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Debt Relief – Insolvency – Bankruptcy Information » Debt Consolidation and Refinancing » I have a question about Debt Consolidation?

I have a question about Debt Consolidation?

I have about $2600 in debt, I thinking about doing a debt consolidation. I don’t want one of those with the loans. I just want them to get it all into one payment. Is this a good idea? If so who should I use? Will it affect my credit also?


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3 Responses to "I have a question about Debt Consolidation?"

  1. Theatreman1 says:
    Please dont ever consolidate debts. $2600 is not a large amount of debt – if you make more than the minimum payments, you will pay this off pretty quick. See what the interest rate is and if it is not good, then get a loan with a better rate of interest. But don’t use debt consolidation companies, what they do is to consolidate your debts, and make you pay them off over a much longer period at a ridiculous rate of interest (normally upwards of 20%!!). This can easily turn your debt of $2600 into well over $7000 total re-paid.
    Debt consolidation should be banned – it is robbery.
  2. what? says:
    you can always just take out a personal loan, and use it to pay off the various debts.

    but really, just set up automatic payments and you won’t have anything to worry about.

  3. Jeanne R says:
    Please do not do “credit counseling”, “debt reduction”, or “debt consolidation”. It will show up on your credit report like a bankruptcy. It is also not free. There is a charge for the company to do it, they will negotiate with the creditors to either take less than you owe (another “ding” on the credit report), or to space the payments out for a longer period (which will cost you more in interest payments), and it will just take longer for you to get out of debt. Here is a plan that will get you out of debt and allow you to never worry about money again. You just have to decide to do it. If you work the plan, the plan will work for you. Get all of the debt paid off as soon as possible, that will enable you to start building real wealth.

    A. Have a garage sale and sell whatever you don’t use or need and use that money to pay down your debt.

    B. Consider getting a temporary part time job or two and use all of that salary to pay off your debt quicker. It is better to have a no fun year
    than a no fun decade.

    1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an “emergency fund” category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make. Pay cash for everything. If you can’t pay cash or write a check, then you don’t need it. Do not use credit cards. Debt (especially credit card debt with it’s high interest rates) is like quicksand, if you fall in, you will drown.

    2.First get current on all of you debts, if you are not already, and make no more late payments, if you have had any. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on. If it is not on your budget, then you don’t need it. If you forget to add a necessity to your budget one month then re do the budget. If you add something in, you will need to take some money out somewhere else.

    3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

    To start :
    Debt #1 (highest interest): minimum payment+ extra payment
    Debt #2 (middle interest): minimum payment
    Debt #3(lowest interest): minimum payment

    Debt #1: paid off
    Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
    Debt #3: minimum payment

    Debt #1: paid off
    Debt #2: paid off
    Debt #3: minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

    That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

    4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

    5a. When you have your emergency fund in place, add a category for “fun” to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

    5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? The Human resources Department will have the forms for you to fill out. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire. Start learning about investments. Do some reading. I like “The Lies About Money” by Ric Edelman, “Ready, Set, Retire” by Ray Lucia, and anything by Ed Slott. They are very good books and each has a little different perspective so you can decide your own comfort level with your investment

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