C.C. asks from Flower Mound, TX on January 05, 2012
Has any one ever done debt consalidation thru a debt consalidation company? Considering and looking for feedback?
does it mess up your credit score in the long term? thanks
1 mom found this helpful
M.P. answers from Portland on January 05, 2012
T.T. answers from Dallas on January 06, 2012
Would not recommend it at all. Go to daveramsey.com or pick up a copy of the Total Money Makeover by Dave Ramsey.
R.J. answers from Seattle on January 05, 2012
Debt Consolidation (different from taking out a consolidation loan, btw.) lasts for 5 years, and stays on your credit for ANOTHER 7 AFTER YOUR LAST PAYMENT IS MADE. A grand total of 12 years of your credit being screwed up *as badly* as a bankruptcy.
If ANYTHING happens during that 5 years (1 missed or late payment for any reason), all the creditors in the plan have the right to opt out, and stack all of your previous 'on hold' interest back up to where it was (interest is put on hold as long as you can stay on the plan), and charge you any fees and overages they deem fit. With the increased back-interest payments... even several years in... the lump sum the consolidatee is looking at is usually greater than their original debt.
Statistically MOST people who file for debt consilidation have to file for bankruptcy within 3 years. Which isn't the bad thing. The bad thing is the 'wasted' money they spent during the time they were in the plan, and the wasted years that they couldn't be saving or working on their or their children's future.
NO ONE should do Debt Consolidation (although many people would benefit from a debt consolidation loan).
CH13 bankruptcy is JUST LIKE Debt Consolidation EXCEPT:
1) You are protected under the law. No old creditors can show up, creditors under the plan are not allowed to change their ammounts. If you become sick, lose a job, have an emergency... the courts put your payments ON HOLD until you are able to pay again, and then those missing months just get tacked onto the end.
2) Your credit is affected for a MUCH shorter time. A max of 10 years, but it often falls off of your credit report as early as 3 years in. This is 3-10 TOTAL years. Not 3-10 after your last payment
3) Your living needs are ascertained by the courts FIRST (rent/mortgage, bills, childcare, car and home maintenance and insurance, SAVINGS, education expenses, medical expenses, life insurance)... THEN with the money left over THAT is what you pay. Instead of vice versa (in DC all your debts are added together and divided over 5 years, and whatever you have left is what you live off of).
4) Unlike CH7 you get to keep your house, at least 1 car, and any assets or debts you choose to exclude from the plan (aka continue paying on).
5) Is a variable time set up. Meaning 1, 2, 3, 4, or 5 years of repayments DEPENDING ON YOUR DEBT LOAD. How many years is calculated out by both your lawyer and the courts.
6) Excluding your retainer, the bulk of your legal fees are wrapped up INTO your settlement, which is paid monthly.
Bankruptcy is a CONSTITUTIONAL RIGHT. Just like a speedy trial, free press, right prohibiting unlawful search and seizure, the right to bear arms.
CH13 isn't right for everyone (for some a consolidation loan through a bank, or others CH7)... but it is a durn sight better and smarter than being taken in by a debt consolidation company.
8 moms found this helpful
C.O. answers from Washington DC on January 05, 2012
DO NOT DO IT!!
Go to the library and get Dave Ramsey or Suze Orman and do it yourself!!
If you want to pay someone to pay your bills - pay me. I'll make deals with the creditors for you - something you can do yourself without damage to your credit report.
You HAVE to be willing to go CASH ONLY!! We (my exhusband and I) did debt consolidation and we ended right back in debt again. You HAVE to make the choice to live within your means.
Using a debt consolidation company will only make it easy for you for a bit. Pay close attention to the fees they charge. READ EVERYTHING - DO NOT skip a line, if something doesn't read right - ASK!! But really? I would NOT do this...do it on your own. You will feel a much better sense of accomplishment doing it on your own. Go to the library - borrow Dave Ramsey's or Suze Orman's books - then get going - gather EVERY single debt you have. Carry a journal with you for at least 3 months so you that you can track EVERY PENNY you spend - you will be amazed at where your money goes - coffee, tea, sodas, 7/11 - all of it - adds up FAST!!!
Call all of your credit card companies - including student loans - and freeze the accounts - get the interest rate knocked down and set up a flat payment plan - companies would MUCH rather do this than pay for a collection company...this way you keep your credit and do it YOURSELF!!
7 moms found this helpful
T.L. answers from St. Louis on January 05, 2012
I agree with everyone else so far, do not do it. We pay off one debt at a time and have for a few years now. I can happily say we are down to two debts outside of the car, house and school. Our tax return will take care of the other two. I can finally see the light at the end of the tunnel and it feels awesome to know how much and how hard I have tried for this.
4 moms found this helpful
F.H. answers from Phoenix on January 05, 2012
DO NOT DO IT!!! My mom did it and it totally screwed up her credit and payments and on top of paying their fees, she is paying some kind of attorney fees that she won't fess up to why she is doing that. Its much better to do Dave Ramsey or even work with the credit companies yourself. Good luck!
4 moms found this helpful
J.W. answers from St. Louis on January 05, 2012
Debt consolidation does not effect your credit one way or another. All it is is taking all your debts and getting a single loan for the balance. It tends not to save you money unless you use your home's equity as collateral for the loan. Home loans tend to have a lower interest rate than unsecured.
Now if you consolidate your debt and then run up the credit cards again that will have a negative impact on your credit score.
There are two things you need to watch out for, first there is no free lunch, these people want to make money so watch for hidden costs. The second is if you don't close the credit you consolidate you will be in the same condition, only worse, in around a year.
3 moms found this helpful
A.F. answers from Houston on January 05, 2012
Some companies CAN ABSOLUTELY hurt your credit score long-term.
You need to find out their process. Some will tell you to stop paying on the debts and only pay them while they work out agreements with your creditors.
What this does is show delinquent payments. That definitely affects your credit. Your best bet is to see if you can get a debt consolidation loan through a credit union or bank. What that will do is get you enough money to pay off all of your various debts at one time. Then you only owe the bank/credit union the money at a hopefully lower interest rate.
In other words, you'd be making one payment instead of (say...) 6. It will be a much larger lump sum, but hopefully not more than what you're paying out separately to all your various creditors.
2 moms found this helpful
C.R. answers from Kansas City on January 05, 2012
Do NOT do this!!! It only makes everything worse. Check out Dave Ramsey - he has many practical ways to become debt free.
2 moms found this helpful
G.M. answers from Phoenix on January 05, 2012
I did a debt consolidation back in 1994. Yes it does ruin your credit, but meanwhile you build it back up again while you pay on your debt. It's weird that way. It really helped out a lot. Only one payment to the consolidation company, and they distributed the funds out to the creditors. You can go through a company like that, or you can file a chapter 13 which does just about the same thing. Depends on what debts you owe. :-D Good luck to ya.
2 moms found this helpful