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Debt Payoff Plan

I have $150,000 in credit card debt, what is the best action?

I have $150,000 in credit card debt, with little credit limit left, and high APR's I currently have $70,000 in cash to pay off the debt, what is the best action? should I pay off the highest APR's first? should I pay each credit card down below 50% of it's credit limit? should I try to negotiate the APR with the credit companies after paying them down (or is this a futile attempt?)

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Bill's Answer
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Sure thing, we will try to get you some tips and advice on the options available to you (there are four primary options) and what you should consider.

The quick answer is that there are options. Which one you choose will depend on what your priorities are, so I will try to cover all of your options and let you decide the best course of action for your situation, but I can tell you that it might be a good idea to sit down and evaluate debt consolidation options that do not necessitate a loan. If you want a free consultation with one of's pre-screened debt consolidation providers, just follow this link: Debt Relief Savings Quote

You basically have to decide to pay off your debts in full (which it sounds like you have the ability to do) or if you can only pay on a portion of your debts then you can consider a more aggressive strategy. In your case, it sure sounds like paying down the highest interest account first and then rolling up all future available monies to the next account makes sense. DebtGoal offers a free tool that we like that might help you with this.

But, just so you know the options, here you go:

The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors.

Since there are a variety of debt consolidation options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, bankruptcy, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.

Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts – but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan DOES show up on your credit report… and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy – or using a third party to re-organize your debts.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Debt Consolidation Loan

Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that the total cost and the time to debt freedom could be very high… but the monthly payment will be lower than other options and there is no credit rating impact.


Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.


Net-net: while there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits for you.

Lastly, here are some fast tips for your own quick Debt Consolidation Evaluator:

1. If you have perfect credit and have equity in your home - consider a Mortgage Refinance.

2. If you can afford a healthy monthly payment (about 3 percent of your total debt each month) and you want to protect yourself from collection and from going delinquent - consider Credit Counseling.

3. If you want the lowest monthly payment and want to get debt free for a low cost and short amount of time, AND you are willing to deal with adverse credit impacts and collections - then evaluate Debt Settlement.

4. If you cannot afford anything in a monthly payment (less than 1.5 percent of your total debt each month) - consider Bankruptcy to see if Chapter 7 might be right for you. makes it easy for you to apply for traditional forms of debt relief, by following this link: Debt Relief Savings Quote

I wish you the best of luck in resolving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.



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