“Dear Steve,
My husband and I are about $27,000 in debt. We have 2 personal loans-unsecured. One will paid off is 2 years and the other in 3 years. Both are current on the payments.
We took out the loans to pay off debt, but still got ourselves in debt. We have learned our lessons on this.
We have 3 credit cards, one is current on payments and the other 2 are 3 months behind. I can honestly say that my husband and I do not splurge. Over the past five years we have used credit cards to live off becuase my husand was in school and making very little money. I was working full time, but not bringing in enough income to pay for things.
Then my husband graduated and I left my job to begin an insurance agency (a little regret there, okay a lot of regret. Anyway, we would like to get out of debt in the next 3-4 years. We would like to start saving for our 3 children’s college and save for ourselves. I really would like to learn more about money, investments and so forth, but I know we have to deal with our debt. I have looked into debt settlement and debt counseling.
Suzi”
Dear Suzi,
A debt consolidation loan can work, but only if the underlying issues were addressed and resolved. For example, if the original debt was the result of spending just to make ends meet, then once the debt is consolidated, it will probably happen again. Even after consolidation, ends still need to be met.
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It does not matter much that the consolidation loans are current, because the cards are two or three months past due. Your credit is going to be harmed by being past due and any benefit of the good payment history from the consolidation loans will be more than neutralized.
The only way you are going to break free from this debt without bankruptcy is going to be if you can increase your family income, reduce your monthly expenses or a combination of the both. You simply need more money lingering in your pocket each month so you can pay down your debt.
Without having that extra money any plan is doomed to failure. I can’t imagine that you’d be able to devote more money towards paying down your debt and afford the month-to-month debts when you are so far behind on them now.
I think it is time to look into more drastic solutions here. Especially if you think you’d be able to make it if you didn’t have any of the credit payments to make.
