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Should I Use the Financial Resolution Center to Manage My Debt? – John

“Dear Steve,

I have high interest debt of about $15 K that I would like to manage better. I have two choices: Financial Resolution Center offered me debt relief. Or I can borrow from my 401K, that was recently halved by a divorce. I have enough in the 401K to borrow $15 K from, but that is roughly 1/4 of my 401K.

Should I eliminate my debt now, by borrowing from my 401K, paying myself back (with interest) on after-tax money? Or, should I use the Financial Resolution Center to manage my debt and pay it back in roughly 5 years?

John”

Dear John,

I am not familiar with the debt relief programs offered by the Financial Resolution Center. What type of approach are they talking to you about? Is this a credit counseling or debt settlement approach maybe?

I’m not a fan of taking retirement funds out and using them. It’s hard enough to get them in the darn retirement accounts to begin with.

Are you able to make your regular monthly payments on the debt? Is this just a case of you wanting to get out of debt faster or struggling to get by?

  • If you want to get out of debt faster then take a look at free solutions like Ready for Zero.
  • It might also be that rather than rob your retirement funds you might examine the possibility of a debt consolidation loan to repay the debt at a lower interest rate. In that case I’d suggest you look at LendingClub.com.
  • If the issue is you just want a repayment plan that lowers your interest rate and you are willing to have your included cards closed, then look at a traditional credit counseling program.

If you can, post more information on the suggested Financial Resolution Center plan and your situation in the comments section below.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  • John, you have not let us know if you are behind in your payments or stuggling with the payments on the debt? You have told us that you have suffered a divorce, thats a financial hardship (I’m sure I don’t have to tell you that!) so the questions are: Are you able to make payments on the credit card debt and still pay all of your critical living expenses, has your credit suffered a hit from the divorce, do you want to dump your debt at the expense of your credit score or are you just looking for lower interest rates?

    I would NOT take money from your 401K to pay off unsecured debt. As far as an interest rate reduction, you can usually handle those simply by communicating with your creditors directly, also I would seriously do more research before signing up with any debt settlement company, make sure they are performance based and do not charge anything unless they are successful and as Steve said there are several sites out there now that can assist you without any upfront fees.

    Good luck!

    Dave

  • John, you have not let us know if you are behind in your payments or stuggling with the payments on the debt? You have told us that you have suffered a divorce, thats a financial hardship (I’m sure I don’t have to tell you that!) so the questions are: Are you able to make payments on the credit card debt and still pay all of your critical living expenses, has your credit suffered a hit from the divorce, do you want to dump your debt at the expense of your credit score or are you just looking for lower interest rates?

    I would NOT take money from your 401K to pay off unsecured debt. As far as an interest rate reduction, you can usually handle those simply by communicating with your creditors directly, also I would seriously do more research before signing up with any debt settlement company, make sure they are performance based and do not charge anything unless they are successful and as Steve said there are several sites out there now that can assist you without any upfront fees.

    Good luck!

    Dave

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