Debt Consolidation

Lounge By keonicakes Updated 26 Mar 2010 , 8:40pm by tirby

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keonicakes Posted 4 Mar 2010 , 10:46pm
post #1 of 19

I suggested to a friend that she may want to look into one of these companies as she is in a world of mess. Neither of us know much about them so I went on line and ended up overwhelmed and confused myself about them. Anyone used one or know of a good one / one to stay away from?
She and her hubby both lost their jobs and have credit and medical piling up. I hate suggesting things and not know much about them.

18 replies
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indydebi Posted 4 Mar 2010 , 10:55pm
post #2 of 19

do you mean debt consolidation (rolling all of your loans into one big loan) or credit counseling?

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keonicakes Posted 4 Mar 2010 , 11:07pm
post #3 of 19

I was thinking of whichever one works with the creditors and lowers your interest and payment.

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jillangeles Posted 4 Mar 2010 , 11:14pm
post #4 of 19

If they can...I think it would be better to roll all loans into one. They will have one payment and will not have to worry about all the different payments. It might even lower her interest a little.

The credit counseling is also good if they can not do the consolidation. They (the credit counseling companies) look at all your bills, talk to all your credit lenders and try and negotiate lower payments and interest. Some credit lenders will agree to lower payments and/or lower interest but some will not. They will then set up a monthy payment that you send to the credit counseling company and then they will pay all your creditors. There is a small monthly fee. I think it is just a few dollars. And I do not think it goes on your credit. Or is it does go on your credit it is not that bad. Someone else might be able to have more insight then that.

The one that I would not go with is the companies that tell you to stop paying your bills for serveral months and then they will negotiate with teh credit lenders for lower pay off. that will hurt the cresit because of the late payments and then the negotiated pay off will also be on the credit report.

I hope that helped some.

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keonicakes Posted 4 Mar 2010 , 11:28pm
post #5 of 19

How in the world do you find a reputable company for this?

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TheCakerator Posted 4 Mar 2010 , 11:29pm
post #6 of 19

I don't have any personal experience with these companies, but it seems I have heard you have to be X amount of debt before any of them will even help you out.

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jillangeles Posted 4 Mar 2010 , 11:44pm
post #7 of 19 I think is the one that I heard is good. I went to their web page and they are a member of the BBB.

I do not think that you have to be in a certain amount of debt to use them. But I am not 100% sure on that. I think they tell you how they can help you and then you decide if it the best root for your situation. I think they even tell you what would be the best way for you to go. They look at your debt to income ratio.

They may even be able to talk with a bank or a credit card company and ask if they have any suggestions on credit counseling companies. I think these companies sometimes will have agreements with the credit companies.

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keonicakes Posted 5 Mar 2010 , 2:46am
post #8 of 19

Thanks, I will pass that on. Having the BBB seal is a good sign. Ya'll were most helpful, thank you.

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jillangeles Posted 5 Mar 2010 , 3:59am
post #9 of 19

no problem...Glad I could help!

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denetteb Posted 5 Mar 2010 , 4:55am
post #10 of 19

Stay away from debt consolidation companies. I was just listening to Dave Ramsay, a financial guy on the radio, author, on numerous news shows, etc. He says no to debt consolidation, that if it was a legitimate business he would have gotten into it years ago. Also there are lots of horror stories of people paying into these companies and they are taking the money but not paying on the bills. So the people are way worse off than before. Dave says the consolidation companies can't do anything you can't do for yourself. You can call the companies and try to negotiate lower interest rates, payment plans, etc yourself.

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indydebi Posted 5 Mar 2010 , 9:09am
post #11 of 19

Let's not confuse the terms here folks.

Debt consolidation: When you go to a bank or a loan company and say, "I owe $5000 on 3 credit cards ... will you give me a loan for $15,000 so I can pay them off and only have one payment instead of 3?"

Credit Counseling: A company that "counsels" you in how to handle debt and "helps you" work out arrangements with the loan companies, credit card companies, etal, so you can pay them off. There is no new loan involved. They may act as your middle man .... the total of all of your loan payments is $2000 a month. You give them $2000 a month and they pay your bills FOR you, based on the pymt arrangements they have helped make for you with the existing loan companies.

I'm also a Dave Ramsey fan and want to confirm what was said above. you can't borrow your way out of debt. Loan consolidation is just a way for the loan companies to get a ton of interest out of you up front.

There are unscrupulous counseling services out there, just like in any other industry. So just like hiring a plumber, a mechanic or a dentist, you need to check them out. Ask for references. call the BBB to see what kind of activity is going on with them.

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keonicakes Posted 5 Mar 2010 , 1:01pm
post #12 of 19

yes.... I think credit counceling would be the better term. She doesnt want to take out any loans, but turn them into 1 lower monthly pymt. So much confusion about this when you read about them and try to find a legit one. UGH!

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s_barnes76 Posted 6 Mar 2010 , 1:54am
post #13 of 19

DH and I used a credit counseling agency years ago and like denette said, they took our money and didn't pay our bills for about 4 months, so we were getting further and further behind. We had creditors calling all day long and I would refer them to our counselor, only to have them tell me that the counselor would never speak to them. We eventually got it all paid for, but I would NEVER do it again. I had someone tell me once that negotiating charge offs or going through counseling agencies is actually worse than filing bankruptcy. I don't know if that's true, but my parents had to file bankruptcy and they were able to bounce back faster than we were.

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jonahsmom Posted 6 Mar 2010 , 2:27am
post #14 of 19

My hubby and I did credit counseling shortly after we got married...we were young and got in over our heads with credit cards! Those "just for emergency" times came around too often and for things that weren't REAL emergencies.

It does reflect poorly on your credit rating (although so does not paying your bills). However, it is reflected on your credit report as being as close to bankruptcy as possible without being in actual bankruptcy. If they tell you that it doesn't reflect poorly on your credit rating, they are lying and you need to move on to someone else. They're very slow to work with (at least our company was) and they were terrible about returning phone calls, etc. It's a crummy situation they're in by the sounds of it, so I guess it doesn't hurt to check it out. But just be very, very careful!

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denetteb Posted 6 Mar 2010 , 3:47am
post #15 of 19

Amy, you are a good friend to try to help them. A few suggestions. Have them call each debtor including the medical providers and see if they can make any arrangements. Smaller interest rate, smaller minimum payment, deferred payment, etc. If the first service person says no politely ask to speak to someone with authority to make decisions. Tell them the circumstances and see if they have options to help out in the short term. They need to get rid of extra vehicles, clean house and sell things, have a rummage sale, craigs list things, etc to get some extra cash. Cut out EVERYTHING. No meals out, no starbucks, sodas, etc. As Dave says, you will eat beans and rice, rice and beans. And both of them need to be applying for any and every job, any shift, any hours. And they need to let everyone they know that they are looking for any work. Any income to keep some money coming in. And after they get back on their feet they need to keep not-spending to get the bills paid off asap so this doesn't happen again. I know this is more than you asked for, but hopefully your friends can get past this eventually.

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cakes-r-us Posted 6 Mar 2010 , 3:55am
post #16 of 19

Using a credit couseling service is negative on your credit report. They can deal with their creditor's themselves. Stay away from the debt consolidation companies. Doesnt matter about them being a member of the BBB-not everyone report their bad experiences. I would suggest that they gather all their bills, see what they can settle them for and be prepared to make the settlement. They can get a letter from the creditor if the agree to the settlement. Get the letter first. They can also ask in the letter to have their credit report updated to paid as agreed. One caution on settlements that is not always mentioned is the part that was forgiven may be added to your annual wages as taxabe income, your will receive 1099 for filing, but there is a hardship form thru the IRS to have it waived think it's form 908 not sure about the number.

If they just explain their situation, ask for settlements, or negotiate a payoff schedule they should be able to get help.

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indydebi Posted 6 Mar 2010 , 8:05am
post #17 of 19

if she's a real good friend, buy her dave ramsey's book, "The Money Makeover". VERY helpful!

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keonicakes Posted 6 Mar 2010 , 3:03pm
post #18 of 19

I should read that one myself.

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tirby Posted 26 Mar 2010 , 8:40pm
post #19 of 19
Originally Posted by indydebi

if she's a real good friend, buy her dave ramsey's book, "The Money Makeover". VERY helpful!

I will just say I agree. I bought the book and AM doing this it has been 2 years but we are ALMOST debt free..... I have now begun to councel others and believe me ONE monthly payment is NOT the way to go.
GET THE BOOK for both of you!

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