Hello all, I'm considering signing up with one of those debt relief places and would like some input from everyone. I currently have 46K in unsecured debt with minimum monthly payments hovering around $1,580 per month. I've called the higher (30%) interest rate cards and asked them to lower the interest so I can actually make a dent in the balances and they all told me they can't do anything. I ran into this company that says they can arrange it so all my accounts will be closed and the interest rates will be dropped to between 6 and 10 percent. I will pay this company $1,280 a month and have all my debt gone in 57 months assuming I don't pay any extra per month. This will all happen without any late payments occuring. This is not one of those companies that lets you get 90+ day late then negotiates a reduced balance payoff. I'm nervous about what closing all those accounts will do to my credit as I'm around a 640 right now but I'm feeling a little desperate as well. I'm also pretty darn frustrated since these CC's wont lower rates for me but they will for this other company. Any advice (even harsh advice) is welcome. Thanks.
Before you sign up with any debt consolidation company you should check several places for references. Most debt consolidation companies cannot and do not keep their promises. The most probable reason for them to wait 90 days before contacting the creditors is that they want all their money up front before they start to work on your problems. Your credit scores go to pot in the meantime. Accounts often get referred to attorneys for legal action before the debt consolidation company even gets started doing anything for you. Debt consolidation companies are under heavy fire from the FTC and other governmental agencies because of their business practices. Before you agree to anything you should first of all check the company with the Attorney General's office in your state, your local chamber of commerce, the better business bureau and the FTC. If any of those agencies have complaints you should not deal with that company. I would furthermore recommend that you ask those agencies to provide you with a list of companies they do recommend then go with one of those if you decide that debt consolidation is the route you want to go. You might want to contact such charitable organizations as United Way or Catholic Charities or other local organizations. Some such agencies do provide those kinds of services to the public and your community may have some such organization they refer people such as yourself to. You seem to be under the impression that going with a debt consolidation company will somehow preserve your credit score or hopefully even improve it. If that is true then I would advise you to think again because the debt consolidation company may attempt to report you "paid as agreed" or in some other favorable light but their reports will poison your credit scores just as surely as reports from a debt collection company would. Lenders will look at the source of the report and view it in much the same light as though you had filed bankruptcy. From their viewpoint you have demonstrated that you don't know how to manage your affairs responsibly and had to seek help to resolve your problems. Not good at all. I think you would be much better off making yourself a budget so you know how much cash you might be able to free up each month and then divide that amount more or less equally between all the creditors and start paying them now. I'm talking about cash you can free up and pay on top of what you are paying now. You might have to lower your standard of living and quit buying things that are not absolutely essential to your existence. Cut expenses to the bone. You might even have to find an extra job.
Thanks for the advice cap1 but I want to be clear here. This is NOT one of those companies that let's your accounts go 90+ days late. (or so they say) This company is telling me they immediately contact my creditors with a proposed contract. This contract has a payment amount and interest rate that the CC's agree to and the contract also provides for the closing of the account and a change in the monthly due date so they can get all my CC's to have the same payment date. They also tell me that most of the CC's will agree to the contract terms within the first 30 days so I won't have any late payments. If it takes a little longer with some CC's then they suggest I continue making those payments until all CC's have entered into a contract with them.... at that point I make one payment to the debt relief organization and they pay all my CC's at the agreed upon amounts and dates every month. Thier fee for doing this is $50 bucks a month but the interest savings alone is around $350 a month by my calculations. If I do this it will allow me to pay an extra $3600 per year towards principal that if I keep doing what I'm doing now. I do need to cut back and probably need a third job to boot but my primary concern at this point is this.... is the effect of closing these accounts to my credit score worth the $300 per month I might gain? I guess I'm also concerned whether or not this debt relief company as I've described them here is on the up and up. I will do some checking with the organiztions you've mentioned but have you or anyone else here heard of this type of arrangement with a debt relief company?
Also... I'm confused by your comment "the debt consolidation company may attempt to report you "paid as agreed" or in some other favorable light but their reports will poison your credit scores just as surely as reports from a debt collection company would. " This debt relief place is telling me they do not report to the CRA's! Are they fibbing to me?
"Thanks for the advice cap1 but I want to be clear here. This is NOT one of those companies that let's your accounts go 90+ days late. (or so they say)" Just because they say it does not make it true. "This will all happen without any late payments occuring. " And if it doesn't, YOU are screwed, not them. "This company is telling me they immediately contact my creditors with a proposed contract." Why would your creditors want to go along with this? They already have a contract with you, at a higher rate, and with no cut to this company.
Are you currently able to keep your payments current? Are you delinquent on any? At current interest and payment rates, how long before you pay this off?
My comments were based on debt consolidation companies in general and the disapproval of most of them by many governmental agencies including the FTC. They should be taken as statements about debt consolidation companies in general. Obviously I know nothing about the particular debt consolidation company you are referring to since you didn't give the name of the company you reference. My point is that you should be very careful of any debt consolidation or debt elimination company and do your due diligence in investigating them and their reputation before entering into any agreements regardless of how good their sales pitch is.
The problem with paying any bills thru someone else is that they may have a good pitch, but if you send your money to them, instead of to your creditors, by the time you realize you have been scammed, you have no money, and all your creditors have trashed your credit. You are in no position to go after them, can't afford an attorney either to go after them or deal with your creditors, and if this is their game, it would be useless to do so anyway, since they will make sure the money is long gone. That is why it works as a scam.
Well I'm glad I posted here. I guess I never really asked myself.... self, when will these cards be paid off if you do nothing but keep making the same payments you're making now until the debt is gone. I looked at those numbers this morning and found the answer was about 5-1/2 years. That surprised me since the debt relief place was telling it would take much much longer. So I then took the total amount, monthly payment and term they were telling me and backfigured the interest rate. I came up with 15%. They told me all the rates would come back at around 8% on average (betwen 6 and 10), so the actual rate was nearly double what they were telling me. So I called this company up and asked them what was wrong with my math. They said "I don't know what program you're using so it's hard to tell why your coming up with the figures that you are but I know our numbers are right." Of course I explained I was using a standard Microsoft Amortization worksheet so I doubt the software was giving me bad figures. I even asked him to send me his amortization figures.... I was basically told that I would have to take his word for it! Needless to say I won't be using that companies services. I'm gonna do this the old fashioned way. I still don't plan on closing the accounts because I've always been told that hurts your score plus some of these accounts I've had for 10+ years and I think the length of time accounts have been open is also another big factor in credit scoring as well. Putting these in the sock drawer hasn't worked so well in the past so I'm thinking I might put them in a big bowl of water and freeze them all and if that doesn't work maybe a safety deposit box at a bank in another state. Either way I'll get out of this myself and just keep trying to get interest rates lowered along the way. Thanks.
If you know how to use spreadsheets and do amortization, you already have more tools than most to track and manage your own finances. In the end, nothing beats learning how to do it yourself. If you are still able to keep your payments current, it probably isn't worth trashing your credit by playing games with your creditors, and paying someone else to do it. You still have to adjust your expenses (or your income?) to get out of excessive debt, and that takes work by you that you cannot pay someone else to do. The starting point is knowing accurately what your financial situation is, and what effect each purchase decision will make, before you make it. You don't get to unspend it once you spend it. Calculate your current debt on a spot (instant) or accrual basis, by calling each CC's automated number and checking at least once a week, to avoid being fooled into thinking you have less debt than you do and being surprised when that next statement comes in. Balance your checkbook, then add up your total current debt, add your known short term payables (utilities, rent, etc) thru the next few weeks, and subtract your current checking account cash. Make that number go down. "put them in a big bowl of water and freeze them all " The bowl will crack. I suggest a zip lock bag filled with water.
Use the old Indian trick. Here is what the Indians did about 100 years or so ago when planting corn. They would put a dead fish in the ground beside each kernel of corn they planted. That fertilized the corn and made it grow and produce a better crop. So pack your credit cards in a small box and put a dead fish in there to to fertilize them. Plant the box in a safe deposit box at your local bank. Wait a couple of weeks. Guaranteed to produce interest. :0)
