Am I a candidate for debt consolidation?

I would think you could find a credit card company that would accept a balance transfer from your more expensive credit cards with higher rates.

That would essentially lower your interest payments and consolidate to one card without actually doing a "debt consolidation."

Remember to pay off the cards with the higher interest rate first.

 

Have you tried balance transfering? That's what I did, find a credit card that offers low interest rates on balance transfers, get it, and then transfer the higher interest debts on to it. The one problem with that is that you have to pay it off before the low interest rate expires, if not some cards will charge you the full interest.

 

I haven't had to do this myself. I'm just giving advice that Suze Orman would.

I think that you can just shop around for cards like any other thing. THe internet and phone are probably the best way to find them. Also, watch out for introductory offers that sound good at first, but the rate expires and increases after a set amount of time. YOu want a "locked in" rate that won't go up automatically. (even though credit card rates aren't actually locked in, you still want one that won't go up after a set amount of time...it should be in the fine print if it is).

I think there are also free credit counseling services that can help you out, but you don't actually get a consolidation loan from them...they just give you advice and help you form a plan, but it doesn't affect your credit or anything.

I'm not sure what they are though, but I think they exist. Just don't let them sell you a debt consolidation loan if you don't need one.

http://www.suzeorman.com/index.cfm

 

if you use these debt consolidation places a couple of things could and probably will happen.

1. your credit score will go down because those 3 credit cards would show you are working with a consolidation/management company in your credit report.

2. when you sign up for these consolidation places they negotiate rates with your creditors to bring them down. this can take months and may effect you credit rating if you don't keep sending the required amount listed on you credit card statement plus your monthly payment to the managing company. you have to do until the creditors agree on the negotiated monthly amount to aviod lates/missed/fees.

3. your credit will also nose dive because credit rating is also determined by amount of available credit and debt. those 3 credit cards available balance would be dropped to $0 but still have a balance. to maintain healty credit score your balance should not be more than 35% of your available credit. dropping available to 0$ kills that ratio.

4. credit will go down because those credit card will be closed. closed accounts have a negative effect on your credit history. you want open enough open accounts for your income.

your best bet is to take out a personal loan, home equity loan, or some kind of credit that allows a lower controlled interest rate. some credit cards even offer lower rates on balance transfers as others suggested. you manually pay them off yourself with this new credit line. this way your accounts will be paid off but your credit/debt ratio is 100%, your accounts remain open, and credit reports list accounts as current with no management flags/comments.

 

Never take a home equity loan to pay off credit card debt. This is a huge mistake. You have just taken debt from a place to where the worst thing that happens if you don't pay it off that they bug you with phone calls, ruin your credit, and you might have to file bankruptcy...and given it to a company that can come and take your home if you default.

Do you really want to set your house against $20,000 in debt? Home equity loans RISK your HOUSE. There might be some good uses for them, but why would you risk your house against credit card debt.

 

I am in debt consolidation right now and it has not affected my credit that I can see. I was able to purchase a car with .9% APR and a good friend of mine is a loan officer ran my info to see if I would have any problems buying a house and I would not. The only problem may be getting new credit cards in the future, but if I can't, that's probably not a bad thing.

All my credit card interest rates were lowered to 9% from anywhere between 17 and 29%. I should be completely out of debt within 18 months.

 

wait... closed accounts have a negative effect on your credit score? is that if they're closed while there is a balance, or closed with no balance?

 

They don't have a negative effect if they are paid in full WITHOUT a collection notice.

 

I have a friend who went to debt consolidation and he said he still received calls from his credit card companies saying they were not getting payments. I remember him also saying he had one credit card company deduct a payment every payday from his check until the balance was paid off in full, I forgot what he called it. Does that negatively affect credit (the payment every payday thing)?

 

I'm in debt consolidation right now and it is working out great for me. I started with over $20,000 on two cards, the consolidation comp got my interest down to 0%. Yes that is 0%. I'll be done by September and cannot wait. In the mean time, me and my wife were able to purchase a new house, so I don't think it affected my credit score to much.

 

bogey, what company did you go through?

 

I had a family member that used Consumer Credit Counseling and they managed to get some strikes on her credit for late payments. If you go through with consolidating your debt or through a single agency like CCC you MUST stay on top of it and MAKE SURE that they are making your payments on time. Some bills are due on different dates and you need to make sure that whoever is handling your debt knows those dates well and doesn't just cut them payments on the 1st or 15th.

 

Word.

It sounds like countingcrow is in the hole $20,000 and nothing to show for it. At least nothing a bank would consider collateral.

The best solution would be to get a new card with a low introductory rate and transfer the balances from the other card (highest rate to lowest). He might be able to get enough new cards to cover all of your high debt, if he is lucky.

If the above fails, he might want to contact the Bank of Dad (tm).

Doing the numbers, $500/month with an average interest rate of 10%, the $20,000 debt will be repaid in 4.25 years. That is pretty sobering.

Going on a cash budget (implies never using credit cards for anything) might also be a strong consideration.