Debt Management Program

[Anonymous]

Hi, my name is Tammie and am not new to the forums, but hardly ever contribute to the conversation.

My situation:

I started with a little under 21K in debt and have now reduced it to about $7, 500.

I have a car loan balance of $7,300.

I have student loans in the amount of $10K (they are currently in deferment).

I plan on having my DMP paid in full in 1 year as well as my car.

I have a child who'll be graduating from high school in 2011 and will go to college shortly thereafter <----- if he doesn't get any scholarships/grants, will he be able to apply for student loans or would I have to/or co-sign.

I plan on completing my degree the same year and begin pursuing a degree in Nursing.

I want to be in my 1st home by June 2011.

Here's my dilemma:

I will have an extra $1,000+ a month after paying off my car and DMP debt.

I was told by a counselor that it is in my best interest to save this extra money towards the down payment

of my home and use my "refund" from being a homeowner to start paying down student loans.

I will need to improve my credit rating but am unsure which route to take.

None of this includes my partner's income and he and I are going to purchase this home together:

He has what I feel is little to no credit.

He's currently paying off court fines but has about 3 deliquent accounts.

1 is from JC Penny that's fairly new.... just went to collections.

1 is from Sprint/Nextel which we think dates back to 1999/2000 and they have been sending letters for a settlement

I can't recall who the 3rd one is with, but we've seen letters regarding settlement with them as well.

All of his debt (outside of court fines) is less than $1,000.  Do we agree to these settlements? Ignore them?  What's his best chance of establishing some credit?

[Anonymous]

Wow that is a dilemma.  Well ignoring the debts isn't going to help, his credit will just keep getting worse.  He'll have to pay them off.  To help rebuild his credit faster I'd suggest he get a secured credit card and then use it frequently while paying off the balance every month.  Some of the more experienced members may have other ideas, good luck

[LIGHTNIN]

Welcome to the forums,

First of all Congrats on reducing your debt to 7k !!!!

Before we can help with your partners credit,you need to know what exactly is on his CR's.

Have him pull his free CR's from annualcreditreport.com

By law, you can get a free CR from each of the CRA's every 12mos.

Then come back here and post the baddies with the SOL and DOFD for each account, of course minus the personal info his name,address, etc

GTG talk with you soon

 

[Anonymous]

Hi Tammie

A  debt settlement package typically can reduce payments on sixty-five percent of debt, thus avoiding the pitfalls of bankruptcy or severe credit damage. The best debt settlement business package can offer a monthly payment plan based on living circumstances and what is actually possible.
A simple and easy to use product. 

[Anonymous]

Umm, I don't fully disagree about the debt settlement plan being a good way to pay off large amounts of debt but be warned, credit card companies don't like credit counseling.  They might agree to accept payment at a lower interest rate but they can crucify your credit with R7 tags if they want to.  Now that said if his credit is bad enough he might already have those tags or something worse so one of those plans could be the way to go

[marty56]

Using a Debt Settlement company will destory your credit for 7 years and also effect your ability to get new credit until the account falls off your CR.  You also might wind up get sued and or ripped off in the process.

Finish your Debt Management program.  It will not hurt your credit and your ability to get new credit once you are finished with the program.  I was able to get the best rate on my CU's credit card, the best rate on  anothyer of my CU offered on an autoloan and a real prime mortgage refi.

Also Debt Settlement is not credit counseling.  A CCCS is a DMP porgram only. 

[RobertEG]

I know of no debt management program that I would pay a single penny for.  They take your $$, and do nothing that you cannot do yourself.  You just have to take the time to understand the ins and outs of credit.,

When it comes to any future application for credit, your partner's income, credit status, wont be an issue unless you apply jointly. The amount of debt that partner owes is not as critical as the fact that, with multiple collections and a bad credit score, he would only hurt your chances for any future credit. 

I dont caste personal dispersions,but from what you have said, entering into the application for new credit with him would probably hurt you more than it would help.

Socking away your $1000 a month surplus will certainly give you a bank for any future needs, but wont help your credit score.  Payng down your % util is the most immediate way of improving your credit score.  From a purely FICO viewpoint, that is the way to go.

So your decision is whether to focus on improving your credit score, or building savings.  They are different considerations, and only you can assess their relative importance. 

Good luck!

[Anonymous]

I'm not sure I understand.

Are you aware that the $1,000 extra a month can either go to paying off student loans or saving for a down payment for my first home.

(At the time) I had no choice but to enter into a DMP because my debt was overwhelming.

Please offer some insight into this.

Thanks

[LIGHTNIN]

Hi tammie, This is what I would do if I were you.

I would have an emergency fund 1st. How much? If you lost your job due to illness,injury, lay offs etc..

How many months would it take to find a new job...Thats how many months of expenses you would need to save...About 9mos or so

Reasons why......I don't want to see you having to go thru a DMP again. Learn from this experience. 

Also when you have your own home.......you're fixing something all the time LOL

As far as co-signing for students loans....Please don't....Money and friends/family don't work most of the time will break your relationship and your bank.

You have to think with your head and not your heart. Let your child get grants/scholarships and loans by their self.

If you want to help with student loan payments as a gift, that would be OK, like birthday,Christmas,valentine day gift, call it want to want.

Teach your child how to be responsible with money to become a responsible adult. And before helping toomuch make sure to put $ in your retirement.

Sounds like you have a very honest relationship with your partner....Thats great !!  Let him pay back his debt, not you, don't want to ruin a great think, Honest and trusting partners are very hard to find.

Plan....Emergency fund 1st, then as long as the interest isn't very high on the student loans---Save for the downpayment for your home.

[fishbjc]

WHOA HOLD oN ONE MINUTE.  MY son HAD TO HAVE A CO-SIGNER FOR HIS STUDENT (FANNIE MAE) LOAN. 

My neighbors daughter also had to have a co-signer, her grandparents signed one loan for her.  It had to happen this way in order for her to get the loan.  Not every child is eligible for grants or scholarships.

The FAFSA form must be filled out and reviewed before loan or grant determination is made.