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Debt Relief – Insolvency – Bankruptcy Information » Debt Consolidation and Refinancing » is debt consolidation the way to go?

is debt consolidation the way to go?

I am getting pretty deep into debt slowly. I have a charged off car payment that I have to pay off, a credit card bill, an old cell phone bill, and a student loan. The student loan is actually being defered right now but everything else is outstanding. It probably totals $8000 mainly because of the car payment.

Most of these bills are old from when I was a few years younger. How do debt consolidation companies work?

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5 Responses to "is debt consolidation the way to go?"

  1. Vicky says:
    It can be but not via the TV ads, your local council/CAB will point you in the right direction.
    Basically your creditors are offered a small payment over the life of the consolidation, if the majority accept then its a go. 99% of the time they will as they figure it is better to get something.
    Any student loan, government loans eg social fund etc, TV license is not covered by it, they must get paid, you will have no credit facilities for 5 years and if you miss a payment you are back at square one ie no reprieve straight to court.
    If you think you can handle that then I would advise you to go for it.
    I did it in Scotland where it is slightly different [in name mainly] that was as soon as it was introduced, now own my own home/car and haven’t looked back. The five years were tight going, but it was well worth coming out the other end with a clean credit history and a second chance.
  2. Heather says:
    Debt consolidation is not the way to go. You will only be digging yourself into debt deeper and making your situation worse than it already is.

    You see advertisements for it all the time — “Get debt-free and lower your monthly payments! Call now!” Debt consolidation ads are as ubiquitous as diet pill ads and sometimes just as outlandish. Despite the remarkable claims, debt consolidation isn’t magic and doesn’t really eliminate your debt (at least not immediately) because it involves getting new debt. That’s what debt consolidation is — taking out one new loan to pay off all your other loans. Still want to call now? Be warned: You may wind up in worse financial straits than you were before.

    1) The Hard-Money Loan
    “The biggest myth about debt-consolidation loans is that they’re easy to get,” says Scott Kays, president of Kays Financial Advisory Corp. and author of “Achieving Your Financial Potential.” If you really need a loan, it’s probably because you’ve already missed a few payments and your credit history has more dings in it than a ’74 Ford Pinto.

    And that’s the problem. Kays says that if you are a credit risk, the consolidator may entice you with promises of an easy-does-it loan, and end up charging you higher interest rates than you’re paying now — as high as 21% or 22%. “Your monthly payment may be lower” with one of these loans, “but you’ll end up paying more,” says Kays.

    2) Debt Consolidators Who Promise to Take Care of Everything
    This is the fairy godmother fantasy. This Nice Big Debt Consolidation company comes along and swears they’ll make your life soooo much easier. They’ll negotiate lower interest rates, reduce your monthly payments — and all you have to do is make “one EZ payment.”

    In reality, many debt consolidators build in a fee as part of the monthly payment you make to them. It’s usually about 10% of the payment (i.e. about $40 on a $400 monthly payment). They pass along your payments to the creditor — some debit directly from your checking account — and get back a 10% to 15% slice that the relieved creditor is only too happy to rebate to the consolidator.

    Is it worth paying someone else to do what you can do on your own, i.e. negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first?

    To desperate ears, this might sound like an ideal solution, especially when you talk to these people and they scare the bejeezus out of you. I interviewed two, Cambridge Credit and Counseling Services and Integrated Credit Solutions. Each offered similar services, and I don’t recommend either of them. The senior credit counselor I spoke to at Integrated told me, in grave tones, that it would take me 379 months — or 32 years — to pay off my debt. With their services, however, they would “save me 27 years,” and I could pay off my debt in just 53 months, or about 4 1/2 years.

    Thats funny, because when I plugged my debt into the MSN Money Debt Consolidator — a less biased source, since they ain’t getting no fee from me — they said I could pay off my debt in 41 months, providing I make slightly higher minimum payments to each card: a total of just $60 extra per card.

    Here’s another risk with consolidators you should know about: they have been known, in some cases, to make late payments or even miss payments, thus worsening your plight (and your credit record).

    After I got off the phone with Integrated, I had to ask myself: Is it worth paying someone else to do what you can do on your own? That is, negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? I don’t think so.

    Debt consolidation companies are just as bed as your credit card company. They are in the business to make money from you. The only way to get out of debt is to stop living beyond your means. Stop buying things that you do not need. Throw away your credit cards and only use cash or a debit card for things that you need to survive.

  3. MJ says:
    It may be that your financial concern is that your monthly debt, and you would like to know what your options are as far as getting your monthly obligations under control. One of the options that you have to choose from is debt consolidation, and this debt management program is an excellent way to help you manage your monthly obligations. One of the common misconceptions about debt assistance is that the process completely eliminates your debt. In reality, the process of consolidation significantly lowers your monthly budget and affords you the monthly cash flow necessary to attack your debt more aggressively.
  4. Arun says:
    Debt consolidation ads are as ubiquitous as diet pill ads and sometimes just as outlandish…Dealing with student loans, car loans and mortgages, as well as any other debts is daunting. If you can pull all those expenses together under a lower interest rate, like many ads boast, you will end up making lower payments..This is how it works by taking lower rates…
  5. Samuel M says:
    Debt consolidation can be a great form of debt relief to start tackling your debt – whether it’s just lowering your rates, getting a better loan, or cutting your payments to get debt free faster.

    Debt consolidation is when you consolidate multiple lines into one new loan or debt consolidation program – it typically involves a debt consolidation loan, but could also be referred to as a credit counseling program or other forms of debt resolution that do not involve a new loan. It is important that you know what your options are and what your goals are before choosing a debt consolidation program or company. From my experience with over credit and how I recovered, I suggest Bills.com, which has tips and resources so that one can get the best debt relief option for his situation.

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