Mods: there may be a factual answer to this, and any actual facts anyone can provide will be welcome, but I think I’m going to get more personal experiences than hard facts, so I chose to open this in IMHO. If I’m wrong, well, you know what to do.
I live by the general principle that if something sounds too good to be true, then it probably is.
Background: a few years ago, I got silly with a credit card. Consequence of which, I’m having fun (not!) paying it down due to the typical 20+% rates bank credit cards have.
Now: I receive, about once a week, letters from various lending institutions (that I’ve never heard of), with large, bold print proclamations like “Pre-Approved!” and “Low Rates!” (typically 2%-10%), and "Call NOW with this authorization code! and “Last Chance!”
Question: Has anyone dealt with these various people? Has anyone benefited from them? Or has your life become the kind of living nightmare that keeps you awake at night due to a “Gotcha!” clause that basically gives them possession of your soul?
Any and all replies/anecdotes welcome.
Thanks in advance.
I seem to recall reading that some debt consolidation companies charge you a fee up front and do little to help you out. I’ve never needed their services, so I don’t know.
Have you looked into joining a credit union and switching your card balance to a card there? In my experience, CU rates tend to be lots lower than commercial banks. We’ve been with a credit union for over 30 years. I’ll never have an account at a bank ever again!
There are things that can be done. You can refuse to pay on the cards for a year or two, then offer the credit card company a percentage of the balance. The amount of money you’d pay would obviosuly be less than paying it down the hard way.
However, this action would obviously damage your credit pretty badly. This may or may not matter - your credit rating doesn’t affect everything, and there are ways to reduce the impact it has. It depends on how much money you save versus how much you use your credit rating. This is why “jingle mail” - mailing your keys back to the bank in the case of an underwater mortgage - is usually worth the credit hit. Not having to pay $50,000 or so saves you far more money than you pay by getting charged more for your insurance, having to pay in advance for various services, and so on.
One thing to remember: several of these companies claim to be non-profit. They don’t make a profit by paying ridiculous salaries to the owner and his family.
Once in a while the Feds will close down the more abusive of these companies. But there’s still a lot of bad ones out there. A lot.
Only if you are in a non-recourse state/jurisdiction!
In “recourse” jurisdictions (e.g., about three-quarters of the U.S.), you took the hit on your credit, you have no place to live, AND you still owe the $50K, so may well find your wages garnished or bank accounts emptied at the same time you are being charged more for insurance, etc.
I would pick South Carolina over California, anyway.
I kin unnerstan’ whut they’uns are a sayin’ in South Car’line. Them there Californ-i-a folks talk funny.
Generally, Seriously: about what I thought, “Too Good To be True.”
Thanks all.
Also bear in mind that in both your scenarios the “forgiven” part of the loan is reported to the IRS and taxed as earned income. There is no free ride.
Are there any introductory interest rate credit cards you can shuffle your debt to in order to get a bit ahead on the payments? I just transferred a big chunk of my debt to a card that gave 1% interest for 6 months on balance transfers. This let me put a big chunk onto the principle and when the 6 months were over I transferred again to a low interest card at about 10%. Seems like a better bet than a shady consolidation business.
Please note that I an in Canada and have no idea how this stuff works in the States.
This is an excellent suggestion and one I tired once.
The card was “pre-approved,” and yes, extremely low interest for 6mo. or a year on balance transfers.
After I applied for my pre-approved card, I not only got turned down, I think I got “dinged” on my credit report, something about applying for a credit line, and, maybe, for being refused for same. :smack:
Yes, applying for a loan or line of credit (cc) will cause a “Hard” inquiry on your credit reports.
This is why you know that all those “Pre-approved” letters/emails/tweets are garbage - nobody is going to issue a card without pulling your credit report.
And they need your approval to do that.
Until you actually ask for a cc, they cannot know what your FICO is.
Not always. In Arizona, for instance, you are not personally liable for a purchase money loan on a residential property consisting of four or less units situated on 2-1/2 acres or less. It doen’t even have to be a primary residence, it can be a rental and/or investment property. As it was never a personal obligation it is completely satisfied through foreclosure so there is no “forgiveness.” Because of this, there is no income, no 1099, nothing. In fact, you can claim a loss on your taxes for the difference between the purchase price and the foreclosure sale price even though it was never your money.
WRT “debt consolidation” companies, they typically have you sign a power of attorney so they can talk to your creditors and they collect a monthly payment from you for all your debt and they decide who gets paid first based on how good of a deal they can get. If a creditor knows the drill and will accept less than the balance on an accelerated schedule (say, $400/mo for 6 months to clear a balance of $4,000) they will pay that first. A creditor who won’t budge won’t get a payment at all until they bring something to the table. When a creditor contacts you personally you refer them to the consolidation company. Withholding payments destroys your credit in the process but it’s part of the price of admission.
If you have a single card they can’t really do much that you’re not doing already. Credit card balance transfers at low introductory rates often have a significant transfer fee (typically 3-4% up to 10%) so you’re paying something to use them. If you owe $5,000 and you’ll have it paid off in a year it’s probably not worth the hassle, but if you owe $20,000 and it’s going to take a decade to pay it off you can save some real money by paying 4% up front and 5% apr for a year instead of >20%.
You could always call your credit card company and tell them you’re a good customer who always pays on time (hopefully you are) and ask them to help you out with a lower interest rate. If it doesn’t work you’re no worse off than you are now.
And of course adjusting your budget and paying as much as you can on the card will lower the total interest paid and shorten the time it takes to pay it off. If you deposit the credit card payment into a savings account after the card is paid off you’ll put yourself into a position where you might never need to use credit again.
I’m not disputing what you say, but you lost me there. The IRS is federal, and states can’t override federal law. Can you explain this AZ thingy again?
State law isn’t overriding federal law, state law is regulating how a mortgage can be written, what remedies are available to a lender in case of non payment, and the mechanism through which a foreclosure is handled. In a non recourse state a mortgage is not a personal liability, the only remedy available for nonpayment is foreclosure, and foreclosure fully satisfies the loan.
Absolutely. There has been a threadjack/tangent. Credit card companies will sue you, win, and garnish your wages. If you’re judgement proof they’ll sell the judgement to increasingly unscrupulous zombie debt collectors strategically to defeat the statute of limitations and you’ll be extorted for the rest of your life.
How does a sleaziod collection company defeat SoL?
I’m certain they’d love a shot at that.
I’ll mention this again:
If a bill collector gives you a line about “Just send me anything - 45, $10 - just give me something to show the boss that you’re tryying. If you do, I can keep this away from the lawyers”.
He knows the debt is past the Statute of Limitations and is trying to trick you into restarting the clock.
NOTE: The SoL clock runs from the date of the last “activity” on the account - that means you either charge something or MAKE A PAYMENT - that $5 will trip the “activity” switch and you are back to square one - but now you have a FICO of 400.
Another note: SoL limits only the ability of the creditor to use the Court to enforce the debt.
IT DOES NOT mean that the debt goes away - just that it becomes unenforceable via the Court system.
Now that simply everything is in a database and those databases are getting more and more interconnected, it would not surprise me if a creditor comes after the estate for a debt from 60 years back.
I know of only two ways to discharge a debt: pay it or file bankruptcy.
I think (but am not 100% sure) that if this happens in the context of a bankruptcy, there is no such hit.
Re the OP: yeah, avoid the scammers / spammers. Assuming your credit is doing OK now (I mean, aside from having a big balance you need to pay down) you may be able to find a cheaper option via a balance transfer to a new card. Typically there’s a low teaser rate, and perhaps a transfer fee of 1-3% of the balance. If that turns out to be enough lower than your current rate (and the post-teaser-rate rate is also a little lower) it may save you cash in the long run.
