I have credit card debt of $80,000 after helping to support a family member in need. In the past, I haven’t had problems paying the required monthly payments. However, a promised company bonus did not come through and credit card companies have doubled their interest rates and monthly requirements, making it difficult. I can pay each month, but money is really tight now. I want to pay these off, and wonder if I should just keep plugging along, or try a debt settlement arrangement. What do you advise? – Allison, Wisconsin
It’s hard to pass on helping a family member or friend in a time of need – but sometimes, it can have a major impact on your own life. That means making a choice about the type of changes you are willing (and able) to make in your life. Below, I’ve listed your three main options – and given you some insight into the pros and cons of each.
Cutting down. When you have debt like this that you need to repay, sometimes it’s possible to slow your spending and free up some additional money each month. Now, that’s not to say it’s easy. Making lifestyle changes like this one can be a challenge – but you’ll save your credit score, and learn some new budgeting strategies that will stay with you and keep you out of debt in the future. More…
“I am going to get about $3500 as a tax return. I want to buy a CD at the bank for $1000 and try to pay some of the credit cards debt I have. I have about $13,000.00 in credit card debt outstanding. I also have 3 store cards and 1 credit card that are in good standing but maxed out. What should I do?” – Annette, Pennsylvania
Once you have your emergency cushion in place, paying down credit card debt is a terrific use for your tax refund. (If you don’t have that emergency cushion, put the $1,000 in a money market where you can access it if you need it rather than in a CD.) Take a look at the interest rates on the cards you’re carrying. Use the money to completely pay off (if you can) the card with the highest rate of interest. More…
As a distressed homeowner, should I try to modify my loan, or short sale my home?
-Eve, Florida
By distressed, I assume you mean unable to make your mortgage payments. If you can pay your mortgage – even if your home is one of the one-third in this country that are underwater – then as long as you are not in a position where you have to sell, you can hold on and wait for property values to come back. But if you can’t pay, you’re right to be exploring both of these options.
Let’s run through the pros and cons of each. More…
I am the co-signer on my daughter’s student loans that she has defaulted on. It has gone to the collection agencies and they are demanding that I pay them $68,000 right now. I don’t have that kind of money. What can I do? Do I have any options?
- Audrey, Illinois
Defaulting on a private student loan can have serious effects: legal action can be taken against you, your wages may be garnished and your credit score will likely take a hit. “Just like federal education loans, private student loans are very difficult to discharge in bankruptcy,” adds Mark Kantrowitz, publisher of the websites FinAid.org and FastWeb.com.
My advice to you? Pick up the phone, call your lender and explain your situation. “If your financial situation is so destitute that there really isn’t any reasonable opportunity for you to repay the debt, you should be open More…
Hi Jean, I just read your book, “Pay It Down!” I have $15,000 in credit card debt. I am dedicated to cutting some major things in my life to cut down this debt. My question is, when I save $10 where am I putting it? Do you want me to put it in some sort of savings account, a piggy bank, or a safe?
- Antonio, Pennsylvania
First off, congrats on taking the first steps towards paying down your debts. I think that with the information you’ll find in “Pay It Down!” and your dedication to cutting down on spending, you’re on the right track to financial freedom.
Let’s talk about where to put the $10 you’re saving every day. Ideally, you should be keeping it in a high-yielding savings or More…
Why should you “Pay It Down?” Last week I took part in Portfolio’s “Business Beat” podcast to answer that very question and talk about the new, credit crunch edition of “Pay It Down!”. Listen in on the interview below for my answer.
About a week and a half ago, I released a new version of my best-selling book, Pay it Down! The updated version still includes my tried-and-true Rx for getting out of debt on $10 a day, but it also takes into account the changing times, including the CARD Act of 2009, a tighter credit market, and your tighter wallet. Even if you’ve read it before, there’s enough new that you may want to think about reading it again.
But I also took it a step further, and developed an online program, The Debt Diet, that launches today on this website. More…
This morning on the fourth hour of Today, I was joined by the Hildebrandts, a couple that was able to pay off around $123,000 worth of debt. Watch the video below to hear how they did it.
I have heard you mention credit counseling through the NFCC. There is an agency in my hometown. Can you tell me what kind of help they can give my husband and me? We have a large amount of credit card debt as well as equity line debt. We are paying our bills on time but can only pay minimums. Do they negotiate with the credit card companies on our behalf?
-Lisa, Alabama
Every year the NFCC assists over 3.2 million people who are struggling with their finances. For over 50 years, NFCC member agencies have offered free or low cost services (whether or not you’ll be charged for the help they provide depends on the member agency and the laws in your state) to those wanting to take control of their debt. The NFCC offers confidential help via phone (through their national toll-free hotline), online or in person.
Through credit counseling, the NFCC can help you to work towards paying more than the minimum amount on your bills. During a session, your counselor will address your credit issues and help you find ways to work towards solutions. “Adjusting the budget, decreasing spending and increasing income would be ways to find extra money to pay more than the minimum and get out of deep incredibly sooner,” says the NFCC’s Vice President of Communications Gail Cunningham.
If you’d like the NFCC to negotiate with creditors on your behalf, they can do that through a Debt Management Plan, or it’s commonly known, a DMP. A DMP is essentially a plan to help More…
I am curious about consumer credit counseling. Can you tell me how it affects your credit? Is it as bad as filing bankruptcy?
-Kelly, Oldsmar Florida
You’re right-using consumer credit counseling to manage your debts can potentially affect your credit score. What may surprise you, however, is the fact that when your score is calculated using the FICO scoring model, whether or not you’ve received counseling won’t affect your score. “Any notation on a consumer credit report indicating that the consumer is or has been involved in credit counseling is ignored by the FICO scoring model,” says CardRatings.com’s Curtis Arnold.
However, what you do with the advice you get from your consumer credit counselor is another matter. For example, if a counselor advises you to manage your debt or credit cards a certain way, and you follow through with that advice, it could potentially have a negative impact on your score.
One thing is for certain though; getting credit counseling will have much less of a negative impact on your credit than bankruptcy will. “The negative impact of credit counseling is fairly minimal, whereas a bankruptcy has HUGE negative implications. For example, according to Credit Counseling of Arkansas, your score can drop as much as 100 points if you file bankruptcy,” adds Arnold.
If you decide to move forward with credit counseling, a good way to start looking for help is through the National Foundation for Credit Counseling. The NFCC is a national, nonprofit network of counselors whose mission is to help you get out of debt. Through the NFCC, counseling is available by phone, online or More…
I have credit card debt of $80,000 after helping to support a family member in need. In the past, I haven’t had problems paying the required monthly payments. However, a promised company bonus did not come through and credit card companies have doubled their interest rates and monthly requirements, making it difficult. I can pay each month, but money is really tight now. I want to pay these off, and wonder if I should just keep plugging along, or try a debt settlement arrangement. What do you advise? – Allison, Wisconsin
“I am going to get about $3500 as a tax return. I want to buy a CD at the bank for $1000 and try to pay some of the credit cards debt I have. I have about $13,000.00 in credit card debt outstanding. I also have 3 store cards and 1 credit card that are in good standing but maxed out. What should I do?”
As a distressed homeowner, should I try to modify my loan, or short sale my home?
I am the co-signer on my daughter’s student loans that she has defaulted on. It has gone to the collection agencies and they are demanding that I pay them $68,000 right now. I don’t have that kind of money. What can I do? Do I have any options?
I am curious about consumer credit counseling. Can you tell me how it affects your credit? Is it as bad as filing bankruptcy? 
