control. In case it helps someone in the future in our position, I will be sure to report back in the coming days regarding the answers we were given.
Yep. Don't mean to offend at all. It's just usually easier to get straight advice from strangers who look at it from a ( albeit limited ) unbiased viewpoint. I hope you guys get a good rate on your consolidated loan amount. It will help with focusing on paying down the debt, simplify everything and also reduce the time owing by a month or two.
Deal Addict
Jun 12, 2015
2444 posts
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Ontario
So this thread was here are my expenses and debt, I got it under control, btw will the bank denie us?

Just go to the bank and ask them then.

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