Quick Answer: Avant loan repayment at 32% interest can be included in debt settlement programs where debtors choose specific debts, but credit counseling typically requires including all debts. The high-interest Avant loan likely pushed an already maxed-out budget over the edge rather than being the root cause.
Question:
Dear Steve,
I have a number of credit cards, in most cases able to pay minimum, sometimes more. I have a loan for Avant which is setting me back by charging 32%, which showed up in my bank account, but I used the money and stuck, they won’t give me reduced interest rate.
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Is it possible to select certain credit cards for get out of debt firms, and can I select the Avant loan in?
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Lauren
Answer:
Dear Lauren,
The easy loan from Avant can come with a steep interest rate. But then the rates based on credit scores seem to be similar to other unsecured personal lenders.
The key to this issue is your statement that you were doing okay making the minimum payments on your other cards. That indicates to me you’ve maxed out your life and were just slipping by. You probably were not making any real progress in paying down the other debt and then when the Avant money arrived, you probably used that to make ends meet. I’m not blaming you, just making a best guess.
At this point the Avant loan is just the debt that has pushed you over the edge. It’s not really the underlying issue about your situation.
You ask good questions about how to tackle the debt problem. The question if you can include some but not all debts is a valid question. Typically, with a credit counseling approach, all the debts would be included. With a debt settlement approach, you could pick and choose but that can create issues as well.
But I think you might need to take a further step back at the moment. The most important question you need to ask is what is it going to take to get you back to a point of being able to meet your debts and save money at the same time.
Missing savings while you are trying to get out of debt can be a huge financial mistake. Just use my online calculator to see how much in retirement you might lose.
So the real question you need to be asking yourself today is not how to work a debt relief program but what overall approach makes the most sense.
In situations as you describe I often think bankruptcy can make a whole lot of sense. Bankruptcy is usually the least expensive way to break free from unmanageable debt, in the shortest amount of time, and you can recover afterwards. In fact Those That File Bankruptcy Do Better Than Those That Don’t. Now there is an interesting link to read.
More importantly with a Chapter 7 bankruptcy, which most people file, in about 90 days all your debt will be discharged and it will be the best opportunity to learn from the experience and do better moving forward, and start with a good savings plan.
There is absolutely no substitute for having a savings account with money in it. In cases of emergency you can use your own cash instead of borrowing expensive money. having savings is a key secret to future success.
Most people just flat out have the wrong impression of what bankruptcy really means. So maybe you should read this to better understand it.
The best way to evaluate if bankruptcy is right for you would be to call a couple of local bankruptcy attorneys. Make an appointment and go talk to them to learn more. These appointments are typically free and it will give you a chance to see if you and the office are a good fit.
I just wouldn’t leap to do anything till you talk to that bankruptcy attorney who is licensed in your state.
Know Your Rights: If a debt collector is contacting you, you have legal protections. See the complete list of FDCPA violations collectors commit most often. Use the free Debt Validation Letter Generator to demand proof of the debt, or check this collector’s complaint history with the Scam-O-Meter.
Dealing With Debt? Before you pay a collector, understand all your debt relief options — including ones the collector won’t tell you about. If the debt feels unmanageable, take the 2-minute bankruptcy quiz to see if the math favors a fresh start. Federal Reserve research shows filers recover faster than those who don’t file.
Lauren, I just answered your question here.
Lauren, I just answered your question here.