Debt question

[RTA Supra]

I've got about $2,400 set aside in my account for some debt that I have. I'm ready to take it out and make some dents in the debt that I owe. I have both Credit Card debt and Student Loan debt. I'm faced with the decision of what to pay first.
I have one account that is currently in collections (Stupid mess that could have been avoided, but it is what it is)

Credit Card debt
Card 1 ~ $992
Card 2 ~ $513
Card 3 ~ $832
Card 4 ~ $547

Total ~ $2,884

Student Loans
Loan 1 ~ $2263 (In Collections)
Loan 2 ~ $7287
Loan 3 ~ $2100

Total ~ $11,650


Obviously I cannot pay off all of the student loans at once, but I would be able to get the collections debt off of my credit history. I CAN, however, pay off most of my credit cards and have them completely gone within a month or so.




Basically I'm wondering if it would be better to pay off the debt that is currently in collections, or pay off all of my credit card debt.

 

[GrimJack]

What interest rates are you paying on each? And can you get your student loan out of collections without paying the entire amount?

Have you considered a debt consolidation service, taking out a single loan from a bank to pay off everything at once, and use the lower interest rate to pay it faster?

 

[RTA Supra]

The interest rates are much higher on the credit cards. They range from 19-29% The student loans are 5-7% but obviously on a higher balance. My credit isn't very great so most banks won't give me another loan to combine the other debt.

 

[BorHor]

By looking at those rates I would say pay off the cards first.

 

[RTA Supra]

That was my first instinct. I guess I'm just worried about having an open account in Collections. What kind of impact will it have on my credit if I pay it off (the collections) vs paying it monthly?

 

[GrimJack]

Have you actually talked to a bank? Many of them are more than willing to do this as long as you agree to close the credit card accounts. The bank wants your business, and as long as you are paying, they make money.

 

[RTA Supra]

I'm currently with Bank Of America and they were not willing to give me the loan. I'm not sure if it's my credit or bad econonic times?

The problem is that now that I'm out of school, it's time to pay everything back. I have a decent job now, but my debt to income ratio is still out of whack. I was hoping to have this 2,500 put me back in the right direction.

 

[IJ.]

^ Was just thinking this as well.

Pay the CC's close em get a Debit card so you can't get in the shit again then talk to your bank explain the situation and make an effort to meet their payment schedule even if it means doing without at times as you won't get a second chance.

 

[RTA Supra]

Appreciate the advice.

Is having that account in collections as bad as it sounds? I'm paying $125 a month payments on it. That would mean I still have about 18 months left on it.

 

[GrimJack]

Tough for us to give you advice on the collections, as that varies from country to country and we're not in the USA.

It might be why the bank doesn't want to touch you.

Up here, I'd leave the one in collections alone, it won't do you any more damage than it's already done, and it's already at a low interest rate. I'd pay off the credit cards, as the interest rate there is killer in the long term, and don't miss any payments on the others, banks don't like missed payments.

Another thing that's probably different... up here, credit cards cannot affect your credit report unless they take you to court, while banks can. So a missed payment on a loan is just as bad as getting sued by a credit card company! But these things change depending on where in the world you live.

To be honest, it sounds like you should find a financial advisor, even if it costs you a couple hundred bucks, and work out a plan to wipe out your debt and fix up your credit report.

 

[IJ.]

Yep didn't want to comment on the collections thing as it's very different Country to country, hopefully someone that knows and is in the US can advise (Mike maybe)

 

[gtsfirefighter]

Get that CC debt consolidated into a lower interest and cut up all those cards. If you need to keep one for "emergency" purposes, then keep the one with the lowest interest rate.

What we've done in the past is applied for a low interest CC and transferred balances to it.

But being able to act on all the advice depends on your credit rating. It's hard to get a low interest anything if you credit sucks.

 

[isnms]

Pay off the credit cards first. Start with the highest interest ones.
Contact Sallie Mae on your student loans.

 

[Dunckel]

You didn't hear this from me.:evil2:

Call the credit card companies and the place you got your student loans through, and tell them you are going to claim bankruptcy because you can't afford to pay them off. They will cut what you owe them in half.

 

[Poodles]

Cancelling credit cards can actually hurt your credit (if you care)

 

[RTA Supra]

Cancelling credit cards can actually hurt your credit (if you care)

I plan to keep them. This may sound really stupid given the situation but I won't touch them even after they're paid off. I've learned a lot since and definitely don't want to wind up in the same boat. I've got a lot going for me so far so maybe in a couple years I'll have enough to some fun IN CASH.

 

[Poodles]

Having credit cards in case of an emergency is a good thing. As long as they don't have an annual fee, you're not losing money in having them...

 

[MkIII_Jeff]

Not sure if they do this to student loans, but if a credit card/personal loan is written off as "bad debt" it is on your record for 7 yrs. If you got the collections loan taken care of, would you be in danger of falling behind on the others/credit cards?

Also look into what laws your state has towards wage garnishment and whether student loans can even be claimed in bankruptcy. If they can't, calling the bank and threatening them w/it will do you no good.

 

[Zumtizzle]

call The Credit Card Companies And The Place You Got Your Student Loans Through, And Tell Them You Are Going To Claim Bankruptcy Because You Can't Afford To Pay Them Off. They Will Cut What You Owe Them In Half.

X2