credit card consolidation
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.
georgiegirl
asked:
"I have heard that some companies end up with all your money, are there any good credit consolidation companies and if so what are they? Thanks for any help"
Question posted courtesy of:
SmartAlex replied:
"Rarely do they help.The fact is, you owe more money than you feel like you can pay. You have to change the very behavior that is causing it. The consolidation companies figure out what you owe, add one new (additional loan) to the mix (they loan you the money to pay the others off) and then they charge you more interest. They then go to the credit card companies and negotiate on your behalf for a lower rate, or better terms.You end up just owing MORE people MORE money.Does that sound like a way out of debt?Not to anyone else either.You have to change your life to change this behavior.Start at the website below--but the real problem is that you are living beyond your means.You need to increase your income (a second job, more hours, sell handicrafts); decrease expenses (spend less, move into a cheaper house/apartment); or sell assets (sell the car, and walk to work, hold a garage sale.)Yeah, I know it hurts. But you haven't been in charge of your money--you've let it get in control of you.Don't spend the rest of your life fighting against creditors. Take control now.The website will help you to make some tough decisions, and give you some great advice--but it is HARD WORK.There are no good credit consolidation companies, because none of them change your attitude towards your money. You must."
Ricky H replied:
"Only if all of your creditors agree to the consolidation. These companies try to get the creditors to remove penalties and lower interest rates so the consolidated bill is more manageable for you. It is usually in the creditors best interest to work with these companies, but sometimes you have one or two that will not. It is worth trying, there are some consolidation companies that don't charge anything for there service."
internetguide8517 replied:
"Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which may be hidden, or urge consumers to make “voluntary” contributions that can cause more debt.Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions."
romedoggy dog r replied:
"I found a sight that it great, my co-worker went to it and got a loan for consolidating all of her debt. It is people who bid on your loan then you don't have the bank or company fee's. I am actually a lender on there. It's also a great investment. Here is the link."
Jimmy John replied:
"Consolidation loans are not magic : they may prevent you from bankruptcy by puting all you bills together. You'll make only one payment. But don't miss a payment. The best solution for a consolidation loan is your bank or credit union, because they usually give better rates.Good luck !"
Succes replied:
"Credit card debt consolidation adds up all your unpaid balances and converts them into a single payment. This payment is far lesser than each of the individual payments. When you finalize a plan with a debt consolidation company, the company repays your dues to your creditors. Then you make a single payment to the consolidation company every month. Your average new interest rate is much below the old interest rate."
mtvdept2000
asked:
"i was thinking of paying credit cards off because of collections. Should i use a credit card consolidation company to pay them all off and have only one payment and avoid bankruptcy?"
Question posted courtesy of:
MBATXguy replied:
"The use of a credit card consolidation company is reflected as a negative item on your credit.To answer your question briefly:Consolidations reflect as an "8" on your credit Bankruptcy's reflect a "9"This means consolidation is last step before bankruptcy. Unfortunately it is frowned upon."
Matt replied:
"Many people think that using a consolidation company is one step away from declaring bankruptcy. This is not necessarily true. Not every credit card company or lender of credit thinks this way; it's subjective. A consolidation company, for some people, is the best way to get out of debt."
Terry S replied:
"Stay away from those types of companies. You will pay them a fee to pay your bills for you. Do not pay someone else to make your payments for you and charge you a fee. Depending on your current credit status, start by trying to consolidate all of your current debt onto a credit card or multiple 0% credit cards. 0% credit card offers are the best. They have 0% credit card offers with and without fees. Try to find a credit card offer without fees if not try to get one with the longest possible period a 0%. Here is a great article here that explains in detail how to get your bills organized. At the bottom of the article is a step by step process to get organized and how to reduce your bills at an Accelerated rate without increasing your current minimum payments. If your credit is beyond the ability to qualify for 0% credit card offers you can try for fixed rate credit card offers. If you are unable to get any credit card offer then talk with each collection company on your own and try to set up payments. Some credit card companies will work with you. One option I have heard a credit card company can implement is freeze the credit card and waives penalties and interest you may have accrued. Do not rely on someone else to achieve the same thing that you can achieve on your own. Your best bet is to try to pay off your debt as fast as possible which will be achieved with 0% credit card offers or low fixed rate credit card offers. When you are talking the difference between 20- 25% interest you are most likely paying right now and 0% - 3.99% you are talking the difference between paying $300 interest a month out of a $400 payment on a $20000 debt to No interest and $400 goes directly on your debt to approx. $300 going to principle and only $100 going to interest.Try all of your options first and if you are unable to attain this on your own then consult an attorney. Most do not realize this but you can no longer file bankruptcy on the full credit card debt that you owe. You can only file on a percentage of the amount owed. It is federal law. Good Luck and God bless"
Triome Z replied:
"I found The best info about your Question HERE:(VERY good loans - c.cards - credit repair & score; info)Good luck!"
Iris
asked:
"I currently have good credit, but it's getting overwhelming. All my money seems to go to my credit card bills and I'm thinking of consolidating my credit cards, but i just want to know if that will ruin my credit?Will it lower my credit score?"
Question posted courtesy of:
bruce m replied:
"Use them like your supposed to; for payment not loans"
Robin C replied:
"The short answer is yes it will drop your credit score.The better bet is to arrange to move all of your credit card debt to one low interest card. Then CUT up everything else, including the new card. Make no new charges and pay down as much of the credit card debt each month that you can afford. Going forward pay with everything with cash until you are out of debt, and stick to a budget. Then you can use your credit card, only when you can pay the balance off at the end of each month if you want to use a rewards program, or in the event of an emergency. Beyond that you need to only owe on your mortgage, and maybe a car payment if necessary."
micky b replied:
"Hi.There is a well recommended debt consolidation company at this site: "
madhu replied:
"Get valuable tips on credit repair from . It's a very useful website."
Bunny Boo
asked:
"i have\ about $25,000 or more of credit card debts and i really want to pay it all but just can't so soon as am a single working mother with two kids... my credit rating is the lowest and all my cards have gone to collection agencies and attorneys have been calling and i can't answer i can't pay so much at one credit card alone and i want to have one low payment...i m scared cuz i heard you could go to jail and i m worried what would happen to my two little babies? i could go on and on about how crazily worried and sick i m from thinking about this every nite... but how do i go about the process and how long does it take please give me through information since i don't have much time to go here and there and research on my own i don't have much time and who ever gives me the complete information on how, how long, exactly how the process works will get the best answer! plz i really need help here thnx a lot for your responses. i no itz late but i want to work this out!just before answering my question, please read it throughly. my situation is THE WORST RITE NOW....i havent paid my bills in ages, and they have gone to collection agencies...i want to work this out with them i want to know a solution!!!! consolidate...who where when how? non-profit....etc!WHAT HAPPENS AFTER THE CRD CARD HAS BEEN GONE TO COLLECTION AGENCIES??? HOW CAN I WORK THAT OUT?"
Question posted courtesy of:
Dan S replied:
"you have to be careful. some go to the credit card companies and negotiate your balance and it is bad for your credit rating. you still have to pay the full amount as that is how they make their money. if at all possible, don't do it. pick the highest interest credit card and concentrate on paying that off. pay the minimums on the others until the one is paid off. as long as you pay at least the minimum your credit will be fine. the other option is to look into the special offer cards that have no interest for 6-12 months. but be careful, if you don't pay that off by the end of the promo period they charge you back interest. I wish you luck"
someone who has been there replied:
"ok - this is my experience..I went to consolidated credit counseling services...they have a website I think I filled out a form, or called. but I know I had to tell them all the creditors information - name, amount owed, how much I was paying minimum etc.. they ask how much you make, how much your other expenses are (so that they can figure out how much you can pay). It never went against my credit - in fact..I had a great credit score when I finished (It took me 4 yrs..to get from $24,000 to $0). What they do is they call all your creditors - slash the interest rates (some creditors agreed to 0% which I found to be amazing!) and get payments down to a minimum that you and the creditors can agree with. There are some downsides. You CANNOT open any other credit cards and you CANNOT use any of your credit cards that are in the program. They only accept cashiers check, money order or western union - no personal checks can be used for your payments. The whole payment you make, will be disbursed amongst all the creditors. They give you a 'kit' which informs you what to tell people who are harrassing you, such as collection agencies. I was happy with the service. I know everyone's situation is different, but if this is what you are interested in, its hard work..and sometimes frustrating but when you have to do something you find a way. I hope this helps you..I hope whatever you choose to do works for you. I hate to say this but if it is too much for you and the credit counseling won't work for you..you may want to consider bankruptcy..many people reading this would think I'm crazy, but many people do it ,unfortunately people who don't really have to, but it is a solution if there is nothing else that will help. Like I said everyone's situation is different -good luck and hope you get to where you need to be."
Go, I replied:
"I would suggest you try to find a local place where you can see someone face-to-face (as opposed to over the phone). A good, reputable non-profit is CCCS or Consumer Credit Counseling Services. They will set up an appointment with you and ask you to bring in a bunch of information: your last few pay stubs, all your bills and statements, a copy of your credit report (if you have one handy, if not, they can pull one), etc. They will go over everything with you and let you know what they can do to help. They are not able to consolidate all bad debts, so be aware of that up front. They are nationally recognized, so they are able to negotiate pay offs for you as well as lower your interest rates on credit cards and the like. They can even change the terms (like the monthly payment). After they contact all your creditors, they take into account your monthly income and come up with a figure that will not stretch your budget beyond what you can afford. They will ask you to make a monthly payment to them and then they will divy up the money to the proper people. After a month or two, it will show up on your credit report that certain accounts are "in consolidation". That is not a bad thing per se. Creditors can at least see that you are taking responsibility. CCCS might also ask that you make a small donation since they are a non-profit. They've been known to waive the fee if you absolutely cannot afford it. One important thing to remember is that you cannot default on your agreement. It looks really bad credit-wise if you do...so just make sure you're ready to embark on the repayment. The length of time really depends on the severity of the debt (which looks fairly bad) and how much your monthly payments are. I hope that helps and I wish you the best!:-)"
Pitty T replied:
"When you finalize a plan with a debt consolidation company, the company repays your dues to your creditors. Then you make a single payment to the consolidation company every month. Your average new interest rate is much below the old interest rate.All credit card debt consolidation loans include some type of credit card and debt counseling. You have to trim your lifestyle to eliminate unnecessary expenses. This will allow you to set your house in order. But this necessary, as the ultimate goal of debt consolidation is to help you out of debt, while keeping your home. "
originale_tees
asked:
"I am thinking about getting one of those loans that pays off my credit cards for me, and then I have to pay them. I know Bank of America offers this, has anyone had a good experience with one of these companies that they would like to share?"
Question posted courtesy of:
JimDandy replied:
"Be very wary of the companies that promise credit card debt consolidation loans. Read all of the fine print on anything that you sign. As a long time member of the Better Business Bureau, I frequently saw warnings about this consolidation company or that one and their business practices. If you are serious about this kind of loan, stick with the federally regulated banks. Bank of America is a good bank."
JB replied:
"Bad idea. Here's why:Myth: Debt consolidation saves interest, and you have one smaller payment.Truth: Debt consolidation is dangerous because you treat only the symptom.Debt consolidation is nothing more than a "con" because you think you've done something about the debt problem. The debt is still there, as are the habits that caused it - you just moved it! You can't borrow your way out of debt. You can't get out of a hole by digging out the bottom. True debt help is not quick or easy.Larry Burkett, noted financial author, says debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving. Our certified counselors will not recommend debt consolidation for a client. Why? Because debt consolidation doesn't work.Debt Consolidation StatisticsA friend of mine works for a debt consolidation firm whose internal statistics estimate that 78% of the time, after someone consolidates his credit card debt, the debt grows back. Why? He still doesn't have a game plan to either pay cash or not buy at all. He also hasn't saved for "unexpected events" which will also become debt.Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case we review, we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, BUT if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business. Debt Consolidation ExampleFor example, let's say you have $30,000 in unsecured debt, including a 2-year loan for $10,000 at 12%, and a 4-year loan for $20,000 at 10%. Your monthly payment on the $10,000 loan is $517 and $583 on the $20,000 loan, for a total payment of $1,100 per month. The debt consolidation company tells you they have been able to lower your payment to $640 per month and your interest rate to 9% by negotiating with your creditors and rolling the loans together into one. Sounds great doesn't it? Who wouldn't want to pay $460 less per month in payments? But they don't tell you that it will now take you 6 years to pay off the loan. This may not sound that bad to you at first unless you realize how much more you will actually pay in additional payments. You will now pay $46,080 to pay off the new loan vs. $40,392 for the original loans, even with the lower interest rate of 9%. This means you paid $5,688 more for the "lower payment". Not such a good deal after all. This example shows you why they are in the business - because they make money off of you."
Many women are succumbing to debt as they are pulled in by glossy magazine and television ads for items that they simply ‘must have’. When the credit cards get too maxed, a good friend is there in consolidation loans, but without changing spending habits it’s little good.
DebtConsolidation.com offers debt consolidation, relief, and settlement, as well as credit card consolidation and credit counseling.
t has been seen recently that Americans are saving less than they have been ever before. It has also been seen that they have larger debts than before. It is possible for one home loan, car loan and few credit card bills to spiral out of hand.
When you have more than one loan, several credit cards and a mortgage to pay, you may find yourself in difficulties at the end of the month when you have to make your payments if your budget is tight and an unexpected expense comes through.
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