Dear Debt Adviser,
I need some advice about my credit card debt, which is close to $19,000. I’m hoping that if I get an income tax refund, I can pay off the worst one which is from a department store. The interest rate is 26 percent. I make more than the minimum payment, but the balance never seems to go down. It is presently $1,263. I am retired, widowed and 78 years old. I have gone back to work because of the debt, which I accrued since retiring. Most of it has been to buy things for grandchildren, which I had to put the brakes on.
I inquired online to a debt settlement company. I have been hesitant about committing to this program. I was wondering if I should go to a bank for a low-interest loan and pay off my balances. I have a portfolio with UBS, but with the Wall Street fiasco, it has been affected. This is draining me of my retirement finances and is having a huge emotional effect. I need to get this settled somehow. Any help would be appreciated.
You have already made the most significant change that you need to make. You have “put the brakes” on your overspending. It would have been better if you had done so a little earlier, but you did it and that is what counts.
What you need is a thorough evaluation of your current financial situation and some unbiased, helpful financial advice. You mention that you have a portfolio with UBS. Do you also have a financial adviser at UBS? If so, I’d start there. If not, you can find a good financial planner at the Financial Planning Association website, FPAnet.org. Tell your financial planner your goal — getting out of debt — and he or she will help you to outline a plan to reach that goal.
Your financial planner should offer possible solutions for paying off your debt that might include a personal loan or utilizing some of the assets from your portfolio. It could be that you would prefer to explore some other options. If that is true, I recommend you stay away from debt settlement and instead, contact a nonprofit credit counseling agency.
You don’t need a debt settlement company to settle your debts; you can do it yourself for free. But the main reason I want you to avoid debt settlement is because a creditor is not going to settle for less than is owed unless your accounts are delinquent. Dealing with debt collection calls is something I highly recommend avoiding.
You can find a quality credit counselor at AICCCA.org or NFCC.org. Your certified credit counselor will review your budget with you and let you know if a debt management plan would make sense to help you pay off your debt. Paying what you owe through a debt management plan will lower your interest rates and help you pay what you owe in five years or less. I would recommend you repay what debt you owe in three years or less if you can afford it.
Ask the adviser