The Truth of Credit

Very often when speaking to a debtor I will ask “Have you explored some alternative ways of paying the debt?” Admittedly, my wording is vague but that is to see if they really have looked at other ways of paying it.  Then 9 out of 10 times, I get a response of “what do you mean?”  In this post I’ll explore 3 options that most people tend to forget are available to pay debts. To put this in perspective, a collector has no idea what your situation is or the people you know.  Here are some suggested options:

• 1. Ask to borrow money from parents or relatives - I know, I know, I hate asking my parents for a ride to the airport let alone $5,000 to pay off my AMEX. The fact is most parents (relatives) if they have the means are willing to help you. This is the best deal because most parents will charge you 0% interest and if you miss a payment it won’t affect your credit. My advice here is to explain your situation and have a plan devised to get out of debt this will make it an easier sale. In addition, put the plan in writing. Your payment terms and dates should all be on paper. That will make it more official.
• 2. Balance transfer - If you have line of credit you could move the charge-off debt to, DO IT. Moving the debt will get the R-9 off your report and replace it will a satisfied account. I know this sounds like “Robbing Peter to pay Paul” when in fact it is but they didn’t have FICO scores in their time.
• 3. Borrow from retirement - I can see all you Dave Ramsey fans screaming at this one. The fact is that it is your money in the end. Although I consider this a last resort, if you have it use it instead of Bankruptcy. I haven’t done the math but the price of bankruptcy is probably a lot more expansive than the fee for taking a loan on your 401k.

The TRUTH is these are only some of the options you have.  I know there are settlement companies and a whole industry that would say these are terrible ideas.  However, like I said before no one knows your situation. Sometimes you do what you gotta do!

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