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I Racked Up Debt And Struggling With the Minimum Payment. – Peter

“Dear Damon,

Racked up Credit Card debt (50K). Haven’t missed any payments (yet), but struggling to be able to pay down debt more than the minimum payments (about 1300 a month). Barely making minimum payments, do not foresee any significant income increases. Looking to buy-down debt quickly, and free up monthly income for savings, etc.

I have settled debt before (over a decade ago), and eventually, all those negative reports have fallen off my credit report, and I’ve been able to keep it “clean” at least from late payments, etc. But ran into situations that has gotten me into another financial debt (but I’m trying hard to keep it afloat, not missing payments, etc.). I’m also in the market for a home, so obviously, do not want to mess with the credit, but due to amount of debt (pretty much all 5 credit cards I have are maxed out), my home loan approval amounts are quite low, preventing me from considering any homes locally. I’ve never tried credit counseling resources (I’m always getting letters and advertisements from various debt counseling services, most recent being rescue one financial). If I decide to utilize one of these services, how will that affect my current credit rating/score, etc. that I’ve tried keeping clean and brin ging it back to where it is the past decade? I hear from others, that maybe I should try settling directly with the various banks I have credit with, but I”m afraid that will show as a sign of weakness, and they would close me out, or red-flag me, etc. Please advise of my best avenue out of debt and back into savings.

v/r,
Peter”

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The Answer

Hello Peter,

It seems to me that you might not be in the best position to be purchasing a home at this juncture and perhaps it is better to first get yourself out of the debt and put off the home purchase for a few years. You are asking me about two different strategies, credit counseling and debt settlement. Which approach would be better for your situation, if either, is impossible for me to say based on the limited information I have.

A debt settlement approach is going to be much harder on your credit, but if done right, you will pay back less and be out of debt quicker.

As far as Rescue 1 Financial goes, I checked out their website and it appears that they are a sales affiliate for Freedom Financial Network. Let’s just say that doesn’t give me a warm fuzzy feeling and we can leave it at that.

You can hire a company to help you either negotiate the principle (debt settlement) or the interest (credit counseling) or you can do that by working directly with the creditors. Ultimately which option is the proper choice will depend on a number of factors.

If you would like to set up a personal consultation to get into much more specific details, please contact me through my website and we can put a plan in place that that is realistic for your financial situation and balances your priorities at the same time.

I Racked Up Debt And Struggling With the Minimum Payment.   PeterI Racked Up Debt And Struggling With the Minimum Payment.   PeterDamon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at DamonDay.com

If you have a debt related question you’d like to ask, just use the online form.

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About Damon Day

Damon Day
Damon Day is a talented Debt Coach who offers fee based consultations to consumers as an alternative to the typical free debt relief consultations which are nothing more than thinly veiled sales pitches lacking any real information to help a consumer make a good decision. You can learn more about how he can protect you from getting ripped off at DamonDay.com
  • Vin Gambard

    a person’s credit score will drop significantly upon joining a credit counseling program – that, unfortunately, is the down side of credit counseling because when you join and the credit card companies (banks) accept the credit counseling programs proposal, they automatically close all accounts which are in counseling and these accounts may never be opened again, thus your credit report will not only show that you are in a program, but also show that many accounts have been closed all at once. I had to file for chapter 7 bankruptcy in 2004 and I am VERY upset that I bounced back from the bankruptcy MUCH faster – having a very decent/good credit score by 2006/2007 than actually bouncing back from credit counseling.  Had to enter credit counseling because of an unfair interest rate hike by three creditors in July/2009 and my refusal to pay 30% interest on cards which had no late payments, nor were they “maxed out”. Have been in credit counseling since October/2009 and have NOT been able to secure any new credit, but this was NOT explained to me by credit counseling agency (cambridge) Had I known this, I might have taken another approach to this whole situation.

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