Payday Loan Fairy

There has been considerable debate between two specific debt reducing options: debt consolidation and debt settlement (negotiation). I'm trying to decide which is the best option to select if one wants to reduce their financial debt (specifically credit card debt). I'm sure there's pros and cons to both options, however which is more effective? Please advise.

depends. If you can make the payments and have good enough credit You can consolidate all your debts into one. Pile cash on it till its gone. As long as you are making the min payment as agreed then Your credit will not take a beating.
It would be best just to list your debts smallest to largest and pay off the smallest first while making min payments on the rest. Then after you pay off the smallest take that money and pay the next smallest debt.
Most People will tell you to pay the highest interest first. Interest rate is not the problem. Its the spending. If you work from smallest to largest you will see progress faster which will keep you motivated to move on to the next.

If you cannot make the payments, thats when you have to go with a settlement. It will trash your credit.
I wouldnt use any company that you have to pay. Most if not all of these companies will not pay your creditors for months and then try and settle for less. No special skills. They just dont pay. Even the companies that have the word "Consolidation" in thier name.

Remember if you use a some company and they dont pay your creditors. You, and you alone will still be responsible for the debt. Your creditors will come after you and not the company you hired.

2007-10-30 20:44:07 by Roderick C

There are many ways to reduce debt. Learn strategies to reduce debt from a registered financial consultant (RFC) in this free personal finance ...

I'm currently working on my PhD, but lately, as my student loans skyrocket, I worry if I am making the right choice. I know you folks can't make the decision for me, but would you stay in school and worry about the debt later? Or, would you drop out, and stop the debt from continuing to accrue?
When I finish my PhD, I will be close to $100K in debt.

Well if you wind up earning 130k a year,is that debt really that big?

2007-07-16 21:04:41 by TwinkaTee

remember that currently the deficit si around 9,000,000,000,000 so thats alot of new taxes or reduction in spending seems all i here is the tax issue

One solution would be to actually lower taxes on those who make less and significantly increase taxes on the wealthy. Another thing that could be done is eliminate federal aid of ANY kind for illegal immigrants and do more about welfare fraud (the FLDS comes to mind), They could re-vamp the welfare system and people on welfare (if they can't get a legitimate job) could do daycare for the govt. pick up litter on the streets, do some general janitorial work. Not just sit on their butt and get paid for popping out children.
Sorry if I sound bitter, but I had a good job and became permanently disabled, and I paid into Social Security my whole life and am now living on apx $800 a month. I don't like being unemployed, and it just pisses me off that some B*tch (maybe illegal or not) that has put little or nothing into Social Security is out there driving a new car and getting food stamps and probably more money than I do. Plus free health care (I still pay 20% & when a person has major surgery it costs an awful lot)
BB
)O(

2008-05-17 12:44:43 by mark y

2008-02-16 20:46:10 by QuestionsRMe

My wife and I both have substantial student loans. However, I consolidated mine at 3.5%, but her's were consolidated at 8.25%.

Just to pay her interest is $700/month. My payment is $300, with 1/3 currently going to principle. We also have about $8,000 on credit cards at 10% interest.

Our combined income is about $100,000 annually. Right now, I pay the $350 on my loan each month, and about $1,200 on hers. At that rate, her loan should be paid off in around 8 years.

I just feel like I may need to rethink this approach, as it seems like we make a lot of money, but are not getting anywhere fast against our debt.

Oh, we also have about 75G's in our 401Ks and put away 10% of our salary. We're early 30's. Any thoughts on how to reduce this debt more quickly? Some days it feels like we'd be better off defaulting and going to work at MacDonalds...lol
Thanks to everyone for taking the time to provide such great information. Looks like the theme is to pay off the highest interest debt first, while reducing montly expenses.

I am going to stop overpaying my wife's loan until the credit card debt is gone. Also, I think it's time to track just how much money we spend on food and drink each month! Time to bite the bullet.

Oh yeah....wish I could reconsolidate her loan, but that will take an act of Congress. Not really fair that you can refi your house but not your student loans.

Let's step back and take a reality check. You guys are not in bad financial shape at all. You did what you had to do to get an education. You are young, have 75k in savings and continue to save a good portion of your pay. All great things! If you can continue to lower your debt and save at the same time, you're going to be fine.

Now let's talk about the debt. I'd worry about the credit cards first. They are at the highest interest rate and the "worst" form of debt to have on a credit report. I would focus as much energy on getting rid of that $8k. 10% is not huge interest, but it's not great either. I would then accelerate her loan as much as you can. Can you pay the minimums on yours for a while. 3.5% is like free money. Get rid of hers. If you have a house, you could try to borrow on a line of credit, but the rates would likely be in the 8 range anyway.

The one piece of advice I have is do not stop putting the money in the 401k in order to pay down debt. Yes you would debt free faster, but you lose a great tax benefit, the ability to accumulate interest on pre-tax dollars, and the company match.

2007-09-14 08:50:37 by Ten Years Gone

2009-02-21 00:23:20 by mzchristina323