Debt-Consolidation Question?

Question:

My husband has about $5000 worth of debt from before we met. He is finding it very hard to pay it all off. Before we try one of those consolidation groups, would you think that it would be wise if I took out a loan for the amount and used it to pay them all off so that we would just have one payment a month instead of a whole lot? Would you consider it his problem? We are wanting to buy a home soon but we would like to get his debts settled sooner so that he can start building his credit back up. I have good credit, almost 700, so would this work? How would it affect my credit?

Answer:
I answered the question you posted earlier. Hope the advice was helpful.

It might be better to buy the house in your name, easier to approve. FHA rules may require he settle the account in some way. Debt consolidation counseling servies are good but they will garnish wage to pay it off till done. They usually also require all other credit accounts to be closed. This may affect purchasing a home.

I would highly recommend getting the account settled as soon as possible before you buy a house. Even if you refinance under your credit card. The issue is with the new bankruptcy law, creditors are suing left and right consumers now days.

Well, since you're married why are you considering this to be only his debt? A marriage is a partnership and should be treated as such. Work to minimize the INTEREST that you pay while you are paying down your debt. Consolidation might be a good way to go about it, but your best strategy could be a scissor to all but 1 credit card. That's what I did 20 years ago. I had 3 cards maxed out, cut up all but 1 card and now only charge what I can pay off that month. I have a great credit score and essentially no debt.

If you took out a loan to pay off his debt, his debt becomes your debt, and the monkey that is on his back will jump onto yours.

Bruce Lee said, "To understand the problem is to solve the problem."

If you don't understand the root thinking/behavior that caused the debt, you won't know what thinking to change and what opposite actions to take to resolve the debt. Change the root of the problem to change the fruit.

Once you understand what actions caused the debt and the thinking behind those actions, you can then determine if the thinking still exists and focus on what to change. You have good credit, he has bad credit. Teach him your way of thinking that caused you to get and keep good credit.

As for paying off his debts, he should go to each of his creditors and make a payment plan (with interest as an incentive), to pay off his debts incrementally over time. See if they are willing to reduce the amount of the total debt in exchange for a quick settlement of the debt.

$500 a month would pay off the debt in 10 months. Can you both come up with creative ways to each come up with $250 extra a month (if you are willing to help him pay off the debt)?

Voluntary overtime pay?
New income streams from some type of home based business (make and sell baked goods to childen)?

$20 a day for 30 days yields $600 a month. Can your husband do something for one person a day who would pay him $20. If he finds 2 people, that comes up to $40 a day (which yields $1,200). If he finds 5 people at $25 each, that's $125 a day! Which yields $3,750 per month. Now if you both work together and each make $125 a day, you both will make $5,000 in 20 days!

Do the math!

As for buying a home, learn about real estate investing, and then use that knowledge to buy real estate with little of your own money.

J

Debt-Consolidation Question?

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