Anyone Use One of Those National Debt Consolidators?

Updated on May 03, 2013
J.T. asks from Oradell, NJ
12 answers

A very good friend is heavily indebted. I'm not sure how much but she's a spender and what they really need is Dave Ramsey from what everyone here says about it but I won't get anywhere with that. She just asked if I'm familiar with debt consolidators, are they a good idea? I have no experience but thought maybe someone on here does. She didn't give me the name of the company but said it's national. She doesn't quite understand it but they will renegotiate her rate and of course take a percentage of the savings. Are any of these companies reputable? They have always stayed current on all payments so she's worried to turn over her ongoing payments to this company and have them miss one and ruin her credit. Any other things to be aware of? Anyone find success with one of these? And if so, can you share the company so she can try that one if she's talking to someone different? She said they have no equity left in their house so can't borrow against it. Thanks!

ETA: maybe it's a debt "management" company. I googled and seems like they're all the same thing ultimately but just to clarify as it seems to best describe what she said to me...

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So What Happened?

TF - you're preaching to the choir. We don't even have a mortgage... But no - it seems they are not self disciplined. She never has been where money is concerned but she's still a good friend. And the idea is these companies can get a lower interest rate than they can so there theorectically should be savings above the fee. But does it work out like that?...

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answers from New York on

I did debt consolidation 20 years ago. Best decision ever. It DOES NOT appear as bankruptcy at all and it improved my credit. I used American Credit Counseling Service. They consolidated my accounts into one lump payment and hardly took anything for fees.

They are reputable and were recommended word of mouth. The government Web site lists valid ones. Don't use ones on commercials.

ETA: Here is a link to federally-approved credit counseling services according to state:

2 moms found this helpful

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answers from Kansas City on

Debt CONsolidation appears like a bankruptcy on your credit.
Never a good idea.
They have to stop the bleeding (soending) and pay off the debt.
NO credit cards.

You can't make an alcoholic stop drinking.
They have to want it.
And often before the quit, they do all kind if other stupid things like " two drinks per day limit" or "only drink on days with an R in the name".

Consolidation is O. of those stupid things for people with a spending problem, IMO.

Some people learn quicker than others.

If she asks for advice, give it.
Otherwise, stay out of it.

Here's the secret: spending down, income up.
It's not rocket science anymore than consolidation is a quick fix.

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answers from Dallas on

I've never used anything like that because we don't carry debt.

My question... Why would you pay someone to do what you can do yourself?

Use the $$ you'd pay a company ( who has a bottom line interest of profit and running a business) and do it yourself.

Do they not have enough sense to know they are in trouble and use self discipline to get themselves out of trouble? You can negotiate with companies all by yourself. If you show personal initiative and discipline, a company will respect you more than he fact that you rel on a scam to take care of your issues.

Just my two cents...

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answers from Williamsport on

Greenpath is awesome. We were with them for a year before having to file a chapter 7 due to unrelated catastrophe-we were always responsible but husband's accountant screwed his band one year and got us a massive erroneous IRS lien which led to periphery debts while fighting that..blah blah...anyway ..

Greenpath was so helpful and got our payment to be so unbelievably reasonable we didn't even want to file and could have gotten debt free if not for lien. They are free to talk to for a run down of your finances and quote for your new payment and very ethical and friendly-they don't make you feel bad. Your friend WILL have to shut down all her cards though which is where most people don't want to cooperate if they are undisciplined spenders. I think we were able to keep one small card open by paying it all the way down for emergencies. But all the cards with significant debt CLOSED. You pay them off at a MUCH lower rate (our $1300/month payments were consolidated to $350 and no more calls from collectors) but you can no longer use cards. Yes, it is because Greenpath has the power to negotiate the payment that you don't yourself. And I had TRIED.

Some of these places are scams, but Greenpath was great. We were referred to them by Capital One or Mastercard when I just straight-up couldn't make their payments anymore. I wished I had heard about them much sooner.

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answers from Salt Lake City on

Most are a scam. At best, they are overpriced.

The worst ones- (Payless Financial & Payday Support Center come to mind) will happily take your money and then do nothing. My job is to work with debt management agencies and I can tell you that we have been trying (nicely!) to work with these companies for about a year. I am talking about thousands of emails, calls and faxes not answered.

The mediocre ones will sometimes get back to creditors but tend to be understaffed. This means that debtors miss out on important information (like adverse action such as credit reporting is about to happen).

Tell her that debtors can try to settle their own debt. Creditors are not required to work with debt management agencies. Creditors also do NOT want to write off or sell a debt to an outside collection agency, if possible. We do not want to lose money. Creditors are usually happy to offer extended payment plans or settlement offers to debtors that follow through on their promises.

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answers from Washington DC on

No, do NOT use a debt consolidation company. They pay your debts for you - but ruin your credit in the process as they pay off what they think it is most important.

Tell her - you can pay me to pay your debts. I'll write the letters. I'll pay your debts with your money and charge you to do it. I will work with the credit card companies on your behalf...that's essentially what she is doing. PAYING someone to pay her debts. REALLY?

How sad they can't borrow against their home. They really must be a in a pickle.

If she won't listen to you about Dave Ramsey or Suze Orman - buy the books for her and drop them off at her home when she's not there. let her read them herself.

Tell her to STOP using ANY credit. If she can't pay cash for it? too bad. Make a budget. Stick with it. if she goes with a debt consolidation company her credit WILL be tanked.

Good luck!

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answers from Dallas on

We have thought about it ourselves. We don't spend outside our means and we don't use credit cards....but we have mistakes from our collective pasts that we want to get rid of. We thought about calling a consolidation company and decided against it. We told any creditors that called to immediately cease and desist as we were dealing with the original creditors ONLY. After that we made a list of the major ones to work on and which ones to just let go (not the wisest decision but since they are old enough to almost drop off our credit report we would pay the uglier ones).
My advice is to have them run their credit reports and figure out which dings are doing the most damage. Call the creditors directly and see if they will either reduce the interest or make a deal for a lump sum reduced payment. Whatever they do, they need to make sure to only deal with the original creditors and get letters that they paid stuff off from those creditors as soon as they pay off!

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answers from Washington DC on

They're a scam. Often you send a couple thousand and they make a settlement offer that's rejected - and that's it.

On a side note - you can't fix her. She has to fix herself.

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answers from Chicago on

They are scams. If she is going to pay off debt. Tell her to cut the cards up. And start paying chunks on one at a time. The same one each month til paid off. Or file bankruptcy. But don't do the consolidation thing. You make big payments to them and they don't pay your creditors until they (the consolidation co) have been paid in full up front. It's a SCAM

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answers from Denver on

I used Consumer Credit Counseling years ago after being hit by a drunk driver and having a common law marriage (in which nothing was in my name) break up. They were great. The key, I think, is to use a service that has a REQUIRED money management course.

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answers from Oklahoma City on

We did this years ago when hubby and I were first married. He had a plan to be totally out of debt in a year or so but we just got behind on some things. We went to one that was free through the credit bureau or somewhere.

They called each company we had a credit card with and told them we were doing the consolidation thing. They got a lot accomplished. Almost every penny of our money they were "managing" went to pay principle. IT was nice.

Now the down side.

You have to contract with them to give them $XXX.XX per month and they pay those creditors. Period. We were giving them $1300.00 per month and still have a house payment, utilities, car payment, insurance, gasoline, food, other normal expenses like diapers, shampoo, toilet paper, etc.....We could not live on what remained so we broke the contract with them. Our credit card companies started all their stuff again but there wasn't anything they could do to us other than take us to court. Only one did and they garnished hubby's paycheck for a while to pay off the debt.

The good thing about going to court is they get a dollar amount awarded and a percentage they can require your employer to send to them. So if you're not working or your hours get cut they can't do anything. They can only take the amount they are awarded. That means no more interest, no more fees, nothing, they can't add to the awarded debt. So it saves you money in the long run.

Hubby got the full amount possible held out which was just over 20%, might have been 25% but it was years ago.

I think you should consider them if you can do so. It was really nice to not know who was calling each and every time the phone rang.

1 mom found this helpful


answers from Miami on

She won't consider Dave Ramsey because she's lazy. (Sorry - I know she's your friend.)

Would she consider Suzy Orman?

If she isn't willing to WORK like Dave and Suzy teach, then she's just going to end up in the same place even after help. I hope you can get it across to her...

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