Should my friend put more money in savings initially, then once she's saved alot start paying off old bills.

Question

I have a friend that will be going over seas. She has alot of bills in collections at this point. She will have paid all of the accounts except about 3 that total about $5000 by next month. When She gets to those last 3, she wants to start putting a majority of her $$ in savings and start paying those last few items off later. Is this a good strategy or should she try to go ahead & knock the bills out, while putting a little in savings for now. Her main goal is to comeback & be able to start over, after not having a car, housing, etc. Will it hurt her credit to have those items sitting on there, even though she will be paying them in full after a few months or so. Right now she is paying all her current bills on time & will continue to do so. I think her biggest fear is to comeback w/ not enough cash saved to start over.

Answer 1

Are the bills in collection charging interest and penelty fee's? IF so then she will want to get them down fast. The best thing to do is to make sure you have a credit agreement with them. So they are not actually in collections , but are a monthly bill. Such as a large electric bill. You would make a agreement with the electric company to pay the bill so much each month. Then each month pay just a little more than the amount you owe. even if it is 1.00. Credit scores go .by if you pay the amount you get some many points if you pay more than the amount you get more points. But doesn't say how much more. If she comes back with no bills and a bad credit score it could hurt just as much. There are always those bad credit places. But in order to get a good interest loan you need good credit. So in a nut shell. you need bills to get good credit. Sounds stupid but that is the way it works. Savings plays no part in your credit score. And you would need a lot of cash to start over. atleast half a million.

Answer 2

Setup an auto-pay from the paycheck until the bills are paid (the highest interest card first, not the highest balance). Savings accounts can't compare to paying off bills asap. Chances are she would find something to spend the saved money on, and the debt would continue to not get paid-off.
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Answer 3

She should pay off all of the old debt now. It will look a lot better that it was paid off several years when she returns.

If she continues to pay all her current bills on time, she should have a decent credit history.

Answer 4

She needs to keep paying her creditors on a regular basis and reducing her indebtedness. Create a plan to systematically pay off what she owes and include in that plan a percentage of paying "herself" by regular investments. That way she will cure her credit problems, pay off her debt and save money.

If she lets her past bills slide she will have a worse mess than she has already made for herself. Money in the bank is no substitute for consistently paying off existing debt.

Answer 5

Putting money in savings will only earn about 2% interest and I am sure her debts have interest rates much HIGHER!

Pay off the debt then save!

Not paying on her debts will cause serious credit score issues. When she does pay them in full if they are credit crads, she should use them only once a year and pay them off to maintain good credit history! (Never cancel cards!)

Answer 6

in case you're 0.5 way by on your vehicle loan, you already paid approximately 70% in interest. i might positioned it interior the reductions for the abode next year. verify once you purchase your abode you get a fixed fee with an open end meaning you pays down the loan without being penalized. A loan is fairly like a vehicle, you pay approximately 70% on the 1st 15 years. Request an amortization once you flow to settlement.

Answer 7

Pay off the bills first.

Answer 8

i would pay off all the bills as quickly as possible and worry about getting back on my feet when i returned!!!.