Debt Consolidation Anyone Done This Before ?

Updated on June 18, 2008
J.K. asks from Leechburg, PA
20 answers

Hello Moms,
I have been researching online about debt consolidation and am still confused. I have a lot of chargeoff's / credit card debt that i want to take care of however can't just pay everything off up front. I was young and dumb and am now trying to get back on the right track. My father was sick a few years bsck so i quit work and had my car repoed (father was more important) and i used my credit cards for everything because i quit working. ANYWAYS !! please let me know if anyone has had any experience with debt consolidation.
Sorry if it sounded like i was venting

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L.L.

answers from Philadelphia on

I heard it is risky. Good Morning America just had a segment on about this on Wednesday, June 11th...look on their web-site for alternatives.

M.S.

answers from Pittsburgh on

Another Dave Ramsey fan here! My husband and I are totally debt free (including no mortgage), thanks to working multiple jobs, cutting spending, and bargaining with credit companies (all based on Dave's advice/books/radio show).

It took us 5years, but soooooo worth it!

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S.Y.

answers from Pittsburgh on

No No No sweetie!!!Whatever you do do NOT do consolidation...most companies are dishonest and you end up paying through the nose!
Go to www.daveramsey.com and look up "Financial Peace University" classes in your area, or order the cds to listen to from Amazon.com. We have reduced our debt by $11,000 in TWO months!!!!! If you want, I would be glad to give you my phone #. I don't work for Dave Ramsey,but am a HUGE fan...my brother and sister-in-law were so impresses after they took the course that they are now going to teach it!
Good Luck!!
ps. I can give you great ways to deal with debt collectors...remember to always tape (with their permission) their comunications with you...www.recordmycalls.com

WOW I WROTE THIS BEFORE I READ THE OTHER RESPONSES>>>GUESS I"M NOT THE ONLY DAVE RAMSEY FAN!!! LOL

1 mom found this helpful
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L.W.

answers from Philadelphia on

Debt consolidation is as bad for your credit as bankruptcy. You'd be better off filing personal bankruptcy (your husband doesn't have to) and getting it over with and making a fresh start.

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C.G.

answers from Philadelphia on

J.,

2 things: First of all, NEVER use a home equity loan or home equity line of credit to pay off credit card debt. Anyone who watches the Suze Orman show can tell you that credit card debt is unsecured debt, which means if you declare bankruptcy, credit card debt goes away. If you pay off credit card debt using the equity in your home (if you have one), this is secured debt, meaning you used your home to secure it and if you don't pay off the loan, THEY CAN TAKE AWAY YOUR HOME! Check out www.suzeorman.com if you need more info on this.

Second, I HAVE used a reputable organization to do a debt consolidation, and I had NO problems. This was before the scam artists popped up everywhere. In 1999 I consolidated $18,000 worth of debt and paid it off over 5 years. My monthly fee to the company was only $5 a month! They are Consumer Credit Counseling Services, and their new website is www.allvista.org. Go to their website and click on the Debt Management link. I lived in Florida at the time and had a local office and a personal credit counselor to visit. Contact them to see if they can tell you where the local Consumer Credit Counseling Services offices are for PA/NJ. They negotiated low interest rates for my credit cards (though certain store cards, like Sears NEVER lower your interest rates) and they knew what order to pay off my cards so my balances were paid down the quickest. You have to agree not to open up any new credit card accounts or other credit (car loans, mortgages, etc.) during the time you are paying off your debt and your existing cards are frozen.

I can tell you that my credit was NOT bad after I paid everything off. I got new credit cards almost immediately after I paid everything off (in order to re-establish credit). 5 years later I have EXCELLENT credit!

It IS much better to go into a legitimate debt management program than to declare bankruptcy. Bankruptcy ruins your credit for 7-10 years. Debt management doesn't ruin your credit. Creditors look more favorably upon people who attempt to pay their debts instead of declaring bankruptcy. Besides, there is more than one kind of bankruptcy, and unless you qualify for the one where every debt is erased (except for student loans, which can NEVER be erased), you're going to have to make monthly payments to the bankruptcy court anyway. I know, because my parents had to do this. I don't know if there is another kind of bankruptcy, but there is Chapter 7 and Chapter 13. Last year the government made it harder to file the one where you erase all debts.

You have to be super careful, as others have already said, when choosing a debt consolidation company. Please feel free to e-mail me if you have any other questions or just need the support. Good luck! If you find the right company, it can be one of the best decisions you'll ever make!

C.

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L.K.

answers from Philadelphia on

Hello J.,
Wow! I'm shocked at all of the negative feedback on debt consolidation. When I graduated from college I realized just how much debt I racked up. I contacted a company who negotiated the interest rate with my credit card companies. I sent the consolidation company a check every month and they paid the credit card companies on my behalf. I was debt-free in less than 3 years. It never looked like a bankruptcy on my credit report. As a matter of fact I did that about 4 years ago and I now have a credit score in the mid 700's. As each credit card was paid off they were closed out, and on my report it reflected as closed by consumer. I hope that helps. Oh, and you're a wonderful daughter for taking care of your father in his time of need. I really hope you can find a way to work out your debt. You deserve it! Best wishes.

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P.W.

answers from Philadelphia on

Hi J.,
You can actually work with your creditors on your own and achieve the same results as a consolidation company. You can ask your creditors if they have a hardship program. Some will place you on a 5-year payoff plan with a lower interest rate and payment amount. Some will reduce your interest rate to 0% for 12-months and lower your payment during this same timeframe to allow you get back on your feet. In addition, some may offer you a settlement on the balance, which is significantly less than the amount you owe. This will impact your credit score somewhat, but it sounds like you are already impacted in that area.

I found myself in the same situation and this what I did. I pray that you find the best solution for you and your family.

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F.V.

answers from Lancaster on

J.,

DON'T WASTE YOUR MONEY! We did it and ended up having to get an attorney to get all of our money back. And this was a 'reputable' company featured on shows like "Today Show" and "Nightly News." They make so much money off of you and you can still be taken to court and sued. They can not protect you at all. They take your money and hold onto it till they can send it out to the companies, meanwhile your credit is suffering and your money is being thrown out the window. If you want to know the 'credit company' we used I can email it privately so no one is offended on here (which I see happens often).
Go talk to a professional that is non-profit in your town they have them out there. Talk to a financial advisor or someone who is qualified to not make a profit off of you.
Good luck...
Chris

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L.S.

answers from Philadelphia on

I also recommend Dave Ramsey. My husband and I are approaching our 50's and we have been working on being debt free. We also got into trouble when we were younger, back in the "yuppie" days when we were trying to have it all. Hubby is a CPA and he does not recommend debt consolidation companies, which are in business to make money off of you. Basically, all you do is put yourself in debt to the debt consolidation company. Don't give them your money. Instead pay your debt down yourself. If you have a home, you can consolidate your debt through a home equity loan. But be careful! My husband has many clients who consolidated debt, and when they found that they had more money in their pocket each month because their one loan payment was lower, they lost control and started overspending again. Dave Ramsey's plan can really help you to develop better saving and spending habits.

Good luck!

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S.N.

answers from Philadelphia on

Hi J.,

I too got into cc debt and I went thru Consolidated Credit (see link below) and it was the best think I could do. They were able to get my interest rates reduced drastically, one down to 6%. Now when I look at the statements the balances are really going down, I think I've been on the program for about 2 years now and last check it looks like I may be out of credit card debt in about 2 more years. There is no way I would be where I am now. My only regret is that I didn't do it sooner. I would not recommend loans or anything like that unless you are doing to cut up your cards and really stop using them otherwise you'll end up right back in the same place. One think I will say is my payments are pretty high I don't think any less than what I paid before but the change in the interest rate made a huge difference.

Hope my advice helps. Good Luck!!!

http://www.consolidatedcredit.org

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D.P.

answers from Pittsburgh on

J.,
PLEASE do not do a consolidation loan. Some of the so-called "non-profit" ones are actually like filing for bankruptcy as far as your credit goes--of course they will never tell you that! Consolidating debt without cutting up your credit cards is what as known as "financial suicide"!
Get Dave Ramsey's Total Money Makeover book OR his original "Financial Peace" asap--from your library for free! Either O. will give you the basics.
He does "baby steps" to being debt free. The basic premise of paying off credit cards is to pay them off smallest to largest. First, you MUST cut up your credit cards immediately. As you pay off the smaller ones, you can add that payment to the payment on the next largest O., etc etc. This is called the debt snowball. It will work for you. You will see that too much of your disposable income is going to those "minimum payments" and you are getting nowhere! I cannot recommend this book enough. My husband and I are in our mid 40's with a paid off house and now we are concentrating on saving for retirement and a college fund.
But do NOT do a consolidation loan--avoid Consumer Credit etc. Yes- they are technically non-profit but the owners are getting HUGE salaries from the backs of people strapped with debt. Crummy!
You will get out of debt a LOT faster by doing it YOURSELF!!!!!!!

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M.T.

answers from Philadelphia on

I have to agreed with the Dave Ramsey fans as well. Read Total Money Makeover. It will help you get started on an emergency fund, get out of debt, set up a budget, etc. I have always wanted to budget but hubby didn't really jump on board until he read the Dave Ramsey book. We have already paid off 3 credits cards and on our way to paying off 2 more by the end of the year. We just started earlier this year. We also stopped using our credit cards and what a difference it makes. It's a GREAT feeling to pay with CASH. Also, you want to be a stay-at-home mom???? I may have something for you. If you are interested in getting paid what you are worht and getting paid for the work you put in then we need to talk. [email protected]____.com

M.

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B.F.

answers from Philadelphia on

My husband and I are following "The Total Money Makeover" By Dave Ramsey. He is a national finance advisor who has written a wonderful book about how to get out of debt. He has experience because he was a millionaire who went bankrupt and learned firsthand how to get out of debt and become a millionaire again. I like it because it is so simple and has completely changed our way of thinking about money and spending as well as the way we view life. We are starting on our makeover and plan to be completely debt free in two years. Every Friday on his radio show, callers call in and talk about how they got out of debt in a few years. Many of these people were in thousands and thousands of dollars in debt. It's not easy because you have to sacrifice a lot for a few years, ie things you "want" versus things you "need."

Anyway, in his book he talks about debt-management companies. He says don't do debt consolidation. When you use one of these companies it is like you have filed Chapter 13 bankruptcy. Your credit will be trashed. In fact many of these companies have hidden fees and deceptive practices. Mr. Ramsey says if you are absolutely going to use a debt consolidation company use Consumer Credit. I personally would be very wary of using a debt consolidation company. My husband and I are very aware of our credit score.

I'm sorry to sound like I'm endorsing him, but I guess I am. I have found this system is completely working for us and hopefully soon we will have the debt burden off our shoulders.

Good Luck! : )

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S.D.

answers from Philadelphia on

I am doing that now, I did a lot of research too, I did find a company that seems to be ligit, we have had no problems with them so far. I belive we are using Freedom Debt Relief the name the company uses is CNI. If you want more info about it pm me. I can explain how it is working for us, and what they do. HTH

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S.C.

answers from York on

Dear J.,
Dave Ramsey is a financial genius IMO. My parents took his class & are working their way out of debt. You've taken the first step by realizing that you have a problem & need to fix it. You might also want to check out www.crown.org it's a Christian financial website. You can e-mail questions & get real advice. The more specific your question, the more specific the answer they'll be able to give you. Also, if you regularly attend church, I'd suggest speaking to your pastor about finding someone (in or out of church) who could act as your financial advisor. You'll want someone who is financially sound themselves -- don't want $$ advice from someone who's bankrupt. ;) At any rate, I will say that we went through a debt-consolidation company in Georgia, and while it did consolidate our debt, their "fee" was exorbitant & outragous. In most states, if you are paying SOMETHING every month, there's not much your creditors can do. As for the credit cards, Dave Ramsey recommends paying the minimum monthly payment on ALL of them, but paying more onto the LOWEST balance. When that card is paid off, you add the amount that you were paying on that card to whatever you're paying on the next lowest balance. This way you see pay offs more quickly. (Some recommend paying off the card with the highest interest rate first.) Just some options for you.

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K.J.

answers from Philadelphia on

If you own a home and can do a home equity loan, youcan write the interest off at tax time. Otherwise, find a credit card that offers 0% for 12 months or longer w/ no transfer fees since a lot willcharge 3% of the balance and then try to pay as much as you can off in the time period where there is no interest. I know Citi cards offers this most of the time. Look them up on the web. But always ask about the transfer fees cause that can get you.
K.

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K.N.

answers from Philadelphia on

do you own a house? if you do you can look into a home equity or a line of credit...rates are pretty low right now. Can request quotes if you use lending tree. Interest on these loans are tax deductible.

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A.C.

answers from Philadelphia on

Dear J.,

Let me start by saying that you are not alone.

Next you might want to check with your local Consumer Affairs Department to see if they can recommend any "Debt Consolidation Companies" to you. (They are not ALL what they are cracked up to be!) They can help get your debts consolidated, sometimes at reduced amounts, into affordable payments. Unfortunately if you had a car repossessed this is a major problem and will stay on the books for up to 10 years (I believe) if you do not pay it off.

As a result of having charge offs and a car repo, I would advise you to first see an Attorney, J., to discuss the pros and cons of either debt consolidation versus some form of Bankruptcy. I know that word sounds scary but this may be your only recourse due to the charge offs and repo.

An Attorney will be able to advise you on which way to go, how each method would impact your credit score, and the general "rate of credit recovery" from each method. Typically most people who file bankruptcy can re-establish good credit and be financially "stable" and credit worthy within 2 - 3 years.

I have had clients who have done debt consolidation and complained that the company paying their debts didn't pay them on time!

Also ... as a Realtor I have found that the 1st step to failure is taking a home equity line and allowing the house to pay off their debts for them. Many of those going into foreclosure today did just that! They wrapped thousands of $ of debt into their homes with lines of credit. In each instance these folks do not cut up their credit cards and now they have DOUBLE debts with the 1st and 2nd mortgages PLUS their credit cards that they run up AGAIN. It isn't until they are in foreclosure that they say ... GEE! What did I do!

Keep in mind that the more knowledge you have the better off you are.

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M.M.

answers from Philadelphia on

We used CareOne and it was fine...your cards get "shut off" during the consolidation, which was great for us since we could not fall back on them and learned to budget a bit better for layoffs (why we needed the consolidation in the first place).
I would keep your lowest interest credit card out to pay off seperatly as an emergency card just in case.

Good luck.

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A.K.

answers from Pittsburgh on

I am with the Dave Ramsey fans and agree with no debt consolidation. Why bring in a third part, debt consolidation companies to help you pay off your debt when you can do it yourself. Debt Consolidation companies are not Not for Profit, they are for profit, hence making money off of you. Stop the cycle.
So... Dave Ramsey great!
If there are more serious problems, not saying you indicated it, but if someone has a spending problem, Debtor Anomyous is a wonderful 12 step program. One of my dear friends is in that program I have witnessed wonderful results.

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