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Pay Off Debts Or Debt Settlement

Pay Off Debts Or Debt Settlement

Should you pay off debts or save the money if you have a lump sum? Even if you win the lottery, inherit money, borrow money from a family member or friend, you might still want to consider debt settlement.

CuraDebt Win the Lottery

Alright, so let’s say that you do come across that lump sum of cash needed to pay off your debts. Before actually paying them completely off you might want to determine which debts you’re going to pay off first. You also should decide whether it is in your best interest to pay off your unsecured debts in full or if it is better to pay off a negotiated reduced amount and keep the cash in your bank account for a “rainy day.”

First, let’s look at what debts to pay off sooner and what you may want to consider leaving for last:

Secured loans with a low-interest rate

If you get your hands on a large sum of money and you have a home mortgage with a low-interest rate, you might want to consider paying it off later and focus on your higher interest rate debts first. Low-interest rate car loans can fall into this category as well. When evaluating this, also take into consideration the interest rate deductions you receive on your tax returns. You may want to consider the CuraDebt Tax team for tax preparation.

Tax debt

You do not want to get tangled up with state or IRS tax issues. The IRS and state are some of the most powerful collection agencies, so do not put off paying your tax debts. Make sure that you are absolutely sure that the taxes you owe are currently owed. Once you are certain about the taxes you owe pay them, do not hesitate.

If you are not sure about your tax debts and want to know whether they can be reduced contact us.

Revolving credit card debt with high-interest rates

Usually, interest rates on credit cards are steep (the national average being 13% for fixed-rate credit cards and 15.7% for variable-rate credit cards). However, clients come to us with interest rates as high as 29% These interest rates make it very difficult to impossible to pay back the accounts by making minimum payments.

“Plain and simple, revolving credit card debt is bad debt,” says Kent Kramer, the chief investment officer and lead adviser at Foster Group, a financial planning and investment advisory firm headquartered in Des Moines, Iowa.

Student loans

If the lump sum of money you have come across is large enough to pay off your high-interest rate credit card debts and your student loans, consider it. With that said, if your student loans are in forbearance, then definitely wait.

In most cases, if you can continue making the minimum payment on the student loan you’ll be fine. “Student loans tend to have a low-interest rate and an extended payment period,” Kramer says. “They are also typically unsecured loans that are not tied to collateral such as property, meaning your creditor will not likely repossess your personal assets, such as your home if you are forced to delay repayment.”

Falling behind on student loan payments can result in some extreme consequences like having your wages garnished. Wage garnishment for most people is better than having your home foreclosed on or having your car repossessed. In most cases, if you have an extra thousand dollars, you’re better off using it to pay down your revolving credit card debt than putting it toward student loans.

Should I Use Debt Negotiation Or Debt Settlement To Pay Back A Reduced Amount And Save The Difference In My Bank Account?

Even when people come across large sums of money they still contact CuraDebt for debt settlement to pay off debts for a negotiated amount.

Why do people that have a large amount of cash still decide to settle on their debts?

First, it is because they may have already fallen behind on their debts. Their credit has already been affected and they want to make the best use of their money. Paying off the complete amount of the debt, which is usually a considerable amount of money over the original loan balance, is not a very enticing thing to do, even if you do have a large amount of money.

Second, it is because they may be current, but realize that they are only treading water. They realize that their income just isn’t enough to have some cash in the bank in case of an emergency. They are making minimum payments but at the end of the month, there is no money left. By using the lump sum for a negotiated reduction on the principle, they are able to resolve their debts and have some cash in the bank.

Third, most people who appreciate the help of friends or family decide to ask for less money to pay off a reduced negotiated amount instead of the full balances.

Remember that we are a debt relief company, we can assess your situation and find the right debt relief solution for you to help you pay off debts for the best overall benefits to you.

At CuraDebt, we have over 15 years of experience settling debts, 750+ five-star ratings total on numerous online review sites, and we are rated #1 or in the top two of  best debt relief companies in the United States.

We pride ourselves in having some of the best debt counselors in the industry. We offer free consultations, where you’ll be able to speak with one of our debt counselors and get the information  needed in order to make an educated decision.