If you are facing a large amount of debt and a potential financial crisis, it should be a top priority to contact a credit consolidation service. They can help you reach the best settlement for your outstanding debt loans and credit card bills. You will be able to pay off your multiple creditors with money received from the one loan with a lower interest rate. You will soon be on your way to repaying your debt and improving your credit.
You should first contact your creditors and ask them to eliminate or reduce the interest rate on their respective debt. Debtors often do not ask creditors for help, the creditors raise the required monthly payment usually due to increased interest rates and when the individual cannot meet the payment, he or she must then pay a penalty fee. This will only increase the amount of outstanding debt, putting the debtor even further into a bad financial situation.
You will then want to consolidate your credit card debt into one single payment. Once you receive the funds from the consolidation loan, each creditor will cancel your debt as you begin to payoff the accounts with that money. In addition, the consumer debt consolidation companies work with the creditors by reducing the rate of your interest on those bills. Hence, a benefit of credit consolidation loans is that you will be repaying your debt on a lower interest rate.
However, the benefits of credit consolidation are two-fold. Debt consolidation services can also help you improve your credit rating. Those with large amounts of outstanding debt often find that they have a negative credit score, and contacting a consumer debt consolidation service is one of the few options to both repay that debt and improve the negative credit rating. Consolidators work with the creditors to eliminate the negative points on your credit report to reflect that you are now a bill-paying consumer.
The simple act of taking out a debt consolidation loan can also help you quickly begin to improve your credit rating, as you will simply payoff your outstanding balances with the loan funds. If you own a house, you have the option of an equity loan. However, with any type of debt consolidation loan you choose, you must pay attention to all of the terms of the loan, specifically the interest rate. You want to avoid putting yourself in a worse financial situation by consolidating your debt yet repaying it with a higher interest rate.
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Help answer the question about credit consolidation
How do credit consolidation programs work? Are they worth it?My bf has about 14000 in various credit card debt. Most of it interest. What credit consolidation programs (if any) would be worth looking into?
just make sure that you don't end up paying MORE interests than you are paying now, and that they are fixed interests
There are two main ways to deal with this, the 'dubious' version is with a credit consolidation company. Bottom line, they lend you enough money to clear your debts over a far longer term and with very strict penalties and actions for missed payments. i.e if you miss a payment, they can raise the 'introductory' rate from around 5% to 19% as a penalty (you'd be signing for this at the start so Its quite legal, if unethical) or demand full payment before siezing assets (cars, houses, etc) which again is quite legal.
The second is very different, it is done by a company working with your creditors to come to arrangements that benefit both parties. BUT there is no gaurantee that your creditors will accept the deal and the company charges a monthly fee to keep the arrangements met.
Either way you totally trash any hope you ever had of getting credit for a long time. This can include paying bills quarterly, getting mobile contracts, loans, credit cards, etc. It may also prompt companies you have credit with to increase your APR as you are now high-risk.
NOTE: there is no such thing as walking away clean. You either pay the piper, make arrangements to pay your debts or go to court and get your assets stripped. Any way you choose will leave your credit rating in shambles but the FIRST option you can do yourself by going to each company and explaining what is happening and making a serious offer to help clear the debt. They do listen and sometimes you come out of it intact.
I love Dave Ramsey. We have been on his plan for about 3 years and it has helped us more than we ever dreamed.
First, read his book The Total Money Makeover and start there.
Debt-consolidation programs are a complete rip off and you can do it yourself. Plus it doesn't change your behavior. Many also look like a bankruptcy on your credit report. If you are done using credit you don't want to ding it further by using a debt consolidation program. Follow a written budget and that will be your own consolidation program.
Also, do what Ramsey says, go with smallest debt amount first, not interest rate. That psychological boost when you pay something off is what will keep you going.
Bargaining with debtors- they will only barter when you are behind, if you aren't behind they won't barter. They barter because they figure you are noncollectable and so something is better than nothing. This will hurt your credit but better than not paying anything. Also, don't get behind just so you can barter- not worth the stress!! You can barter the interest rate and the amount. If you aren't behind you may be able to still negotiate a lower interest rate. Since you have some large interest rates, you may want to consider an unsecured loan from your credit loan just so you can pay off more on principle. But you have to watch out for the loan fees, etc to see if it is worth it. Dave says only do this if you are positive you are changing your behavior and you are getting totally ripped off.
Biggest changes- a budget, every single month. Some months we have 5 friday's some we had 4. Some months we have health insurance taken out, some we don't. Some months we pay car insurance, some we don't, etc. Next, we reduced eating out. We still do but we keep it to a MINIMUM!!! We will ask family for gift cards to resturants so we can have date night every so often. I also shop sale ads. Depending on who has what I need on sale is where I shop. My husband is a hunter so we have meat and that is a huge expense we don't have to shop for. Watch Costco/Sam's club, some things are bargins, some aren't. Sometimes you can get a better deal with coupons and a sale. If we want a coffee or coke during the day, then it comes out of our blow money (see Dave's book). Debit card is only used for gas (because of kids, I am not unbuckling them to go and pay), we pay bills through the credit union on our free bill pay and we write checks for daycare/preschool and then we withdraw the cash- ONCE PER WEEK (pay period).
Entertainment: We rent movies, we have free digital cable for a year which came with HBO, when that is done then we will get rid of it, we go for walks, we watch for coupons to go to the zoo, we also have a free musuem in our area. As for movies, it is a special treat for us and we dont' take the kids…can't sit still and not worth the price for them to be squirley.
Good luck! You can do it!
Medical collections/bills are one of the top reasons as to why people file bankruptcy. This is definitely an option if your medical bills are extremely high and you simply don't make enough to pay them off.
Another option is for you to contact the creditors individually and have them agree to settle on balances that are less than full. The downside to this is that you will most likely need to pay the entire settlement amount in one lump sum payment. You could also contact the medical collections and work out a payment plan with them to make monthly payments. Two tips though: Make sure you get any settlement agreements in writing before paying it off and make sure they agree to report the accounts to the credit bureaus as paid in full (get that in writing too). Too often collection agencies will not report the debt has been paid off.
The thing with credit consolidation companies is that many of them have pre-arranged agreements with the credit card companies and not with collection agencies. They will be able to basically set up the same payment plan with the collection agencies that you would be able to, but you will probably end up paying a consolidation company even more because you will have to pay their fees too. The advantage is that you would probably only make one monthly payment to the credit consolidation company versus making several payments on your own to each collection company.
See the credit blog below for more information on improving your credit.
Stop using the card altogether. Stop buying unnecessary things. Sell everything you don't need. Take proceeds and pay off debt. Budget yourself frugally.
You can also contact the credit card companies directly to negotiate a lower fixed fee. If you are always on time with payments, lenders have a vested interest in keeping you solvent. The more you are able to pay and not declare bankruptcy, the better off they are. My experience with Amex was good on that front since I have had a card for 10+ years and told them I was thinking of transferring balances to a 0% APR promotion, so they lowered the rate for me.
Det consolidation, and debt counseling are two seperate things. If you borrow one ig loan and pay off many little loans, then thats Debt Consolidation. This does NOT hurt your credit. If you go through a credit company and they take oever your payments and you pay them. It is recorded as a BANKRUPTSY on your credit report. This is not a lie, THey won't tell you this, but it is true.
$9,000 is not a big deal at all.
If any are seriously past due, you can call them and make an offer for much less than she owes. Just make sure to get the agreement in writing, then mail a money order (not a check) along with a copy of the letter. Keep the original letter and copy of the money order FOREVER.
For the rest, make all the minimum payments every month. Take EVER EXTRA DOLLAR you have and put it to the lowest balance. Once that is paid off (which should be quickly), start applying that amount to the next one. Continue the debt snowball until you are out of debt.
To do this you have to cut out ALL unneeded expenses. Don't eat out, don't buy new clothes, get rid of the cable, get rid of the cell phone, etc..
If needed, get an extra part-time job (or two).
Just buckle down and pay it off. IF you booth work hhard at it you could easily pay it off in less than a year.
In the meantime PAY ONLY CASH OR DEBIT for everything.
DON'T CONSOLIDATE. Rolling everything into one payment does NOTHING to get you out of debt, and it frees up all those credit cards so she can charge up more junk. Your problem is not having to write a bunch of checks each month so consolidation won't help.
The collections process works in a sequence so you are pushing the process with your questions. You will get a series of phone calls and letters before they consider turning you to collections. It will then be in the hands of the collection agencies to sue you on behalf of the creditors. Yes they can garnish your wages and trust me, you don't want that. The creditors (agencies) can get 25% of your salary off the top once they have such a judgement. It's way too early to consider debt negotiation and with $50K of income you won't qualify for bankruptcy with the new laws. You won't get $80K of debt forgiven with $20K of cash. Why not speak with a free consumer credit counseling program in your state so you can get a legal response to your legal question(s)? The organization below only represents genuine and legitimate agencies not those scam sites you will probably be bombarded with. Don't put this off. The longer you wait the more interest and problems you'll encounter.