Your Questions About How To Pay Off Debt Fast

Betty asks…

Pay off high interest or lowest balance first?

I’ve heard a lot of conflicting information regarding paying off credit card debt. Is is easiest to get credit card debt paid off faster by paying off your highest interest credit cards first, or your lowest balances first?

Curious to know if anyone has tried either of these methods and how it worked for you?

richmama answers:

I would agree with the first answerer when he says that mathematically, it makes sense to pay of the highest interest first. However, math doesn’t always work. Getting out of debt is more about psychology and behavior rather than math. Paying off smaller accounts first creates mental momentum. Getting a quick success makes you hungry for more. Plus it frees up monthly money which you can roll over onto bigger accounts.

Mark asks…

What is the best way to pay off our debt?

My husband and I just filed our taxes. We are going use part of the refund to pay for car repairs and catch up on rent.

We haven’t decided how to spend the rest. We don’t know if we should…
a) catch up on all of our monthly bills
b) pay off all three high interest credit cards
or c) pay off half of our medical bills that are in collection agencies (We will only get enough to cover half)

Which option is the best? We want to pay off our debt in the fastest, most efficient way.

richmama answers:

Catch up on your rent first. It wouldn’t matter much about the other debts if you are homeless.If there is a chance your car will be undriveable pay to have it repaired or buy a used car. If you mean utilities etc. By catching up on monthly bills that should be your second priority. Again you need lights and water right now. If you still have the money pay off all your credit cards or at least down to 35% of the credit limit..that looks best on your credit card. Do not to continue to use them or you’ll be right back where you started. Having credit cards maxed out, the bill is up to the credit limit, will go against your credit.

Mandy asks…

How do you pay off an old debt once they have done bankrupt?

I am needing to pay off an old ambulance bill for like a 100 dollars, but they went bankrupt two years ago and no longer exists. I can not find any information about their debt collecting agency from the hospital I was brought to or anything. How can I get this off my credit fast?

I am trying to get into the airforce, thats why I need it off fast, by the way.
I ment to type gone bankrupt, not done.

richmama answers:

You need to dispute the debt with all 3 credit bureaus. You can go online to equifax, transunion & experian to do this. It does take awhile though 30-45 days. The credit bureau will try to contact the creditor to verify debt owed. If they can’t they are required by law to delete the account from your credit. Good luck!

Chris asks…

How to pay off credit cards enrolled in a debt management program?

I have been in a debt management program with a local credit counseling service for about 8 months. My parents have offered to co-sign a loan so I can pay off the cards. The loan with the bank is a lower interest rate than the cards and will pay them off faster with a lower payment each month. Should I pay the cards directly or go through the credit counseling service? Which is better for my credit score?

richmama answers:

The Credit Counseling company will probably get you a better price in the long run because they will negotiate a lower rate than you can. But, you are being charged a very large amount of compounded interest on every dollar that you owe them for every Month that the amount is owed. Let Mom and Dad help IF the interest rate and terms are better than you are currently paying the credit card companies. And, if you can afford to pay all of your bills iccluding that payment. Remember that the credit counselor is making money on you, they will not always counsel you to your advantage.

Powered by Yahoo! Answers

Your Questions About How Do I Get Out Of Debt Review

Ruth asks…

I work with a firm that offers services to small businesses, how do I approach them?

I work with a company that offers services to small businesses (less than a 100 employees), as well as those that are self employeed and work out of their home in many states.

Our services are designed to protect and grown businesses by giving them access to services that BIG business enjoy, such as consultations with Accountants, Tax Advisors, HR Directors, IT Managers, Hosting a website and putting it together with unlimited changes. In addition to all of this my firm is there to protect the business legally by offering consultations, contract review, debt collection, and representation in civil suits among a few other things.

I am very excited to be involved, I am just not sure how to approach my target market. It seems people are so inundated with information that they are in a blur or they can’t see how so much could be offered for so little. I need ideas of how to get them to see it, but more importantly see me.

richmama answers:

Have you thought about pay per click programs? The two biggest, I think, are Yahoo! And Google

A few free resources – check out the sources box for links:

1) Create a blog pertaining to your field

2) Use Yahoo! Local & Yahoo! Groups – Be sure to read the TOS for each one!

3) Write articles pertaining to your field and/or expertise.

4) Advertise on Craiglist

Also, consider signing up for an affiliate program. These programs enable you to advertise on other’s sites (your affiliates) and once a sale is made to you, your affiliates & the program are paid a commission.

I listed a few handy sites & articles relating to marketing, promotion & advertising. Here are some book titles that are relevant:

* 301 Do-It-Yourself Marketing Ideas: From America’s Most Innovative Small Companies by Sam Decker
* Off The Wall Marketing Ideas: Jumpstart Your Sales without Busting Your Budget by Nancy Michaels, Debbi J. Karpowicz
* Guerrilla Marketing for Free: Dozens of No-Cost Tactics to Promote Your Business and Energize Your Profits by Jay Conrad Levinson
* Entrepreneur Magazine’s Ultimate Small Business Marketing Guide: Over 1500 Great Marketing Tricks That Will Drive Your Business Through the Roof by James Stephenson

Hope that helps! I wish you much success & happiness in all your ventures!

Helen asks…

Can Chapter 13 bankruptcy help my situation?

I‘ve had a rough year unfortunately. This year started out great, but came January 5th my world started crumbling. I found out I‘m getting laid off and then an hour after I found that out, I turned my head for a split second and in that split second, the cars in front of me completely stopped and by the time I looked up I smashed into a Honda Civic and rammed it into a tow truck and damaged both cars. In one day, my job, my car, and my bills got worse like that. But hey, I survived the crash so I have something to be thankful for and no one else was hurt. The worst news is that my car insurance cancelled on me in November, but I didn’t find out until December 27th. By then, I didn’t have the money to get new Car Insurance, I was strapped on bills already. I had planned on getting Car Insurance January 9th when I got paid, but obviously it was a bit too late. So with no car insurance, my car has sat totaled in my driveway since. The cost to fix it would be over $8K. A lost cause indeed. For months I‘ve been trying to find a way to survive my current and new debts and I was lucky enough to find a great job that pays $60K a year as a IT consultant. Unfortunately, with as much bills as I owe, its still not enough and I‘ve been living on $100 a week for months now trying to pay these debts, but unfortunately other bills have come up, like they always do, and with theats of creditors and the Auto loan suing me and garnishing my wages, I‘m beginining to think that my last resort is Bankruptcy. Of course, Chapter 7 won’t work because I make too much money now and there is no way I‘m letting this job go as I spent over 2 months searching rapidly and luckily craigslist saved me again. I believe though that I qualify for Chapter 13 bankruptcy which would allow me to create a more affordable repayment plan and protect me for up to 3 to 5 years from creditors coming after me. I‘m no expert so I would like someone to review my debts that I‘ll list below and let me know what they think. Any help would be great. Thanks

Here is all my debts:
-My Auto loan (Which is the worst decision I ever made) balance is $13,500.
-The civic I hit into the tow truck was totaled. I owe $8200
-The tow truck has $2100 worth of damage that I‘m responsible for too.
I owe $2000 on a credit card. Another $900 for another credit card.
-Another credit card (That I let my Mom open under me) $900
-Overdrawn Checking account $800 (Wells Fargo is out to screw you. $35 Overdraft fees and they always seem to put all your transactions before your deposit and direct deposits)

That brings the total to $28200. If I had 3 years to pay this off with no interest getting added I‘d have to make $783.33 monthly. If I had 5 years, all I would have to make is $470 a month. I‘m not sure if its that simple though. It never really is. Also my auto loan is a secured debt and I‘m not sure how thats effected and if Chapter 13 protects me against that. Any feedback about my situation would be great. It’s pretty bad, but I‘m at the point now where doing a bankruptcy would be relevant as I have 2 more months before these bills start coming after me trying to garnish. Thanks in advance

richmama answers:

Yes, chapter 13 will protect your assets from being seized by creditors to satisfy debts owed to them by you. You can get a bankruptcy kit that was prepared by a lawyer in your state that includes a book that will guide you and all the legal forms you need at { }.

Sandy asks…

Debt Consolidation? Bankruptcy? What should I do!? :-(?

In desperate need of a kind soul with lots of financial knowledge and a the time to read my story.

Today, I found out the hard way that my wife of 1 year (girlfriend/fiancee of 7 years) is in a LOT of credit card debt. She had managed to keep it from me all this time but today checking the mail I saw something that peaked my interest and confronted her.

After a lot of yelling, cooler heads finally prevailed and I realized the situation needs to be addressed NOW. She has about $9,000 in debt racked up among 8 different credit lines, and the interest rate on a couple of them are insanely high (20%!).

I have never had any type of financial issues so I am at a complete loss on how to handle this. As it is, the majority of her paycheck goes to just paying the minimum payments and with the high interest rates, the principal amount is barely going down. The debt will never get paid off this way!

I‘ve read mixed reviews about using debt consolidation. Some say it’ll lower your payments and put everything in one convenient bill but some say it’s a total scam and will destroy your credit.

Some say Bankruptcy is a better option but at this point she’s not deliquent on any of her accounts. Like I said, she CAN pay the minimum each month, but it leaves her very little left and the debt isn’t going down very fast.

I‘ve also read that you can call the various credit card companies and negotiate a lower interest rate, but I‘m not sure they would do this since she’s still paying them every month.

Lastly, I heard going to the bank and trying to get a debt consolidation loan yourself is a good idea. I‘m not sure if we’d get enough to cover the debt because I have no idea where her credit is at but so far this seems like the most sane idea.

Ok, that being said, please help! 🙁

We have already resolved to buckle down and do a budget. I‘ve always been able to keep a budget but she can’t, but that’s going to change now that I actually KNOW about this debt. But right now I‘m wondering what the best course of action is to get us out of debt ASAP! It seems that just paying the 8 credit card companies as much as we can every month will work but take a while. I‘m in for the long haul but if there’s a quicker way I‘m up for it!

Thanks in advance!
Thanks for you quick and concise answer to my debt question, Rick.

Just a follow up regarding consolidation: What if we were to go to the bank and get a loan for $9,000 (roughly the amount owed to the credit card companies) and managed to get a lower interest rate than the credit cards? We could then pay off all the credit cards and instead have one loan with the same principal amount but a lower insterest rate. Wouldn’t that essneitally be trading the high-interest credit cards for a lower-interest loan?

Thanks again!

richmama answers:

$9,000 is not a big deal at all.

If any are seriously past due, you can call them and make an offer for much less than she owes. Just make sure to get the agreement in writing, then mail a money order (not a check) along with a copy of the letter. Keep the original letter and copy of the money order FOREVER.

For the rest, make all the minimum payments every month. Take EVER EXTRA DOLLAR you have and put it to the lowest balance. Once that is paid off (which should be quickly), start applying that amount to the next one. Continue the debt snowball until you are out of debt.

To do this you have to cut out ALL unneeded expenses. Don’t eat out, don’t buy new clothes, get rid of the cable, get rid of the cell phone, etc..

If needed, get an extra part-time job (or two).

Just buckle down and pay it off. IF you booth work hhard at it you could easily pay it off in less than a year.

In the meantime PAY ONLY CASH OR DEBIT for everything.

DON’T CONSOLIDATE. Rolling everything into one payment does NOTHING to get you out of debt, and it frees up all those credit cards so she can charge up more junk. Your problem is not having to write a bunch of checks each month so consolidation won’t help.

Joseph asks…

How did these debt collectors find my address?

So I have recently moved because of the military and somehow 2 debt collectors found out my address. I monitor my credit report and no one has reviewed my credit report sense the move, so they couldnt have gotten it from there. Any ideas?? I plan on paying these debts soon but I just didn’t want the collectors to know I am in the military.

richmama answers:

Didn’t you leave a forwarding address when you moved? When the post office forwards mail, they relabel the envelope with a yellow sticky that has the new address on it and send it on its merry way. Your old landlord might have even readdressed the envelope; by crossing out the old address and writing in the new one. The mail is then forwarded on to the new address.

Bill collectors however have a little note on the envelope that reads “Do not forward.” In this case, the re-addressed bill is mailed back to the sender who will destroy the old bill and envelope, change the address in their database, and then send you a new bill and envelope. All these can be done without looking at a credit report.

Powered by Yahoo! Answers