Getting Cap. 1 to Lower Interest Rate

[meinnc]

Hello,

I received a Chapter 7 discharge in August of 2010. It went very smoothly and I was happy to be relieved of about $26,000 in debt. We kept our house.

My husband was not included; we wanted to preserve his credit. He now has a balance of about $7,000 on Capital One and the interest rate is around 22%. We always pay the minimums but at this time cannot afford to pay much more than that. At this rate it will be 20+ years before it is paid off.

We have called asking for a rate reduction several times with no luck. They always say "no offers at this time."

I realize they know they have us by the tail but has anyone here had any luck getting Cap. 1 to lower an interest rate? Would threatening bankruptcy help or would that make it worse? How about not paying? Not really sure what we should do. Transferring is out of the question, as I have very little credit and my husband's credit seems to be tapped out.

[btbeme]

Sorry, but you have invited me to stand on my soapbox for a few moments of stern lecture and opinion...

It isn't a credit score, as you are discovering - it is a debt score. You get scored on how well you handle debt by having debts. The single most onerous type of debt is a high interest rate unsecured debt, commonly known as a credit card. That type of debt is what really really helps you to develop a better debt score so that you can score some more debt.

And so it goes, until such a day that you have used too much of the debt that you have gone into debt to secure so you can get more debt overhead room. That day, you become a debt risk, and you prove that you have achieved that status by creating more debt and showing that you cannot afford the debt that you have, because you would go more into debt by paying your debts in such a way that you can avoid default.

Some people borrow and create more debt so they can pay off debt. Unfortunately, this does nothing helpful to their debt score, and they are rewarded by having their debt become more expensive because of the expressed reason that they can no longer afford their debts.

Whew! If you can wrap your brain around that pretzel logic you are a smarter person than I. But it is all true.

Unless you are Timmy Geithner and can command the Treasury to crank up the printing presses so you can pay this month's bills, you have but two choices. One is to buckle down and pay that card off, which is a lot easier once you shred it and close the account. Sell blood if you have to, but pay it off. 22% is a good investment rate, which is exactly the investment rate of return that you are getting when you pay off a 22% interest rate card.

Second choice is to travel the road you have already traveled. Not sure that 7 grand is worth that pain, is it?

I won't say more that that, other than I see that you do properly register it as a "we" debt. So don't ask CapOne (see how that actually spells "Capone"?) to help you, just buckle down and pay it off, together.

[LadyInTheRed]

Threatening to file BK will not get them to decrease your rates. Stopping payments is more likely to result in an increase in rates. It may also eventually result in a settlement offer which will require a lump sum payment and may have income tax consequences.

I hope you have both stopped using credit cards. More important than anyone's credit score is that you as a family get a stable footing.

If you stop using credit cards and pay $189.95 per month on that card, you'll be debt free in 5 years. 10 years at $142.08 a month. 20 years at $127.65 a month.

It doesn't take a huge increase in payment to pay off the balance a lot quicker. I have no idea what your income situation is. But, have you taken a close look at your budget to see if you can pay another $15 to $60 a month?

[btbeme]

.