How to pay off debts??

Question

HELP ME!!!!! i have several accounts in collections. would it be a good idea to to make payments on my debts with online banking to the original creditor or collection agency? or should i send the original creditor or collection agency money orders or cheques when i have the money to make a payment??

Answer 1

Once it is in collections you must pay the collection agency, the original creditor sold your account to the collection agency.  I would pay with money orders and make sure to keep your copy include your account number.

Answer 2

Original creditor.  Keep a copy of all monies that you send them.  If you are able to negotiate a lower interest rate, amount owed, etc. make sure that you get it in writing.

Answer 3

Send your payments to the original creditor.  Send money orders if you have bounced checks in the past, otherwise just use your checking account.  As far as your future, there are some things that you can do to get out of the quicksand.

Until you get your debts paid off (if you can with your current income in less than six months) or to pay them off faster, seriously consider getting a temporary part-time job and use ALL of that paycheck to pay off your debt faster. Have a garage sale or use Craig's List or EBay to sell that extra stuff that you have around the house and don't use/need. It is better to have one "no fun/no time" year and be free of the quicksand of debt than to have a "no fun" decade and slowly drown in the quicksand of debt. Stop using credit cards and pay CASH for everything!

1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut you spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Make a list of all of your debts in order of highest interest rate to lowest interest.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :

Debt #1 (highest interest): minimum payment+ extra payment

Debt #2 (middle interest): minimum payment

Debt #3(lowest interest): minimum payment

Debt #1: paid off

Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

Debt #3: minimum payment

Debt #1: paid off

Debt #2: paid off

Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have you emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. You employer probably matches at least part of your contribution so why give up free money. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.