Are You Drowning In Credit Card Or Student Loan Debt

1. I am drowning in credit card and student loan debt. How do I get a debt consolidation loan to pay it all off? How much can I get?

First,sit down and figure out how much you owe altogether,then go to your bank and talk to a loan officer.Assuming your credit is acceptable,the bank will loan you a lump sum of money that you can use to pay off your credit cards and other high-interest debts.Keep in mind that you must begin paying back the loan immediately,with interest,in agreed-upon monthly installments.Typically,however,the bank's interest rate and fees should be lower than your credit card interest,so you can end up saving a lot of money.
The amount the bank will lend you depends on your income.Usually,a bank assumes that you will be able to put aside up to 36% of your gross income (before taxes) to pay your debt. So,if your salary is $45,000,the bank will assume you could use up to $18,000 of your annual net income for loan payments.That's the amount the bank will probably loan you (unless they subtract existing debts,such as a mortgage or car loan,out of your gross salary before calculating that 36%,in which case the amount of your loan will be lower).

2. If I get a debt consolidation loan,isn't this just going to put me deeper in debt?
Not necessarily.While at first glance going deeper into debt seems like the last thing you would want to do,it actually makes a lot of sense to get a debt consolidation loan,but only if you can borrow the money at a lower interest rate than what you are paying on your other debts,and only if you stop racking up new debt in the meantime.

3. Is it better to pay off my credit cards first before I start putting money into my company's 401(k) plan?
Many experts suggest that you do both at the same time.Enroll in the 401(k) as soon as possible,up to the amount the company will match (assuming there is a match),then apply all surplus cash flow toward knocking down your credit card debt as soon as possible.