Debt Consolidation?

[Simba22]

Just wondering if anyone has ever used a debt consolidation service? I'm considering calling National Debt Relief but it bothers me that their website doesn't give you ANY info except a phone number!

Will using this service hurt my credit? I'm sure they charge a fee, right?? Are you guaranteed approval or can I get declined?

Anyone have any experience with this? I'm trying to consolidate a ton of credit card debt so I applied for a loan through a bank but they declined me because my debt :income ratio is too high (no duh, hence my application...), but then they offered me another credit card at the end of the call. I'm so frustrated!

Thanks!

 

[MouseLover]

Research carefully. Make sure this place is approved nonprofit. I believe there is a fee and it may harm your credit-- much is reported the same as a chapter 13 bankruptcy/wage earner plan.

 

[RitaE]

I do not know anything about the agency you mention. One problem is they all have such similar names that it is difficult to keep them straight.

I would suggest that you stick with an Agency accredited by the NFCC. Any reputable agency will first meet with you to discuss your particular set of circumstances and how they think they can assist you, and what the costs to you might be and how their assistance might help or hurt your credit profile. Only when you are satisfied, should you ever sign a contract or commit money.

This is the NFCC website.
https://www.nfcc.org/index.php

 

[Kirk]

You're better off on your own. These things will turn credit to junk if it's not already there. If I were you, I'd look to:

Dave Ramsey

 

[lbmiller77]

I would never use one again. I was a college student struggling to make payments on a few credit cards and medical bills but still making payments on time. I found a non-profit consolidation company that had a good reputation according to the BBB. They first ask you to provide names, address, and account information for every debt you have. They encourage you to close all credit card accounts (which I did and regretted later). They contact all creditors on your behalf in hopes that they will reach a settlement to pay less than you owe and/or reduce the interest rate on that account. In my situation, only one credit card company chose to settle, another agreed to lower the interest rate by a few points, and the remaining maintained original balance/interest rates. I saved myself less than $20 a month.

Once all of this is complete, they come up with a monthly payment you make to the consolidation company. The consolidation company takes your payment and then sends the appropriate amount to each of your creditors. For me, it worked well for the first few months but then I started to get phone calls from my credit card companies saying that my payments were not being made on time and that they were voiding the settlement/charging extra fees, etc even though I was making my payments on time to the consolidation company. In the long run, I was better off just calling the credit card companies myself and negotiating a lower interest rate, keeping the accounts open (building credit), and creating/following my own plan to get out of debt. While the consolidation service did cost money to use (non-profit but charged a small monthly administration fee), the fees I was charged because they couldn't make my payment on time cost me $100's of dollars and a bigger blemish on my credit report.

I have also followed Dave Ramsey's method, and it has really worked for me. While I will never be completely debt-free, I've learned how to live comfortably on a budget.

 

[kymom99]

I feel your pain. I went to a class at the public library and was able to organize myself a little better. We have pretty much stopped using our cards altogether except for emergencies. We don't have a comfortable amount saved up, but at least we aren't causing any more damage. We paid off a smaller debt and made a good dent in another. I wanted to do a home equity loan to pay off some stuff but they turned me down immediately. I think if I had met with someone face to face, they could have made it work. Credit card debt is the worst and I have learned my lesson. We are still allowing ourselves to live, but are being more practical.

My brother and his wife are another matter. Mt SIL has serious issues and continues to run them into trouble. I found a local non profit agency who will do financial counseling, it is just a matter of making them go.

I think you can dig yourself out, it just takes lots of discipline.

 

[dayvewc]

I would never use one again. I was a college student struggling to make payments on a few credit cards and medical bills but still making payments on time. I found a non-profit consolidation company that had a good reputation according to the BBB. They first ask you to provide names, address, and account information for every debt you have. They encourage you to close all credit card accounts (which I did and regretted later). They contact all creditors on your behalf in hopes that they will reach a settlement to pay less than you owe and/or reduce the interest rate on that account. In my situation, only one credit card company chose to settle, another agreed to lower the interest rate by a few points, and the remaining maintained original balance/interest rates. I saved myself less than $20 a month.

Once all of this is complete, they come up with a monthly payment you make to the consolidation company. The consolidation company takes your payment and then sends the appropriate amount to each of your creditors. For me, it worked well for the first few months but then I started to get phone calls from my credit card companies saying that my payments were not being made on time and that they were voiding the settlement/charging extra fees, etc even though I was making my payments on time to the consolidation company. In the long run, I was better off just calling the credit card companies myself and negotiating a lower interest rate, keeping the accounts open (building credit), and creating/following my own plan to get out of debt. While the consolidation service did cost money to use (non-profit but charged a small monthly administration fee), the fees I was charged because they couldn't make my payment on time cost me $100's of dollars and a bigger blemish on my credit report.

I have also followed Dave Ramsey's method, and it has really worked for me. While I will never be completely debt-free, I've learned how to live comfortably on a budget.

This was the experience I had. They didn't help much, and then weren't making the payments even though I was paying them.

 

[akcire]

I have never used debt consolidation, but I stopped a friend from college from doing it. I had heard a lot of bad stories. I had her get all her bills and I made an excel spreadsheet. The document included these categories: amount owed, interest rate, minimum payment. Then we called all the companies and asked about lowering interest rates or doing balance transfers. Then we added a new category for the lower interest rate. We were able to get some movement on most of the debts she had. We even found out she qualified for a reduced repayment on the hospital bill she owed due to her income. This was something she repeated on her own every 3-6 months.

She looked at her spending (I'm not telling anyone how to spend their money) and she found about $200 a month more she could pay toward debt. A couple months later she got a 10% raise, and that all went to repayment. Using the spreadsheet (she updated it regularly) she was able to dump the debt and get on with her life.

It can be done, but involving a 3rd party handling your money is rarely helpful. She said it was really helpful to see all the debt in one place, and all the interest rates. Even if she only saved a 1/2 percent it made her feel like she was making some progress. When she was out of debt, I let her take me to lunch at Panera to celebrate (I'm a cheap date).

 

[hollypoast]

I don't have any experience with debt consolidation companies however, about a year ago we began using YNAB (You Need a budget) and it was incredibly helpful in organization our finances and making sure we don't overspend. I think you can get a discount if you say you heard about it on the Dis and sometimes they offer deals on Steam. (Steam is some kinds of gaming website... I had to have my teens buy it for me 'cause I'm clueless about such things.)

When we bought it on Steam, I think I paid $15 but even at the regular price it would have been worth every penny. Prior to YNAB I was using Quicken... YNAB is so much better. There are lots of videos/tutorials on YNAB's website so you can get an idea of how it works.

Good luck. Being it debt sucks... most of us know first hand so you're not alone.

 

[ruadisneyfan2]

OP, are you able to keep up with your minimum monthly payments, or are you behind/falling short?

Have you checked out the Debt Dumpers 2015 thread? It's been a bit quiet there, we're all a bit on cruise control, but the 2013 & 2014 threads were extremely helpful for me. Thanks to the Dave Ramsey snowball method & all the support from everyone on DD board, I've paid off 7 credit cards since 10/2013. In a few weeks, the next one will be history. If all goes according to plan they will all be gone by April 2016.


Before starting the snowball, it's a good idea to save up $1000 emergency fund. This is good to have for when you need new brakes, tires, kitchen faucet, etc you won't have to charge it to a cc. Even $500 is better than 0 or resorting to charging more debt.
The way the snowball method works is you list all debts, smallest balance to largest. Attack the smallest one with everything you have. I sometimes make little extra payments of $5, 20, whatever I can throw at it. Continue to make the minimum payments on the other cards so they stay current.
Once the smallest bill is paid off, transfer that minimum payment to debt #2. That will still get its min payment but also #1's minimum payment since that is gone now. Attack that, and keep moving on down the line. As each bill gets paid off, your monthly payment keeps growing, like a rolling snowball.

http://www.daveramsey.com/articles/content-center/category/lifeandmoney_debt/



Dave can be pretty intense on ways to cut spending to increase the amount you can pay each month. He suggests if you have a car loan, sell the car and buy something cheap for now. He also suggests cutting things like cable & cell phones. The one thing he suggests that I really disagree with is stopping payments to your retirement account. Cutting spending is one thing, and I can't deny it's the right thing to do, but unless I'm homeless and living in a cardboard box, I can't see stopping contributions to our retirement acct.

The flip side of course is earning more money. Get a 2nd job, shovel snow, mow lawns, whatever you can do. It's amazing how much a little extra helps lower it faster and makes you more motivated.

I also found that if I make a list of each paycheck and what bills need to be paid with it including gas, groceries, car ins etc., I can calculate approx. how much will be leftover that I can apply to debt reduction. The reason he suggests that you start with the smallest is that it usually doesn't take that long to pay off the small ones so you see progress in a short amount of time. It's very powerful & inspiring. I'm actually excited to pay bills!

Some might say to start with the highest interest rate bill but according to DR, often that's the highest balance which feels like climbing a mountain. If we were all following smart math, we wouldn't have been spending more than we earn, right? It's psychological. Get a few quick hills done and then the mountain doesn't seem so huge. Your big snowball will be chomping away at it!

good luck to you!

 

[ruadisneyfan2]

I've also found it helpful, but not easy, to simply learn how to say no. "No thanks, I can't afford that right now." This was not easy for me. Not just to our pleading kids for material crap, but to lifelong friends that want to go out to fancy dinners, out shopping, etc. Guilt would make me feel bad to say no to friends that I rarely have time to hang out with since having kids. So now I've learned to turn it around. Instead of just saying no, I tell them $ is tight now and maybe we can just visit at home and hang out a little while. (Instead of spending $150 on dinner.) After all, we just want to catch up anyway and we can do that just as well with home made coffee or some popcorn.

 

[richierich2323]

I know a lot of people see it as being taboo. However, if you are in deep financial trouble and have massive credit card debt that you can not pay. Look into bankruptcy, especially if you can file a no asset chapter 7 bankruptcy. It was a lifesaver for us and allowed us a fresh start. We never had any money and were spending $1800 a month just on credit card bills. We had no way out until we finally set screw it...let's go talk to a lawyer.

We got to keep all of our stuff. We were able to get approved for a credit card to rebuild our credit within 5 months of filing and our credit score is at a 705. We also have $1800 dollars more a month in our pocket to be able to pay for the things that matter in life. It's worth at least looking into for a free consulation.

When we tried to consolidate it just made it worse ;(...and we wish we would have just bitten the bullet and talked to a lawyer 5 years earlier which would have saved us about 80,000 dollars in interest payments.

The advice about Dave Ramsey is also great advice if it is less debt. We buy everything with cash now except for 1 purchase a month on credit card to help our credit scores. We also have a budget for each month with what we need to spend on things for that month and the rest goes into savings. Our emergency fund was 0 while we had debt...now it's growing by leaps and bounds.

 

[ruadisneyfan2]

I would never use one again. I was a college student struggling to make payments on a few credit cards and medical bills but still making payments on time. I found a non-profit consolidation company that had a good reputation according to the BBB. They first ask you to provide names, address, and account information for every debt you have. They encourage you to close all credit card accounts (which I did and regretted later). They contact all creditors on your behalf in hopes that they will reach a settlement to pay less than you owe and/or reduce the interest rate on that account. In my situation, only one credit card company chose to settle, another agreed to lower the interest rate by a few points, and the remaining maintained original balance/interest rates. I saved myself less than $20 a month.

Once all of this is complete, they come up with a monthly payment you make to the consolidation company. The consolidation company takes your payment and then sends the appropriate amount to each of your creditors. For me, it worked well for the first few months but then I started to get phone calls from my credit card companies saying that my payments were not being made on time and that they were voiding the settlement/charging extra fees, etc even though I was making my payments on time to the consolidation company. In the long run, I was better off just calling the credit card companies myself and negotiating a lower interest rate, keeping the accounts open (building credit), and creating/following my own plan to get out of debt. While the consolidation service did cost money to use (non-profit but charged a small monthly administration fee), the fees I was charged because they couldn't make my payment on time cost me $100's of dollars and a bigger blemish on my credit report.

I have also followed Dave Ramsey's method, and it has really worked for me. While I will never be completely debt-free, I've learned how to live comfortably on a budget.

Why do you say this? How can one know it can never happen?
I never say never.

 

[Jake&IzzyLand]

I wish you the best and hope you can find a solution. Debt is a type of enslavement. The fact that many people feel they can't live without the latest and greatest even if their income doesn't support it is troubling. I do not know why so many people lack patience and intelligence when it comes to finances. Most do not wish to learn the ins and outs until it's too late and sometimes not at all.

 

[ruadisneyfan2]

I wish you the best and hope you can find a solution. Debt is a type of enslavement. The fact that many people feel they can't live without the latest and greatest even if their income doesn't support it is troubling. I do not know why so many people lack patience and intelligence when it comes to finances. Most do not wish to learn the ins and outs until it's too late and sometimes not at all.

Thanks for sharing your opinion. Having nothing to offer except put downs doesn't help anyone. That's like telling somekne who needs to lose weight they're fat and stupid.

 

[jenrose66]

Just wondering if anyone has ever used a debt consolidation service? I'm considering calling National Debt Relief but it bothers me that their website doesn't give you ANY info except a phone number!

Will using this service hurt my credit? I'm sure they charge a fee, right?? Are you guaranteed approval or can I get declined?

Anyone have any experience with this? I'm trying to consolidate a ton of credit card debt so I applied for a loan through a bank but they declined me because my debt :income ratio is too high (no duh, hence my application...), but then they offered me another credit card at the end of the call. I'm so frustrated!

Thanks!

Don't use debt consolidation. They can't do anything for you that you can't do yourself. The best thing to do is write down all your debts and look at your monthly income and make a budget. I find Dave Ramsey helpful and think you should read Financial Peace. You'd be surprised at how some simple changes can make a big impact. For example, my grocery spending was out of control! It's a chore I don't care for and I wasn't taking the time to meal plan or write a list. So for the last 2 months I have been making a list and meal planning and I went from spending anywhere from $175 to $225 a week to $110 a week. We have plenty of food, I'm just mindful about what I buy, it was really eye opening.