Debt Consolidation--any experiences?

So after a look at the finances and assessing the financial impact of my wife not working (we’re being sent overseas, where she probably won’t be able to get full-time employment); I’ve decided that my current debt-to-asset ratio is unfavorable.

No, wait, it sucks. I have approx 16K in credit card debt and 10 in student loans. We’re paying off a car until March(can’t take it with us) and we live pretty simply. I’ve decided that paying the cards off over time won’t work like I want it to, and I want to consolidate them.

My options as I see them are as follows:

  1. Go with a credit consolidator like Ameridebt, but I don’t have collateral other than my job, and I’ve heard that they can screw up your credit rating

  2. Try to get a consolidation loan from my bank, provided that they’ll give me enough at the right rate so as to not make the situation worse

  3. Declare bankruptcy. Not really an option, as I work for the government and that would basically mean career death. (They won’t tenure me if I’ve declared bankruptcy in the last ten years).

So, anyone been in this situation? Anyone worked for or had experience with debt consolidators?

You really should give Financial Peace by Dave Ramsey a read before you do any of the above. The credit consolidation will be almost like a bankruptcy as far as credit rating goes. Believe it or not, people with way more credit than you have dug themselves out using the advice in this book. It’s easy to understand and not dry or boring at all. You can’t get out of debt by continuing to borrow money though. Dave advocates the “debt snowball” which is listing bills smallest to largest, pay minimums on everything but the smallest, pay everything you can on that one till it’s gone, repeat. Really, give it a read before you do anything drastic that will linger for years to come. Also he has a website www.daveramsey.com where you can listen to his radio show (he’s also on many AM stations).

Good Luck!

Also give this article a read.

In addition to what Slainte recommended, I offer the following: If you can get a bank loan at lower rates, it will pay you to borrow from a bank and pay off credit cards. BUT: That will only work if you are prepared to not carry over a single dollar on a credit card until the bank loan is paid off! Many people who try this wind up in a few months with a bank loan and new credit card debt. Needless to say, that’s a tragic outcome. You’d be better off working through it with the “debt snowball” method than compounding your problems with a bank loan and new credit card debt.
Hope it works out for you.

I am almost done climbing out the hole that I dug for myself. I had spent 4 years of acquiring student loans and an additional 6 years of bad spending habits before I resolved to fix the problem. For the 10 years I spent getting in debt, it will have taken my 4 years to get rid of it all (I am 11 months away from paying that last penny).

I’m sorry, but I don’t know much about Ameridebt, but I did get a loan to consolidate some of my debts from a local bank. Whichever direction you go in, here are a few principles that I think are true no matter what.

  • Get used to the notion of not only living within your means, but beneath your means. This can be a tough one, but it is also the most important one. If you can’t do this, forget about getting out of debt.

  • Stop using credit cards. I used my ATM/Check Card in the same capacity as I used to use credit cards. The temptation to overspend is much less when you don’t have such a vast well to dip into. I have cancelled all but two of my cards (which have a zero balance on them), which I keep only for dire emergencies.

  • Watch your accounts like a hawk. Record transactions, reconcile statements. Pain in the ass unless you have the following…

  • Get a program like Quicken. In addition to making the recording of transactions and reconciling your statements fast and easy, it can also help you create a budget and show you where you are spending your money. Once you know where you are spending your money, it is easier to see what can be reduced or eliminated.

  • Make a list of all your debts and the interest you are paying on each one. Pay the one with the highest interest off first. Pay as much as you can while keeping in your budget. Meanwhile pay the minimum on all the other debts. Once #1 is paid off, move to #2 and repeat.
    Assorted Credit Card Basics for the uninitiated:

  • Cash advances often hold a different rate than purchases. Payments will go towards whichever rate is lowest before it even touches the high-rate amount.

  • Be careful of the “Low Introductory Rate” offers. If you think you’re being wise by transferring amounts from the account after the introductory rate passes onto some other card’s introductory Rate, be forewarned: Some card companies will charge you if you try to transfer accounts within a certain amount of time The number you always want to look at is the APR. Forget the introductory Offers. They’re inticement.

  • Scan the fine print for late payment penalizations. And not just a one-time late-payment charge, but it may likely affect your APR!!! For instance, one card I had has an APR of 7.9. Nice right? If even one of my payments had arrives just a day late, that APR jumps into the high teens.

Good luck whichever way you go. And though it will be tough going for a while, as soon as you start seeing the amounts fall away, you will actually look forward to paying bills. It happened to me.

As a credit manager, I can reiterate the Dave Ramsey solution, rather than a debt consolidation. Most places that accept a payment plan from AmeriDebt or places like that will probably end up writing your debt off to bad debt, which will be reflected on your credit report. The money coming in will eventually clear off the debt, but more than likely it will be too late. It will cut the interest rate you’re paying, but it’s not worth it. This isn’t a problem that you got into overnight, and you won’t get out overnight, either.

If you’re not going to use your car, can you sell it for at least enough to pay off the loan? Otherwise you’ll be paying for both the car and insurance (presuming your lein-holder requires insurance while they hold the title). A budget is a must. Know how much you’ll have coming in and take from that the money for the bills first. The rest what you have to live on, not the other way around. If you need to eat less steak and more mac & cheese, suck it up. It won’t be forever and being debt-free is a wonderful feeling. Cut up all but one credit card. Then freeze that one in a block of ice. That way it’s there for emergencies, but not easily accessible.

Your wife may not be able to work full-time, but see if she can get some sort of job. Even if she does things like going to local flea markets and picking up interesting stuff to sell on e-bay. My sister financed one extended stay in Europe by buying old German toys at flea markets and sending to the States for my mother to sell. She lived in Istanbul for a long time and bought oriental rugs to sell. There are things that a creative and intelligent person can do to make money.

Good luck!

StG

I got myself out of about $20K in debt over five years by following the advice in this site.

Basically, it reiterates what has been said here, but a minor point I’d like to add:
• You can renegotiate annual fees and interest rates with your credit card companies yourself; you don’t need to get a credit counseling service. Just call 'em and tell 'em you want to close your account. They’ll immediately offer to drop your interest rates permanently. I played three credit card companies against each other until I was down to less than 8% on all three cards. The company that wouldn’t budge: I closed out the account.

Also, I refinanced my car, paid off the biggest balance, then transferred the remaining balances between my three cards taking advantage of the low interest balance transfer offers they kept sending me.

Now, I have fat cash in the bank, no debt and pay off my credit card every month (only use it for travel and online purchases). The trick, is most definitely living below your means and staying that way, even after you are debt free.

Have always lived below my means, have always paid everything up front with cash.

Only have credit cards (2) for emergencies.

Only got a loan for a used car to establish credit…paid the payments faithfully for a year, then paid off the note to release the lien…to reduce my auto insurance.

This has created a cash reserve that puts me…technically…richer than some of the lower executives in the company work for.

Recently, I bought and installed a gas clothes dryer for approx. $450 cash.

Right now, I can go out and buy a fairly nice Saturn or VW up front in cash.

I hope to be a landlord of a Duplex I buy with a down payment…

…in cash.