Debt Consolidation Loans

[CinaC]

I got my first credit card a few months after I first moved out on my own. I thought "I can handle it." At first, I could. But money management took its time in being learned, and one credit card with a $500 limit has expanded into many credit cards and a total debt of close to $12,000 (this not counting what I owe on my Jeep).

I've been paying more than the minimum on every card I owe - $100 a month, at least - but, gosh, the old saying "the balances never seem to drop" applies here.

I'm looking to get a Debt Consolidation Loan. I tried to get a loan to consolidate my debts about a year ago from my bank, but apparently they don't have DCLs and wanted to do it as a personal line of credit . Obviously, I didn't get that, and no surprise.

On Monday, I'm going back to Chevy Chase, and I'm also going to hit First Union/Wachovia, and Suntrust in the quest for a DCL. Why I'm posting ... has anyone taken a DCL before? Are they hard to get? What's involved in getting one? Oy.

[JKT]

I went through Concumer Credit Counseling (basically a negotiator) instead of DCL, and it worked for me, but my total was around $5-7K. And you have to close the accounts.

Around here, nearly anyone with over $10K is advised to file bankruptcy.

The one time I tried to get a DCL, I was also advised to close the accounts, and didn't want to at that time.

Either way, you will probably have to close most, if not all of your card accounts.

Best of luck, CiaJ, it's tough.

I'm STILL trying to learn how to manage my money....

[Deputy757]

Like JKT I've used the Consumer Credit Counseling service and they did require that I close my credit card account. What they also did was deal with the credit card company itself which resulted in the balance being frozen so that no more interest accrued. Then it was just a matter of paying the balance off.
I'd recommend that you read "Financial Peace" by Dave Ramsey. It has a great strategy for reducing debt and staying debt free.
Good luck.

[Sig220Man]

A loan of any sort is of no use to you if you first don't solve the underlying problem. If anything, it'll get you deeper into debt, because you'll have your original balances to pay PLUS whatever new debts you'll manage to rack up.

Another problem with debt consolidation loans is that the majority you see advertised on TV are really home equity loans. If you're a renter, or a homeowner who's already used up his home's equity, you're S.O.L.

Unless it's the home-equity sort of loan, you'll often find the interest rates to be no better, and sometimes worse, than a credit card.

Non-profit debt counseling agencies like Consumer Credit Counseling are good, but make sure that whatever debt reduction plan you get doesn't make the problem worse. For example, CCC has been known to recommend that you actually WITHHOLD paying off certain credit cards in order to use the extra cash to pay off others. While this MAY pay down your debt faster, the side effect is that you now have substantially lowered your FICO credit score. If you already had late payments it's not a big deal, but if you managed to hang on by your fingernails you may have done more harm than good.

Stay away from any company that promises to "fix" your credit problems. Only time and responsible financial planning can do that. Also stay away from any companies that ask for hefty up-front fees.

Speaking of FICO score, don't underestimate it's effect on your life. Even if you don't ever plan on getting another loan for the rest of your life, your FICO score can make life very easy or very difficult for you. It can affect your ability to get utilities (deposit or no deposit), your ability to rent an apartment or house, even your ability to get a job.

For that reason I recommend AGAINST bankruptcy unless all other avenues have been exhausted. It takes MANY years to recover from a bankruptcy, and in the meantime you'll be treated as a financial "leper" in the form of higher interest rates (on the verge of extortionistic), hefty cash deposit requirements for things like utilities and even car purchases, and possibly not even getting a job that you were otherwise qualified for.

[AutumnAngel]

Good advice Sig, and I have also heard that these consumer counseling groups are a mark on your credit. I'm not sure if it matters but it's something to think about, I guess.

[Tprspouse]

Do what I do...apply for every 0% apr offer that comes down the pike (pay attention to the small print re: transfer fees). Switch the balance and then close the account and cut up the card.

Then, when tax returns come every year, pay a chunk of it off.

I don't know one person in my family who is not in some kind of debt. Hey..it's the American way!

Edited to include: I forgot to mention one IMPORTANT thing! Never take any offer that switches back to over 7.5 or 8% when the offer expires just in case you forget to switch again in time! I once switched to 0% with no transfer fee. I forgot when the offer expired and I was stuck with a 17% apr.

[ 06-13-2003, 02:15 PM: Message edited by: Tprspouse ]

[JKT]

quote:

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Originally posted by AutumnAngel:
Good advice Sig, and I have also heard that these consumer counseling groups are a mark on your credit. I'm not sure if it matters but it's something to think about, I guess.

---

Yes, it will affect your credit rating, but it does show that you are trying to eliminate the problem. I applied for a car loan while still on CCCS, and through a car dealer the best they could do was 19.5%. I finally went with the Credit Union I'm a member of and got the loan at $14.5%, then renegotiated a year later for a lower interest rate. I've since paid it off.

I didn't realize how many submissions the car dealer made until I pulled my credit report last month.

Several of my co-workers have filed bankruptcy, after consulting with CCCS, because of the level of debt.

No matter which way you go, it will take time to overcome this hurdle.

There is no quick fix.

[CinaC]

I applied for a personal loan for debt consolidation with Chevy Chase Bank, where I have my car loan, and my savings and checking accounts. After totalling up my bills, it came out to a little under $12,000. I should find out by Monday if I got it.

Assuming I did, I'm canceling all but one of my cards (for emergencies).

[Trendz]

I've got a ton of debt! Of course, I just got out of college.

My school and vehicle loans are basically it. Together they total about 45k. Of course, my vehicle will be paid off in 4 years (its brand new) and my school loans have to be paid off over a 10 year period. I plan on having them gone come 6 yrs.

I also make a point to save every month. I have a 401k and a Roth IRA as well as a savings account I contribute to every month.

[Sig220Man]

One website that I've found really useful is Bankrate.com. From their homepage click on "Calculators" then "Credit Cards." This brings up a tool that lets you determine how long it takes to pay off a certain amount of credit card debt. If you play around with the figures, you'll see that by paying just a little bit more, you can pay off the card months if not years earlier.

[Southpaw]

quote:

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Originally posted by Tprspouse:
Do what I do...apply for every 0% apr offer that comes down the pike (pay attention to the small print re: transfer fees). Switch the balance and then close the account and cut up the card.

---

Switching credit cards often (more than 1 or 2 times/year) will greatly affect your FICO score also.

Also, get a copy of your credit report and make sure that the balance is indeed switched and the other account closed. Also, if one of your credit card banks has been merged/taken over, make sure the account under the old name is shown as "closed." I found out that one that showed the balance as still owed

Finding out your FICO (also comes with one report from one of the reporting companies):

www.myfico.com

[AverageJoe]

I too would recommend the Dave Ramsey book called "Financial Peace" if you realize that you have too much debt and want out for good (a lifestyle change, not just transferring debts around).

There's a lot of good advice in the book. To summarize his get-out-of-debt tactic: Rank your credit card debts by outstanding balance. Pay the minimum on the larger debts and send everything left over towards the one with the smallest balance. When that's paid off, concentrate everything you have on the next smallest, and so on. Each card you pay off leaves that much more money to pay on the next in line. That drops balances in a hurry. When you're down to only a couple debts left, you can start saving a little money in an emergency fund that will keep you out of debt going forward.

But under no circumstances should you skip paying on any card each billing cycle! As soon as you skip a payment ("default") the card company can and will jack your interst rate to their around 20+% default rate. That seriously screws your attempts to get them paid off as well as puts a boo-boo on your credit report.

AvgJoe

[Deputy757]

Just happen to see this on MSN. Check out the number 1 no-no!!
Money no-no's!

[JayneDawson]

I can understand your problem. I have been through a similar one. Fortunately, I found some competitive loan options from LoansGeeks. It is a wonderful place for having debt consolidation loans. Just give it a try. You won’t be disappointed.

[Iowa #1603]

I can understand your problem. I have been through a similar one. Fortunately, I found some competitive loan options from LoansGeeks. It is a wonderful place for having debt consolidation loans. Just give it a try. You won’t be disappointed.

DO you understand this is a 16 yr old thread?