My friends in massive credit card debt

[ozmale42]

It was around $60k+ at one stage and he sold an investment property/old PPOR to lower the debt.

He will get out of it eventually, I mean, his on a huge income (over $150k a year gross). But any ways of refinancing the debt to a lower rate are helpful at this stage.

I leant my friend the book, "I will teach you to be rich" by Ramit Sethi in the hope it will change his spending habits.

In that case he should be Ok....If he was on less than $50k it would be somewhat of a crisis.

I'm also in that ballpark income and had a CC debt of over $20k 2 years ago which arose due to a balance transfer on 2 other cards as well as my car loan. The balance transfer was 0% for 6 months , after which time it was 11%(which was more cost effective than a car loan at 12%) . The CC was not used for day to day expenses but was paid off religeously at around $1,200-$1,300 a month ....Admittedly it took 18months to pay off but it was no stress even after paying my ex wife child support of around $2k a month.

Tell him to get a card with a low % balance transfer and put in place a payment plan and stick to it.

 

[pdawg]

The bit that has been asked to be 'put to the side' is the only thing worth talking about, as is by definition both the root cause of his mate's predicament and also the thing that will keep him squarely in the bad debt corner.

The tiny portion of tweaking the interest rate on the debt is irrelevant. Tackling the cause of the debt in the first place and the personal habits that create them isn't being spoken of.

Being "aware" doesn't mean jack squat.

Quoted for truth.

Here's an interesting story of poor spending habits:http://forumserver.twoplustwo.com/34/other-other-topics/does-earning-65k-per-year-mean-youre-poor-788923/

 

[qaz]

Hey guys,

Look, im gonna be honest here as I haven't so far. This is painful for me to say it on this forum specially as I consider myself smart with money.

But he's not in $30,000 of credit card debt. He's in $8,000 of credit card debt. I lent him $22,000 out of my own pocket, out of love, to help him in his situation.

I did make an arrangement with him that he'd pay me back 10% interest PA from the last payment of capital (ie, $20,000, 2 years, 10% P.A. = $4,000 in interest if he made the last capital repayment 2 years from the start of the loan), but in reality, I don't care too much about that and just wanted to help.

It was the dumbest financial move i've ever made in my life but done with the best of intentions for my best and closest friend.

So yeah, thats the real situation. I know it was dumb but yeah. I am genuinely worried that it may take me 10 years to see all of the money again, even though I know deep within my heart he will pay me back one way or another eventually.

If you know any ways I can encourage him to do the right thing without damaging the friendship tell me. He will be reading this thread.

 

[tobe]

Good life lesson, for you both. Stop talking about the money and see if you can continue the friendship. No sense losing both the money and the friendship.

 

[lizzie]

ah - that seems to be the problems. you didn't arrange a repayment system at the time of lending him the money.

one of my stepkids needed money to buy a car recently (1st car died). we agreed to lend her a fair slab interest free as she wants to keep her savings for when she finishes uni and moves to sydney for work end of this year.

but ...

before we put the money in her account the repayment agreement was reached that she must repay $100/wk and have the whole debt paid off in under 2 years. she knew if she didn't do so we'd take the car - so she arranged a direct payment from her bank acc straight to ours.

now - what you have to do (imo) is take the problem by the balls and sit down with you mate ... and work out a repayment system and a time limit instead of just letting it waft on.

he's bringing home $2,000 a week! surely he can repay $200/pw to you. that means he would have repaid you in just over 2 years. or make it $300/pw and you've got your money back in less than 18 months ... but it has to be a regular payment each pay day - not just some wiffy waffy "one day".

otherwise you will be having this hang over your friendship and festering. i am sure he looks at the $22k and feels it's insurmountable, but if you break it down into smaller amounts on a regular basis then it won't be painful for either of you.

and lesson learnt!

 

[Luv2Travel]

If you're worried you won't see your money again, I'd be wanting to try and formalise it, but give him an incentive to do so. He's on a very good income and in my opinion, also agree he should be able to pay it off in less than a year easily! However, let's say he's used to a comfortable lifestyle, so maybe stretch it to 18 months. So without taking into account interest that's $280 / week, nothing really on his wage.

Maybe suggest you'll waive the interest during those 18 months IF he makes those repayments regularly (weekly, monthly or whatever suits) AND puts it all into a formal contract and signs it. I know it's not right, and is costly for you to lose the interest, however if you think you may never see the money, or 10 years like you're talking then I think just cut your losses and try that. At least then once it's formalised you have something legally to stand on, should you ever want to take action. That's pressuming you can make a legal contract well after the date of the transaction? That way it gives you some protection, and him some incentive to pay it off without the interest.

 

[pdawg]

Hey guys,

Look, im gonna be honest here as I haven't so far. This is painful for me to say it on this forum specially as I consider myself smart with money.

But he's not in $30,000 of credit card debt. He's in $8,000 of credit card debt. I lent him $22,000 out of my own pocket, out of love, to help him in his situation.

I did make an arrangement with him that he'd pay me back 10% interest PA from the last payment of capital (ie, $20,000, 2 years, 10% P.A. = $4,000 in interest if he made the last capital repayment 2 years from the start of the loan), but in reality, I don't care too much about that and just wanted to help.

It was the dumbest financial move i've ever made in my life but done with the best of intentions for my best and closest friend.

So yeah, thats the real situation. I know it was dumb but yeah. I am genuinely worried that it may take me 10 years to see all of the money again, even though I know deep within my heart he will pay me back one way or another eventually.

If you know any ways I can encourage him to do the right thing without damaging the friendship tell me. He will be reading this thread.

Qaz

If he truly values the friendship, he should pay you back ASAP and being on a salary of over $150K, this should be easily achieved if he can learn to adapt to a more humble lifestyle and hold out on any of his current vices as I'm sure there maybe a few.

I still don't understand why you would need to loan him $22K if his debt was only $8000... that makes absolutely no sense but I'll leave it with you.

The first step to take is admit he has a problem with spending. If he doesn't... I'm afraid noone can help him.

Second step he should take is write down ALL his current expenses... That way he knows where his money is disappearing and can work out what he can cut back on cos there are no other way around it, he will have to make some sacrifices. Basically he needs to discover a cheaper way to live ie rent, food, utilities

Third step, get the lower interest rate card and cut it up. There is no point getting this at the start if he hasn't already identified the core problem which is his spending.

Fourth Step, Work out a routine/habit of regular payments until the debt is cleared and sticking with it. Once he achieves this... he will be a changed person.

Good luck, I wish you both well.

 

[qaz]

I still don't understand why you would need to loan him $22K if his debt was only $8000... that makes absolutely no sense but I'll leave it with you.

Because his credit card debt was over $30,000 before I lent him the money and brought it down to $8,000, at one stage before he sold his place the debt was $60,000 plus.

The first step to take is admit he has a problem with spending. If he doesn't... I'm afraid noone can help him.

He's admitted his got a problem tho I dunno if he's doing enough about it. I honestly beleive if he's fair dinkum about cutting back, he can afford $750 a week in repayments given his income and the spreadsheet he showed me.

Second step he should take is write down ALL his current expenses... That way he knows where his money is disappearing and can work out what he can cut back on cos there are no other way around it, he will have to make some sacrifices. Basically he needs to discover a cheaper way to live ie rent, food, utilities

He's produced a spreadsheet with all (or most of his expenses) on it. I want him to document everything to the last cent he spends his money on but his resisting doing that as he thinks its a pain in a bum to do and is probably afraid to do it.

Third step, get the lower interest rate card and cut it up. There is no point getting this at the start if he hasn't already identified the core problem which is his spending.

He only has one credit card at the moment (other than the one with $8k on it) and it's got a $2k limit so he's mostly heading in the right direction.

Fourth Step, Work out a routine/habit of regular payments until the debt is cleared and sticking with it. Once he achieves this... he will be a changed person.

I am very confident if he can clear the debt he won't get himself in this mess ever again. Mostly I am just worried about him going out and spending more on new debt (he's got a wedding coming up very soon) and never getting on top of it.

Good luck, I wish you both well.

Thanks buddy

I wish us well too

 

[tobe]

www.debtorsanonymous.org.au/

 

[pdawg]

Mostly I am just worried about him going out and spending more on new debt (he's got a wedding coming up very soon) and never getting on top of it.

This explains alot - Change step 1 to He and his fiancee need to admit they have a problem.

They need to be in this together in all the steps or there will be relationship strains in future as well I guarantee it.

 

[Strannik]

can you even refinance a private debt?

 

[Sunfish]

Is this thread still going? In the time it has been discussed here Mrs Fish and I could have repaid the debt in full on $150k/year. (Well nearly. )

Why do people on high incomes need advice on survival? Same people prolly look down on battlers.

 

[WinstonWolfe]

Qaz, I've been rolled by two 'closest' friends.

I've just read all of what you have to say, and I'll tell you now, imho, this guy doesn't consider you as close a friend as you consider him.

If there is a marriage coming up, you are stuffed. The guy is going to have so many expenses coming up and 're-prioritizations' that you are going to be shuffled to the bottom and kept there.

Why is it, that you are on a forum asking for help and he isn't?
Why is it he hasn't done the research to refinance the debt?

IMHO, the best thing you can do is get your self respect back and tell this 'mate' he is no longer a mate until he pays it back. I bet you even if you did this he won't pay it back. The guy obviously has no concept of negative reinforcement for poor behavior.

Mate, every day he isn't paying back, is another day he has his foot on your neck and spitting on you. Deep down inside, the guy sees you as weak, a light touch, someone who can be shuffled to the bottom of the deck every day.

Wake up. the guy obviously has a habit of some sort that takes precedence over his friendship with you.

Tough talk but think about it this way. This guy is stealing money from your children, and you have to build the anger to not tolerate being treated like a door mat.

And here's a word of advice about lending to anyone.

Never lend money unsecured.

Preferably lend it against an appreciating asset, like property.

Don't make the value of the asset any higher than 50% above the loan value, otherwise a judge will think you are extorting in claiming all of the asset.

And even when you do secure it, realize it isn't secured. People can do 10 2nd mortgages without any of the others knowing. You don't find out until you try to make a claim on the asset, which the first mortgagee will probably get all equity on anyways.

Consider you have gotten out of it cheaply. I know people who have lost over 400k in similar circumstances.

 

[D.T.]

No offense to your friendship, but how do you know he won't take your 22K (multiplied by how many people he's shown the repay spreadsheet to) and relocate? Even with written agreements in place it can be hard to enforce.

 

[Dazz]

I'm a big fan of Judge Judy. Some people may not like her, but in her late 60's she's literally seen 10's of thousands of these cases. Hard as nails, tough and practical.....no BS entertained.

In every single case like qaz finds himself in, when she is feeling generous, she lets out little pearls of wisdom. This is what she says about lending money to friends.....remember this is after seeing 10,000 or more cases ;

1. If you want to see your money back - DO NOT LEND THEM ANYTHING.

2. If you value their friendship, and you have the money, then gift it away and never ever ask for it back. Don't call it a loan, don't set up repayment plans and never expect anything. A pure gift. Gone. Vamoose.



Your option qaz of trying to make a 22K loan, without security, without signatures, without drawn up contracts, with recourse measures is farcical. You never had a ghosts hope. You are riding on your friends integrity alone, and she's an empty cupboard.


In the immortal words of Bruce Willis in Pulp Fiction - "Zed's dead baby, Zed's dead."

 

[D.T.]

In the immortal words of Bruce Willis in Pulp Fiction - "Zed's dead baby, Zed's dead."

Can i have his chopper?

 

[cloudyday]

Here's an interesting story of poor spending habits:http://forumserver.twoplustwo.com/34/other-other-topics/does-earning-65k-per-year-mean-youre-poor-788923/

Good read, thx for the post.

Qaz, I've been rolled by two 'closest' friends.

I've just read all of what you have to say, and I'll tell you now, imho, this guy doesn't consider you as close a friend as you consider him.

If there is a marriage coming up, you are stuffed. The guy is going to have so many expenses coming up and 're-prioritizations' that you are going to be shuffled to the bottom and kept there.

I agree 100%. There was a time when we let everyone borrow money but people don't pay you back on time and when they do they always put a bad face on. You won't see your $$ for ages, trust me.

 

[BayView]

Why do people on high incomes need advice on survival? Same people prolly look down on battlers.

A high income can be mutually inclusive of no financial training, and often is.

 

[kathryn d]

You need to get something in writing while he is still your friend.
Have the amount of the loan, interest charges, and payments made.
Start with a repayment plan.Any amount you want, just make sure he signs something,
When he stops paying, and he will, you will be able to take this to court and hopefully start garnish his wages.

This person will never be your friend again, to the same degree as before you lent him money.
He will get himself back into debt, if he does manage to pay this off.
Sooner or later he will declare bankruptcy.

Has he started avoiding you yet?
Afterall, if he buys something, won't you be thinking, "why didn't he pay me?"

A friend wouldn't make you feel this way.

 

[.toe]

According to Bernhard Salt quoted in The Age a week ago (it's not online, but it might be on that ipad app thingy), there is a growing trend of 'poor rich', young inner suburban professionals (often IT), on high income, having lived with mum&dad til 30 & now trying to buy a house in the next block, but can only just afford to make ends meet.

I dont know if your friend fits into that category qaz, but I think you were on the right path with the book, just ramp it up a little. Your friend needs to realise a high income job may not last for ever, industries change, circumstances change. But getting stuck with a massive mortage plus more debt and a family to entertain could be slow torture if they're just making ends meet. Better off using some of that income to create wealth & passive income. Tightening the belt to pay of that debt could be the start of something pretty great for your friend.

The thought of a move away from a future full of headache to something fullfilling might be enough to motivate some to consider renting a little further out on the railway line and putting a tenant in that inner suburban pad till they have a couple more IPs and a developement under way

There's a nice story in 'Rich Dad, Poor Dad' about how a father wasn't sure if it was the right motivation to buy his son a car. After pondering it for a while, he gave his son a subscription to the Wall Street Journal and a few thousand dollars which the son had to invest to make the money for the car. The kid got engrossed in learning about markets, and though the kid was down some of the money, the father felt it was the best investment he'd made in his kids education.