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ellosweetie

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Does it reflect better on my credit to pay down my school loan, or my defaulted car loan?
Hi everybody. My husband and I are coming into some money soon, and would like to pay down one of our large debts.

We have a defaulted car loan from co-signing on a car for our niece. She totaled the car in a car accident and had not been carrying insurance. :/ We have been making payments on it faithfully for almost 2 years. The loan is about $10000 - but the company is offering a settlement of $6500. I've heard that it's bad, at times, to accept a settlement. Is this true in this case?

The other loan we have is a student loan for 7,500. It is one we have NOT been making payments on, because it had been deferred, and just now - the deferment ended, and we will begin making payments on it this month.

As you can see, the payoff amounts are similar. The monthly payment is also similar - $70/month. Now, what we're very concerned with is which one will help repair our credit the most, as we will not have enough money to pay them both off. Thank you for any help and advice you can provide.

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Everytime I've seen Suze Orman on tv, she goes on and on about getting student loans out of deferment and paying them. Student loans are not dischargeable in a bankruptcy either.  Which loan has the higher interest rate? 

The car loan:  I think it depends how the creditor reports the loan. If they change the loan amount to $6500, and then state paid as agreed and in full, then I think your credit will be fine. If they show the original loan at $10,000 but paid as agreed for $6500, that will send a red flag on your credit I believe.  I would get a written letter from the lender finding out how they plan to report this on your credit before forking a settlement over. 

I hope someone else with more knowledge chimes in on this matter. I wish you luck and never ever co sign on a loan again. No good deed goes unpunished. 

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