So, About My Debts - Consolidation or Settlement?

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Hey Fat Wallet users! Long-time lurker (shoutout to the savings I've made in the FAQ post. That thing has been a - literal - gold mine for me over the years), and first time poster.

I was originally going to include this in the mega post, but thought it might work better as a standalone post. Mods, just let me know if this is ok!

So, here's my current scenario:
I read an article on Fox Business recently that says the first step in the 'debt-free' process is facing up to your debts, adding it all up, and finding out just how far underwater you actually are. Fun! So, without without any further delays, this is where I am at the moment: 

Credit Card #1: $8,000 @ 13.99%. Due June, 2018. 
Personal Loan #1: (Car repairs. Don't ask. That's another - depressing - story...): $4,000 @ 11.50%. Due September 2018.
Personal Loan #2: $750 @ 10.5%. Due December 2017.

So, that's my current situation. What I would love help with is...where to from here?

Don't worry, I have done research! At the moment I'm weighing up between Settlement or Debt Consolidation. I just can't really decide which is best for me with my current finances. Posts I've read like this one ( https://nzcubaywide.co.nz/info/blog/struggling-with-debt-3-proven-ways-to-take-action-today/ ) mention Settlement being reserved for those who are in pretty deep, but I'm not sure how 'deep' that actually has to be. Does that apply to me? Is Consolidation better? A third option I'm missing completely? I'd considered the so-called 'Debt Snowball' method, but just ended up confused by how all...that...works. 

Anyways, I'd love any input on this or ideas from the community (or other resources I should check out). I'm hoping to start taking action on this fairly soon, so any thoughts would be great. 

Thanks! 

 

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What is your current income and expenses?

Those are all pretty expensive debts, your best course of action is probably to cut expenses and raise income aggressively until those are paid off entirely. Income will also be a factor in your options for refinancing/consolidating or getting settlements.

In the meantime, make minimum payments on all of the loans and then put everything else you have available either toward the Credit Card or Personal Loan 2. The credit card is your most expensive, but the personal loan is smallest and due in full first.

Missing income and living expense information. You'll need that to get valid input.

How deep is deep for settlement basically amounts to how likely they think they are to get more money out of you and how long they think it will take to do it. Consolidation is a bad idea if you lack the self-control to avoid getting back in the same situation (but deeper) with your newly-found freed-up credit limit.

Debt snowball isn't rocket science. It's a Dave Ramsey proposal, of which opinions here, as most places, run the gamut, but it just amounts to making minimum payments to stay current on everything except socking all the money you can free up (without depleting a $1000 cash cushion) at the debt with the smallest dollar value. It's not mathematically optimal, especially in a case like yours where the biggest debts are also the highest-interest. However, anything works (eventually) provided you can stick with it, and it's based on the idea of getting "quick wins" paying the early debts off as soon as possible to motivate people who might otherwise fall off the wagon.

You're linking an article from New Zealand.

Are you from New Zealand?

If you are then most of us will have no idea how debt is handled there. If you aren't then that article may not apply well to you.

You can try paying off the higher balances with another credit card that has a 0% APR balance transfer promotion. You'll most likely pay a transfer fee of 2-3% but still beats paying 12%. Only catch is paying off the new card before the promotional period is up. Rinse and repeat.

Thanks for all of the responses! That article was just one example re: a general overview. I've been reading more location-specific (currently in the US) comparisons too, though that seemed to be the most succinct.

Income wise, I was sitting at just over $80K / Year last time I checked. Though I still have to run the numbers in terms of expenses and what I'm putting out (ugh. Rent!). Will grab that info and get back to you all. Thanks for the help so far!

You make more than enough to easily pay these bills off.

13k on an 80k salary can be paid off in under 6 months. Where's all your money going?

jd2010 said:   13k on an 80k salary can be paid off in under 6 months. Where's all your money going?
  Exactly!
BTW, what does this mean: "Credit Card #1: $8,000 @ 13.99%. Due June, 2018."
The due date part needs explanation.

What is your credit score? One option is to BT these to lower promotional APRs and pay them off soon. But 13k is not much for your income and even if the BT doesnt work out, you should be able to knock this off with some financial discipline.
 



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