Your Questions About How To Pay Off Debt In 3 Years

Laura asks…

We want to buy a home but we have a $10,000 loan out to pay off debt how do bankers look at this?

We also have a car loan that will be payed off in 3 years. Does our debt need to be payed first befor they look at approving us for a loan. We have steady income.

In Minnesota
It’s not with debt consolidation, already tried that first and learned the hard way. We went to a bank are credit is so so could be alot better but we are working away at it!

richmama answers:

The amount of this debt would probably have little impact, but the circumstancing behind it may. If you wisely consolidated debt into a loan with lower interest and better terms, and your history is good, then you should be fine as long as your debt to income ratio is not too high. If your “loan” is actually a negotiated consolidation plan, you would likely be viewed as a substantial credit risk.

Sandra asks…

How do i pay down over $7000 in debt making $10 an hour and raising 3 kids?

I need help paying off some debts that includes credit cards,hospital bills,overdue bills and misc.. I am raising 3 beautiful children working and job making $10 an hour. I need to at pay these debts off in at least the next two years.

richmama answers:

If your credit card bills are in collections, they sometimes make discount offers in order to clean off their books. Many times the discount is 40-60% off depending on how high the bill is.
On your other overdue bills, have you tried to call the companies involved to setup a payment plan? I recall having to do that and most of them were very willing to work with me. You can sit down and figure out exactly how much you make per month (from past pay stubs), and your normal monthly expenses, then you would know what you could afford to pay towards the overdue bills.
I am also including a link to a non-profit agency that may be able to help you, or at least guide you further.
Hope this helps!

John asks…

When cleaning up credit & paying off old debts, is it better to pay debt in full or can I pay a settlement fee?

My husband has two old debts, each about 3-6 years old. It would be easiest on us financially to pay the reduced settlement on these debts than to pay in full. How would paying the settlement fees on the debts vs. the full balance affect his credit score? Keep in mind, our goal is to but a home in the next 6 months & hope to bring his credit score up as best possible & as quickly as possible.

richmama answers:

If he has settlements on his record, unless you can afford to buy the house using your own income, mortgaging a house in the next six months is probably not doable – even the FHA wants a clean paying record dating back 2 years.

In any event, both a partial settlement and a full settlement will continue to hurt your credit, but a full settlement will hurt less. In fact, you may be able to do a full settlement in exchange for a deletion. This usually only works when dealing with collection agencies and not the original creditor. A partial settlement in exchange for a deletion will in almost all instances not be agreed to by the creditor or agency and will remain on your record as paid and charged off (which looks worse than “paid in full but late”).

James asks…

Im 24 years old, I have 10K in my 401K. I need 3K to pay off debt, can i take out without it being loan?

I really need to pay off some debt, time isn’t really an issue for me since I’m 24 and already ahead of the game. My company matches 5 percent which is what I’ve been contributing and the match is immedately vested. There is currently 10K and I need 3K. How do I take it out without 1- being overly penalized 2- it not being a loan and 3– it not affecting me too much in the future.

richmama answers:

Let’s see, 10K in your 401 and you’re 24yrs means beside the $3000.00 you take out you will be hit with a 10% early withdrawal penalty plus 10% income tax which totals $3600.00 altogether leaving you with $6400 balance. Try to think of another way so you don’t shrink your retirement fund, however, since you are still young there may be a way of paying it back by maybe doubling up on your 401k contributions to catch up and replace what you took out. But there is no loan from a 401k so good luck…

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