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Discussion Starter · #1 ·
I am stuck on what to do here, and I would love some insight.<br><br>
Here's the deal: I have $3500 in student loans, which will be in deferment soon as I start school the 17th of September. I have $5000 of medical debt which is at a collection agency, and has been sitting there for 3 years. Of this $5000, one of the bills is $3400, while the rest is spread out over 5 smaller bills ($140, $180, $280, $370, $440).<br><br>
As I said, I'm starting school next month and I will get the full grants (which we need to spend on a car for DH--his is going to die soon) and I also have the option of taking out student loans. Normally, I would not want to go more into debt, but I was considering taking out the loan and using it to pay off some of the medical debt. I really want to raise my credit score, and I was thinking that if I took out a $1000 loan I could close 4 collection accounts, and the student loan would not accrue interest until I'm out of school (which will be 2.5 years). We're working really hard on paying off debt and I have paid off about $2500 in student loans in the past year, but I am so depressed by that medical debt and it seems so huge that I have never made a payment on it. Now, if I do take out a loan, we can afford to pay about $250 a month, sometimes more, even though I won't need to make a payment until I graduate.<br><br>
Does this sound like a good idea??
 

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I wouldn't - only because you say that you can afford to pay $250 a month. I'd call all the collections co's and arrange to make that payment to them every month. You can pay off the little ones in just a few months, and then the big one you can negotiate a lower total if you set up automatic monthly payments.
 

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So if you don't take out the loan how much can you put on the medical bills every month?<br><br>
Can you put what you were putting on the loan that will be defferred on the medical bill instead-or do you need it for something else?<br><br>
For myself, I'm not a big fan of taking out one debt to pay off another but I know it works for some people.
 

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I'm the type of person who is all about the numbers, what way would you end up paying less. If your outstanding debts were credit card, I'd be very leary of pushing those debts onto another type of loan because there is the risk of running them up again. However, since your debts are medical, It doesn't sound like a self-control issue.<br><br>
What I'd want to know would be - how much interest is being charged on the medical debts? I don't know a lot about collections, so I don't know what to assume, but I would want to work out which way would end up with you paying out the least amount of money. If the medical bills have a higher interest on them than the student loan, then I'd consolidate, if not then I'd leave it the way it is and pay it off from there.
 

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Discussion Starter · #5 ·
The medical debt doesn't have any interest, and neither would the student loan because I'd still be in school, and it wouldn't accrue interest until I'm out of school and the loan was in repayment status.<br><br>
I agree that if I can spend $250/month, it would make more sense to pay the collection debt without taking out a loan. But, I'm trying to raise my credit score as quickly as possible, and I'm not sure if paying off several accounts at once would help or not.<br><br>
Either way, loan or not, I can only pay about $250/month. I'm just trying to decide what would help us the most.
 

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If the medical debts don't have any interest, I don't see any reason to take out another loan. The student loan will have interest eventually. I would use the $250 a month to pay something small on each of the debts and the rest to pay down the debts from smallest to largest.<br><br>
Everyone here recommends David Ramsey, I haven't read his books, but I know the philsophy, I recommend you get one of his books out of the library, because he has a very popular debt repayment plan.
 

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well it seems its only the medical debts that would be causing issues with your credit score, so to start I would pay 250 a month and you could have the smaller debts paid off in just over 5 months. Then I might consider taking out the student loan to pay off the bigger one. But if its not collecting interest then you are probably best to pay 250 a month on to the medical debt until its paid off. I think you raise you score quickly by paying on time. So I would suggest you set up a payment plan with the collection agency paying them the 250 and pay it on time.
 

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I think that paying the medical collections off slowly will be better for your credit report than adding another loan. Even if you are in deferrment, the student loan will show up on your credit report and be counted as part of your total debt. Lenders always factor in total debt load to the credit score, so adding the loan (even though it's not due or late, etc) will probably still affect your credit more than have the collections. I mean, the collections accounts are already ON your credit report, so you're better off paying them off steadily and letting your credit reflect that as it happens than you are by adding another item to your credit report with the loan.
 

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I used part of a student loan to pay off credit card debt. I didn't realize I was pregnant at the time and ended up having to quit school which I never planned on at all. Now I have to pay back the student loan for a class I never finished because I used the rest of the loan for other debt. In other words...too many things come up that you don't plan for...I wouldn't.
 

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Discussion Starter · #10 ·
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<div>Originally Posted by <strong>Knittin' in the Shade</strong> <a href="/community/forum/post/9026855"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">I mean, the collections accounts are already ON your credit report, so you're better off paying them off steadily and letting your credit reflect that as it happens than you are by adding another item to your credit report with the loan.</div>
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This makes alot of sense!<br><br>
THANK YOU ALL for your advice! I decided not to take out the loan. I had no idea that I could call and set up a payment schedule with the collection agency. I'm just going to pay the $250 a month and slooooowly pay off that darn debt!
 

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Once you get those small ones paid off(in 3 months 3.5 of them are gone) you will feel so much better having those ones gone.<br><br>
The big $3400 one, you may be able to get them to agree to a smaller amount to pay off & then have it considered paid off with 0 owing.
 
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