Debt Consolidation...Anyone here done it before?

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I'm currently looking into consolidating my credit card bills...however, I have no clue on how it works, what I should be looking for, what's a good company, and what kind of fees are involved, and also if there's any repercussions to doing this. I don't own a home if that matters.

Has anyone had any experience in doing this that can answer my questions?
 
If it's anything like the ones I talked to earlier this year, they are worthless. The 3 I tried all said to stop making payments(and basically default on the stuff thus hurt your credit), then offer to make a lower lump sum payment to the whoever you owe.

I don't know how these morons con people into paying for this, since it seems their advice is useless.
 
[quote name='tangytangerine']If it's anything like the ones I talked to earlier this year, they are worthless. The 3 I tried all said to stop making payments(and basically default on the stuff thus hurt your credit), then offer to make a lower lump sum payment to the whoever you owe.

I don't know how these morons con people into paying for this, since it seems their advice is useless.[/quote]Sounds like you didn't get good ones, as that's not what they're supposed to do.

What a debt consolidation organization is supposed to do is work with your creditors to lower/remove your interest rate on your credit cards/loans, so you can try to pay your debts off quicker. You're agreeing to work with the debit consolidation firm to send them the payment and then they pay off the creditors from your payment. Normally, they EFT the payment out of your bank account. Some of them collect a fee on the payment for it, others don't. All of them will counsel you on how to not be in debt as badly as you are now and work through trying to get into a better financial state of affairs.

Not all creditors agree to it, and I know that with the last couple of years, it appears to be harder to try and clean up your debt and remove it.

I'd recommend looking around at different ones and see what they can offer you.
 
[quote name='shrike4242']Sounds like you didn't get good ones, as that's not what they're supposed to do.

What a debt consolidation organization is supposed to do is work with your creditors to lower/remove your interest rate on your credit cards/loans, so you can try to pay your debts off quicker. You're agreeing to work with the debit consolidation firm to send them the payment and then they pay off the creditors from your payment. Normally, they EFT the payment out of your bank account. Some of them collect a fee on the payment for it, others don't. All of them will counsel you on how to not be in debt as badly as you are now and work through trying to get into a better financial state of affairs.

Not all creditors agree to it, and I know that with the last couple of years, it appears to be harder to try and clean up your debt and remove it.

I'd recommend looking around at different ones and see what they can offer you.[/quote]

Yeah, that's exactly what I thought they did and its what I'm hoping for.
 
we signed up for more info at one of the debt consolidator websites and almost immediatley started getting loan offers in the mail. We got a signature loan for 25k from bank of new York with 6% interest
 
http://www.nfcc.org/

Have you checked out the National Foundation for Credit Counseling site? It seems like a good place to start. They can recommend agencies to help you.

Shrike gives some good advice (as always) but I wanted to point out one little thing. I would be wary of giving a CC company permission to take money directly out of my bank account. I wouldn't trust them to take only the amount they say they will. A possible alternative would be to open another checking account and give that out instead.
 
also...depending on how you go about debt consolidation it can look bad on your credit report....your best bet is to get a loan from a bank and use that to pay off the debt..while you are paying off debt you are also adding to your credit
 
without a doubt it can look bad, and they don't always pay on time. I have worked in call centers and mid level management at a cc company and we had to deal with a lot of issues with the cccs (consumer credit counciling services). When I was in debt collection, there were a ton of accounts that were allegedly working with cccs companies that were deliquent. If you go deliquent then the deal is off with said cc company, and your cccs may or may not tell you about it and continue to send payments lower then required, thus making you have even worse credit.

It would be in your best interest to call them yourself. You mention consolidating your debt, do you have available credit on one of your cards to move more of your balances too? Also pick up some books on the subject on how to pay, and to track your money. Suzie Orman is fairly good, and when I was younger I read a really good short book that told short stories in each chapter that drove home the point and method of paying down your debt. I will see if I still own the book.
 
When I consolidated It was with a Federal Credit Union... what happens is the Bank pays off your Credit Cards... in Full... then you have to pay the Bank back (at a lower interest rate) instead of the multiple credit card companies with higher interest rates... so it's Consolidated... one payment... instead of multiple. The only negative I see from it... is that you might want to do it on your own... (i.e. if you are married... don't combine your debt consolidation...) That's come back to bite me in the ass as now that my wife has hit the road... I am responsible for all of the payments... good luck!
 
I've been in a debt consolidation program through Take Charge America and have been very happy with it. They got lower interest rates for my two credit cards and they do monthly drafts from my bank account that covers both. I have seen a great decline in my debt and it's wonderful to see the light at the end of the tunnel.
 
just call your credit card companies yourself. It's free to call them.
My sister had to do this a few months ago, she got one of her cards to drop the interest rate to 0 and two others to reduce the total amount she owes. So now she's paying minimum payments on the 0% interest and as much as she can on the two others.
Just make it clear to them that you cannot continue paying them and if they want money from you they have to help you. They will work with you, but have a number ready for how much you can afford to pay each month.
 
[quote name='UjnHunter']When I consolidated It was with a Federal Credit Union... what happens is the Bank pays off your Credit Cards... in Full... then you have to pay the Bank back (at a lower interest rate) instead of the multiple credit card companies with higher interest rates... so it's Consolidated... one payment... instead of multiple. The only negative I see from it... is that you might want to do it on your own... (i.e. if you are married... don't combine your debt consolidation...) That's come back to bite me in the ass as now that my wife has hit the road... I am responsible for all of the payments... good luck![/quote]

Tried my FCU...they don't offer that type of service.

[quote name='cletus']http://www.nfcc.org/

Have you checked out the National Foundation for Credit Counseling site? It seems like a good place to start. They can recommend agencies to help you.

Shrike gives some good advice (as always) but I wanted to point out one little thing. I would be wary of giving a CC company permission to take money directly out of my bank account. I wouldn't trust them to take only the amount they say they will. A possible alternative would be to open another checking account and give that out instead.[/quote]

I'll check that out...thanks.

[quote name='deszaras']I've been in a debt consolidation program through Take Charge America and have been very happy with it. They got lower interest rates for my two credit cards and they do monthly drafts from my bank account that covers both. I have seen a great decline in my debt and it's wonderful to see the light at the end of the tunnel.[/quote]

I'll check this place out as well...thank you.

Gamer's Girlfriend;5032313 said:
just call your credit card companies yourself. It's free to call them.
My sister had to do this a few months ago, she got one of her cards to drop the interest rate to 0 and two others to reduce the total amount she owes. So now she's paying minimum payments on the 0% interest and as much as she can on the two others.
Just make it clear to them that you cannot continue paying them and if they want money from you they have to help you. They will work with you, but have a number ready for how much you can afford to pay each month.
Click to expand...

I guess I should try this first...there's no harm in trying.
 
I read a book called "Personal Finance for Dummies" last year and the book seemed to imply that a lot of those debt considation companies are really just scams. You might want to check out that book and read up on it.

I myself transfered my credit card debt to a card with a lower rate. I went to www.cardweb.com and used their website to find the best credit card transfer option. Here is the direct link: http://www.cardtrak.com/cards . Unlike those pre-approved credit card things you get in the mail, you will have to fill out some paperwork and they will preform a credit check on you.

I managed to transfer my balance to a credit card with a 8% rate and I killed off my credit card debt a few months ago.

I hope all this information helps
 
[quote name='Pookymeister']If you do get your debt 'consolidated' , then next step is to make sure you aren't in that situation again.[/quote]

Most definitely...I've learned from my mistakes.
 
It's incredible how many college students graduate with credit card debt, quite a bit too. I think the average is about $5,000. I'll have a fair amount in loans, but no credit cards thankfully.
 
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About four years ago my wife and I looked into these CC agencies. We were surprised to learn that these agencies were not only unable to lower our interest rates but they also wanted to charge us obscene amounts of money IMO to help us fix the problem. (Remember, most of these agencies are getting money or tax exemptions from the government to operate.) Ultimately we decided to tackle the problem on our own and managed to pay off the entire amount in less than two years. We used a method taught by Dave Ramsey and Suzie Orman called "the snowball effect."

We started off by creating a budget of all of our monthly expenses. From there we made choices on which expenses to cut back on and which we really did not need and could eliminate altogether. This gave us a solid amount of extra cash that we could use to pay off our debt. The next step was to pay off the credit card with the highest interest rate (as opposed to the highest balance) by making the minimum payment PLUS the extra cash. As your balance lowers, the interest your card accrues grows smaller and smaller and you'll be able to pay off the card much faster. Once one card is paid off you rollover your entire previous payment (the monthly minimum + the extra payment) to the next highest interest rate card. Keep doing this until all the debt is paid off.

This method is called the snowball effect because you start off making small payments and end up making ENORMOUS payments towards the end. It's just like a snowball rolling downhill, it starts off small and ends up quite large. Towards the end of our debt payment effort we were making payments of over $2,000 per month, not because we were rich, but because we had freed our money from our creditors. We are now living debt free and couldn't be happier. We have one credit card which we only use for large purchases (plane tickets, car repairs) that we have the cash to pay off in full. Otherwise we pay for everything in cash.

The effort takes a lot of sacrifice but the rewards are MONUMENTALLY REWARDING! Give it a shot and stick to the plan. It really does work.

EDIT: I forgot to mention that we also played the 0% interest rate game as well (like others have mentioned). Fortunately, my wife was constantly getting 0% credit card offers. I'm certain that reduced our payoff time by several months. If you aren't getting those types of offers right now be patient. Once you start paying off more than the minimum, your credit score will improve and the 0% cards will start rolling in.
 
[quote name='daphatty']We are now living debt free and couldn't be happier. We have one credit card which we only use for large purchases (plane tickets, car repairs) that we have the cash to pay off in full. Otherwise we pay for everything in cash.
[/quote]

I think credit cards are worthwhile to use for all purchases they can be used on. You just have to make them work for you. Meaning, always pay your balance in full and reap the rewards - they add up.
My AmEx gets me 5% back from Gas and cell phone bills. That winds up being about $20 a month right there. Another card gets you back 3% on supermarkets - everyone eats, might as well get some money back if you can. All of them have 1% back on everything else. Over the course of the year, it winds up being hundreds of dollars.
It just requires discipline. Don't buy things you wouldn't buy normally just b/c you have the credit.
 
I've never used my credit card for anything at all, yet they keep increasing my limit... I'm afraid to use it because I don't think I'd remember to pay it at the end of the month. I only like monthly payments that are set to auto-pay. If I have to check the mail, read a bill and pay it manually I'll probably overlook it / forget it. Cash/debit keeps things simple.
 
I don't get paper bills for any credit cards - its all online. I have it set to email when statement is first available and then reminders. I usually just go in and schedule(for the day before its due) the payment after first email though. That's another good thing about CCs. You get the monthly statement and then you have like 3 weeks until its really due - more time for your money to sit and earn interest in your bank.
 
[quote name='cletus']http://www.nfcc.org/

Have you checked out the National Foundation for Credit Counseling site? It seems like a good place to start. They can recommend agencies to help you.

Shrike gives some good advice (as always) but I wanted to point out one little thing. I would be wary of giving a CC company permission to take money directly out of my bank account. I wouldn't trust them to take only the amount they say they will. A possible alternative would be to open another checking account and give that out instead.[/quote]

Oh! thanks for sharing the website. It was really helpful...
 
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