27 answers

Debt Consolidation Is It Worth It/does It Work???

I am currently in a lot of debt and looking at the possibility of using a debt consolidation company. Does any one have experience with them and can you tell me what the pros and cons are. I do know that it effects your credit score but since my score is not that great any more due to a pending short sale on my home and some financial problem I got into while I was laid off for almost a year I am hoping that this will be a better solution for me instead of filling for bankruptcy. Any advice you can give me would be a great help!

2 moms found this helpful

What can I do next?

So What Happened?™

Thank you to all that have responded. i did attempt to call a couple of the companies my self and of the 3 i called only 1 was willing to drop my interest rate from 22% to 16%. the other 2 told me that i have been making my payments and that at this time they don't fell that i need to lower my intrest rate. i have also called a credit councling/Debt management program and resaerched them on the BBB.com first to make sure they had no pending law suites and/or complaints against them. i am currently working with Money Managemnt International they ahve been able to get my intrest rate lowered to around 8-10% on each of my cards and are not charging me any fees up front just a 35/month fee. i have not signed anything with them yet and will be paying for an attorny to review the documents first to make sure they are lagite before i enter into any contract. they did not promess to lower my total debt all they promised was to lower my intrest rate and work with me on a monthly basis to help find better money management opportunites to put more back in saving and then start putting more towards my debt but at least there is a light at the end now.

Featured Answers

I joined CNI a few years ago and they negotiated a good portion of my debt away. Look into them too, I cancelled all my cards and have bad credit for a few years but I was waaay in debt too much to be able to make the payments.

I haven't done debt consolidation, but when I married my husband, I called all his creditors and told them how much I could afford in monthly payments and made agreements with them. I have found that calling creditors whenever I have a problem is always a good idea.

I have read that for consolidating the debt and making more doable payments....you will actually end up paying more than you originally owed on the debt in the first place.

More Answers

We actually got a consolidation loan through our credit union to pay off all our credit debt. You might want to look into something like that where you bank...it may be a better option than going through an independent company - it was for us. It has relieved our monthly burden in paying off the credit card bills by a few hundred dollars. I know my husband looked into a few companies when we were exploring the idea & finally felt that going through our credit union was the best fit for us.
Good luck!

1 mom found this helpful

When I met my husband, he was in a program where he consolidated all of his bills into one low payment. I was always against those as I had never done them, but had heard BAD things about them. While he was on the program, his credit score was pretty low.... BUT... once his bills were paid off (thank's to the company) his score shot WAY UP!! I thought it would have affected it negativly for a long time after, but it didn't. Because of the good it did for him, I decided to do the same and get my bills in order. I am currently on the program and I am LOVING it!! My bills were close to $500 per month... maybe more, and they got me down to ONE payment of $191 per month!!! The company we go through is called Lighthouse Credit Foundation. If you decide to go through them, please let them know that L. O'Connors sent you... you will need my client ID of "Client ID 211539". Thank you and if you have ANY questions, please feel free to message me. Good Luck.

1 mom found this helpful

Hi OG,

in about 2000 i consolidated about $60k in debt. I forget all of the specifics but I used a company called Lighthouse Credit Solutions http://www.lighthousecredit.org/. In about four years we were completely paid off. Not only was it an amazing feeling to be debt free, but what was even nicer was that i knew what the monthly payments were going to be be, they were withdrawn on the same day each month so I did not have to worry about paying the bills and stressing every time the mail came, and on top of that, the people at Lighthouse were always helpful and kind.

Good luck in what I know is a crazy stressful time.

M

1 mom found this helpful

Hello; It is a tough situation. I just watched a program
with Suzie Orman that show the priority of out debts.She placed credit card debt as the last of all financial priorities. Because it is not secured. The credit card companies cannot take anything from you only damage your
credit rating. I personally discussed my debt with the
American Credit counselors. You can go online and put in
all your information for them to see. They will then have
a phone conference with you and it is all FREE!!!! Yes, free.
They were most helpful in determining several directions for
me to go. Hope this information eases some of the stress and
tension you are feeling. You can always start over. Good luck in the crazy financial time.

Hi OG,

I will say it does work if you want to be strapped with a company for years. It does affect your credit score which you really need to weigh if that is something that matters to you. Instead of going thru a debt consolidation company I actually took a class called Financial Peace University. It is phenomenoal and I would recommend it to anyone. You can check it out on www.fpu.com. It is run through Dave Ramsey and a lot of times you can find that local churches may have a class running. It costs $100 for a 13-week course and after the course I had over $2000.00 in debt paid off and it was the first time I had actually had a savings started. Good luck!

First I'd just like to say you're not alone. Obviously millions are in the same boat. And kudos for you for looking to take action to get yourselves back on top ASASP. I don't have experience with credit consolidation, but depending on the amount of debt your better bet may be bankruptcy, particularly if the debt is primarily in only one of your names. It will hit the one who files for awhile but it only takes a year or two of conscious effort to make you look credit worthy again (in fact you'll get hit up with credit card offers the day after you file because they know you can't claim bankruptcy again for a few years by law - so ironically that's the safest time for them to loan you money). You have to spreadsheet out how long it would take you to pay off the debt and if that will prevent you from building up your savings. If so, you might opt for BK as you might be able to use your cashflow to put away a nest egg in case you get laid off again, rather than paying off even a reduced amount of credit cards. Talk to an attorney about it, as you'll want to make sure you do it correctly if that's the path you pursue.

by debt consolidation do you mean lumping several bills into one new loan? Don't do it. We did it several times and only dug a bigger hole.
However there are companies out there who work as intermediaries with your creditors. they work with your creditors to stop the extra fees and may decrease your interest rate. You will need to allow the debt management company to set up an automatic payment to them once a month, then they pay your bills for you. The company we used charged about $30 a month but that was a lot cheaper then the credit card fees. This worked for us to get out of debt and I would recommend it. Unfortunately, I don't remember what company we went with.

Dear O G,
I'm sorry you're going through all of this. It won't really make you feel any better, but you are not alone. So many people have really been hit hard by this economy.
My friend wanted to do a loan modification to get her interest rate down. She had never been late or missed a payment, she just wanted a new rate. She was told by a mortgage broker about a program in which she had to quit paying her mortgage for a few months in order to qualify. It didn't sound right to her, but he'd done several of her home loans for her, so she did what he said. Long story short, her house is in foreclosure and that broker is missing in action. She saw a bankruptcy attorney to get it all straightened out, but still may lose her house.
My neighbor went through a debt consolidation company and he swears he will NEVER do it again. He is paying incredible payments each month, his credit is wrecked anyway, and he can't get out of the contract. I'm sure some companies are better than others, but he didn't pick a good one.
My point is: Be very careful!!!!

Best of wishes and luck to you!

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