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Debt Relief – Insolvency – Bankruptcy Information » Debt Consolidation and Refinancing » When is debt consolidation the right choice?

When is debt consolidation the right choice?

I have about 45 grand in secured debt (car, truck, motorcycle, atv) I am not behind on payments (about 1100/month) but am curious to know if I could reduce my monthly payments by consolidating and I have good credit and was wondering if it would it reflect poorly on my credit if I did also?


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6 Responses to "When is debt consolidation the right choice?"

  1. Babe says:
    Considering the economy and job market, you might think about consolidating IF the interest rate on your loan will be lower than the rates on the individual accounts. Generally you would be better off staying as you are and get them paid off or sold before refinancing becomes necessary.

    Your FICO score could take a hit if you do the consolidation.

  2. Alice Baby says:
    Consolidation probably would worsen your credit score.

    However you could look into finding a local credit union. If you join they maybe able to offer you better fixed interest rates on your secured loans.

  3. Hector says:
    Debt consolidation improve your credit score in the long run if you pay on time, it is no true that it damages your scoring, how can be possible if you are paying your debt? how can be possible after 12 timely payment?

    Nonetheless, why don you try debt settlement instead? those 45 grand could be reduced up to 75% by using this debt management program, while debt settlement reduce your credit score at the beginning, in the long run when your debt is informed as paid your credit scoring will be improved and you will have saved considerable amount of money. In this case over 25 grand of saving

    I would suggest researching and comparison of both debt management programs have listed resources for both options

  4. Jeanne R says:
    Never. It will slam your credit score.

    Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. Student loans are the only debt that can garnish your wages for non payment without taking you to court first. Just list them out on a piece of paper or a spreadsheet and follow the plan. If you work the plan, the plan will work for you.

    A. Have a garage sale and sell anything that you no longer need or want.

    B.Get a temporary part time job, if you have one, get another.

    Here is a plan that can help you. If you work the plan, the plan will work for you:
    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.

    2.First get current on all of you debts and make no more late payments. 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.

    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? 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.

    5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

    You can do it and it isn’t as hard as you think. Just follow the plan.

  5. BLCOHEN529 says:
    Try ‘NEVER’ Debt consolidation companies are invariably frauds and whose arrangements with creditors are either never made or worse yet, canceled after your partial payment putting you in a worse debt situation.

    Your creditors are likely to want you to return their collateral. Debt consolidation primarily is aimed at unsecured debt which has significantly lower collection value.

    Go to a library or larger Book Store like Barnes-Noble or Borders and learn about a Chapter 13 Bankruptcy Reorganization which is a Federal repayment plan of unsecured debt under the supervision of a U.S. federal judge in the area of bankruptcy law. It is not overly expensive ($700-$1,800), you can sometimes pay part of this over time and you make payments over 36 months of a percentage of your debt which might be as little as 20% to 30% of your total unsecured debt.
    Anything other than full and timely payment of your entire debt will negatively impact your credit report. A chapter 13 reflects higher than a Chapter 7 liquidation which I believe should only be considered for unsecured debts over $100,000 or in excess of three years income.

    If your debt is secured debt, you should consider selling one or more toys and pay off that obligation.

    If any of your secured debts are greater than the value, a chapter 13 allows you to cram down your excess balance to the market value and recalculate your monthly debt accordingly. You are also allowed to abandon your contract for any secured debt. Congress excepts “Home Mortgages” from cram down… Thank you every misbegotton Congressperson beholden to the banking and mortgage lobby.

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