Question:

I need some advice about debt settlement?

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My husband and I have high credit scores and are not behind on our bills. But are overwhelmed with the amount of debt we carry, credit card debt that is. Should we resort to debt settlement or continue to make minimum payments for the next five years. At this point we can only make minimums. Any advice is appreciated. Any rude remarks will be reported. Thank you

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  1. Look at how much interest you are paying on each debt.

    Pay the essentials, they pay as much as you can afford to pay off the highest interest item first.

    When you have paid this off, attack the next highest, making sure that you meet the minimum payments on the others.


  2. There's a good article at eHow on steps to take to begin tackling your debt.  Take a look at it:

    http://www.ehow.com/how_2326032_avoid-es...

    How to Stop Escalating Debt

    You can also look here for tips on earning some extra cash online:

    http://www.ehow.com/how_2254361_money-in...

    How to make money on the internet, scam-free

    Lastly, here's an interesting alternative to conventional lending...getting a "social networking" loan from Virgin Money (from the same folks who run Virgin Airlines):

    http://www.ehow.com/how_2310995_student-...

    Social Loans from Virgin Money

    Hope these help.

  3. you could get one loan  from the bank and pay off the credit cards with that  so then you just have one loan to pay over a longer time .my mam done this best thing she ever done

  4. Just try cutting unnecessary costs and using that extra income towards cards, or transfer balances to your lowest interest card.

  5. Great question!  The answer depends on your situation, your goals and what's most important to you.

    Let's start with your situation...

    The fact that you have high credit scores and have not fallen behind means you have something to lose (your perfect payment history) if you choose debt settlement.

    But, let's first get clear about exactly how your credit will be affected, because along with the negative impact to your payment history, the other two important areas of your credit, your debt-to-income ratio and utilization, are both greatly improved through debt settlement.

    Remember, credit "score" is not everything...  Credit "worthiness" (your ability to get a loan) is more important, especially long term.

    A question to consider is this: What do you do your credit for?

    Most keep their credit in good shape so they can get into deeper and deeper debt, only to pay more and more interest.

    But is your credit really "good" right now?

    Having a perfect payment history (about 35% of your credit) and a good credit score is nice, but other factors could be crippling you.  

    Let's take a look...

    Debt-to-income ratio is the amount of money that you’re obligated to pay each month towards your debt (that’s your credit cards + your car + your student loans + your mortgage + whatever you have = that monthly amount) vs. your net monthly income.

    Now if that monthly amount is under a third of your net income then that’s GOOD. If it goes over a third then it becomes BAD and it's a problem.



    You can have a perfect payment history (never have missed a payment), but if your debt-to-income ratio is too high then you’re effectively crippled when it comes to credit worthiness, or your ability to get a loan. You’re not credit “worthy”, even though you may have a good credit “rating”.  

    You want to keep your debt-to-income ratio at or under a third to be in the best light with lenders.  Over 45-50% is crippling to your credit, regardless of score, because you simply cannot afford any more debt.

    If your debt-to-income ratio is too high now, then concerns about debt settlement affecting your credit simply don't make any sense.

    The third area of your credit to consider is your "utilization" or "debt-to-credit-limit ratio".  The ways this works is very interesting. This is probably the least known factor that affects your credit, but is just as important as payment history to your score.

    Each account you have has a credit limit and a current balance. If that current balance is less than 50% of your credit limit, that’s a positive factor.  If you have an account that’s over 50% "utilized" (balance over 50% of the limit), then it's a negative factor and bad for your credit worthiness.  If your balances get to the limit, or over the limit, then this is a crippling factor to your credit.

    Take a look at your accounts.. are any balances over 50% of the limits?

    Keep these three factors in mind when evaluating your credit worthiness: payment history, debt-to-income ratio and utilization.

    However, most of the time, worrying about your credit rating when you’re drowning in debt is like worrying about how your front yard looks when you house has just burned to the ground.

    I don't know how much debt you have or what your interest rates are.  These are critical factors in your decision.

    The suggestions about calling to lower your interest rates are good, however, since Oprah popularized this strategy in early 2006 with her "Debt Diet" series, millions of people have called their creditors to ask for their rates to be lowered, threatening to transfer balances etc... The reality you'll find today is that this rarely works anymore, but may be worth a shot.

    Most important is this, the "BIG IDEA":

    STOP paying interest and START EARNING interest, ASAP!

    This is critically important if you ever want to retire, and makes all the difference between a life of wealth or a life of slavery (seriously).

    You mentioned paying minimums for the next five years.  If you could pay off your debt in 5 years with minimum payments, then a) you have a small amount of debt and low interest rates, and b)  you don't have enough debt for debt settlement.

    Take a look at the time it takes to pay off debt with minimum payments if you are paying what the average American pays in credit card interest...

    Number of Years to Pay-Off Credit Card Debt at 19%

    Debt: Pay Off (Principle & Interest): Number of years at 19%

    $10,000.00 $26,276.59 42 years, 9 months

    $15,000.00 $55,370.41 48 years, 11 months

    $20,000.00 $74,464.22 53 years, 3 months

    $25,000.00 $93,557.98 56 years, 7 months

    $30,000.00 $112,651.77 59 years, 4 months

    $35,000.00 $131,745.58 61 years, 8 months

    $40,000 $150,839.39 63 years, 6 months

    $45,000 $169,933.22 65 years, 6 months

    $50,000 $189,027.02 67 years, 1 month

    $60,000 $227,214.61 69 years, 10 months

    $70,000 $265,402.22 72 years, 2 months

    $80,000 $303,589.81 74 years, 2 months

    $90,000 $341,777.43 76 years, 0 months

    $100,000 $379,965.06 77 years, 7 months

    $110,000 $418,152.62 79 years, 0 months

    $120,000 $456,340.27 80 years, 4 months

    $130,000 $494,527.82 81 years, 4 months

    $140,000 $532,712.48 82 years, 8 months

    $150,000 $570,903.04 83 years, 8 months

    While credit is important, CASH IS KING, and CASH FLOW RULES, right?

    So for you to make the best choice, you and your husband must decide what's most important: credit or cash flow.

    Consider your goals.

    If credit is ultimately most important to you two now, then you must cut your expenses to the bare minimum and put EVERY DOLLAR you can towards paying off your debt in an accelerated fashion in order to get out of debt ASAP.

    You'll need an "accelerated debt pay-off plan" if this is the case...

    Accelerated debt pay-off plans come in three main types.  In each, you pay the minimums on each account, and put all the additional money you can afford towards ONE account.  This is often called your "margin".  The three approaches are:

    1) List your debts in order of the highest interest rate and pay down the highest interest account first until it's paid off, then pay down the next highest interest rate account and so fourth, until your debts are eliminated...

    2) List your debts in order of the current balance, paying down the account with the lowest balance until it's paid off, then pay down the next lowest balance account, etc., until your debts are eliminated...

    3) Take the current balance of each account and divide it by the minimum payment (= division number), then list your debts by this division number from the smallest to the biggest, paying down the account with the lowest division number until it's paid off, then pay down the account with the next smallest division number, and keep going until you're debt free...

    Any of these three approaches will usually get you out of debt in about 5-7 years IF you are committed to budgeting and putting as much money as possible towards paying off your debt.  It requires self discipline and long term commitment.  You will have no negative affect on your credit this way.

    However, you mentioned you are overwhelmed with the amount of debt you have and can only make the minimums, so an accelerated plan doesn't sound like a solution to get you out of debt anytime soon.

    Debt settlement can most likely get you debt free fastest.  My average client is completely out of debt in 28 months.  

    Usually, debts are cut in half, and often payments are cut in half as well.  Payments are almost always significantly reduced during the program.

    While debt settlement has a negative impact on your payments history (more so if you've never been late, not so much if you've already fallen behind), debt settlement also has a POSITIVE AFFECT on your debt-to-income ratio and utilization because the accounts are paid to a zero balance on your credit report.  

    You can also do credit repair and credit rebuilding (usually within 6-12 months) after you complete debt settlement.

    Of course, all that money you're currently paying in minimum payments will be back in your pocket, usually within 24-36 months.  What would you do with all that extra cash flow?  Investing these savings to EARN INTEREST can make all the difference for your financial future... and that's the BIG IDEA!

    If you are shopping around for a debt settlement program, BE CAREFUL!  The industry is filled with ignorant sales people who will steer you into a "bad program" for their own gain and your detriment.  I'm serious, watch out...

    *** Read this Debt Settlement WARNING: http://ezinearticles.com/?Debt-Settlemen...

    Hope this helps!

  6. I've been where you are. We consolidated as some suggested here and then my husband lost his job. After losing his job we are now unable to pay minimums. We've cut costs assome suggested. My advice is to try to contact the credit card companys to request a lower rate. Tell them you'll transfer the balance if they don't. Once you get your rates as low as they can get, then do the snowball effect if it'll work for you. If you think doing a debt settlement will put you at ease and give you rest at night, then go for it. I personally am at a point where my credit is messed up. If you're credit is worth saving, I'd wait on the settlement.

  7. There is a huge benefit in going with a debt settlement company in that you can become debt free in a short period of time instead of paying the minimum payments to your creditors which with interest takes quite a long period of time to finish up. A debt settlement company can get you debt free in two year or less. And it would prove more beneficial if you settle it through a debt consolidation company as they are the experts in this field and more often they know your creditor.

    For more details and debt solution you can refer to this source: http://ezconsolidation.com

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