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Regular Contributor
Posts: 143
Registered: ‎08-26-2009
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Is debt consolidation a good idea?

I have gotten to the point where I have become overwhelmed with credit card debt. I have managed to pay the minium payment and have no late payments at all but it has become very stressful to keep up with these payments and have the money to make them as well. I have concluded that I must take action now so I do not go the route of missing payments or defaulting. My TU FICO is a 632 due to 51% revolving utilization. Are debt consolidation loans a good idea? I have talk to a credit conseling company that has offered to help and I would pay them 1 payment then they pay the credit card companies. Has anyone done this before? Will it effect my FICO? Any advice is welcomed. Thank you. 


Starting Score: TU-710 EQ-717
Current Score: TU- 732 EQ-726
Goal Score: 780 (for both)

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Valued Contributor
Posts: 1,540
Registered: ‎10-25-2011
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Re: Is debt consolidation a good idea?

I would honestly just attack this on your own,

 

What i would do is start with the smallest thing....

 

How many CC's do you have, whats the balance/CL on them?

 

there is no reason to pay their fee's other then convenience... there are plenty of people here who can help walk you through it. 

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Starting Score: 512 10/2011 Current Score: EQ: 686 | TU: 689 | EX: 690
In My Wallet: SFCU Visa: $10,000 | UECU Visa: $5000 | WellsFargo: $3900 | Cap1 QS: $3500 | Cap1 QS: $3000 | Cap1 AU: $3250
Regular Contributor
Posts: 143
Registered: ‎08-26-2009
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Re: Is debt consolidation a good idea?

Discover is around 2500 w/ a 3,000 CL, Chase Freedom is 2,000 w/ a 2,000 CL,  Chase Slate is 2800 w/ 3000 CL, Best Buy is 500 w/ 3100 CL, Big Lots is 300 w/ 1300 CL, Cap one is 600 w/ a 750 CL, AMEX Zync is 0 balance, Kay Jew. is 0 balance. I have a Bill Me Later Account with a 1500 dollar balance and a LOC w/ my CU with a 1900 balance w/ a 2000 CL The problem is though is that paying all these minimums cause me to not have any cash to spend for gas, food, etc. I have concluded that I need a second part time job, but that is still in the works. 


Starting Score: TU-710 EQ-717
Current Score: TU- 732 EQ-726
Goal Score: 780 (for both)

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Valued Contributor
Posts: 1,540
Registered: ‎10-25-2011
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Re: Is debt consolidation a good idea?

So to confirm,

 

Discover is around 2500 w/ a 3,000 CL

Chase Freedom is 2,000 w/ a 2,000 CL

Chase Slate is 2800 w/ 3000 CL

Best Buy is 500 w/ 3100 CL

Big Lots is 300 w/ 1300 CL

Cap one is 600 w/ a 750 CL

BML 1500

LOC CU 1900 w/ a 2000 CL

 

 

Once you are in the position to pay some of these down, i would begin with Best Buy, Big Lots and Cap 1. 

Get those down since they are easier.... Continue to pay the monthly payment on the others...

 

I know this is easier said then done, but this is saving you money in the long run....

 

Start working from the bottom up. 12K worth of debt is not easy to get out of. 

 

 

----- IF you find my post helpful, Select the star in the KUDOS button! Smiley Happy
Starting Score: 512 10/2011 Current Score: EQ: 686 | TU: 689 | EX: 690
In My Wallet: SFCU Visa: $10,000 | UECU Visa: $5000 | WellsFargo: $3900 | Cap1 QS: $3500 | Cap1 QS: $3000 | Cap1 AU: $3250
Regular Contributor
Posts: 143
Registered: ‎08-26-2009
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Re: Is debt consolidation a good idea?

Yes all of that is correct. I'm going to pay as much down as possible with tax returns. Is a 401k loan a good idea to help pay down? 


Starting Score: TU-710 EQ-717
Current Score: TU- 732 EQ-726
Goal Score: 780 (for both)

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Valued Contributor
Posts: 1,540
Registered: ‎10-25-2011
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Re: Is debt consolidation a good idea?

a 401k loan does take out of your current pay though (not a hardship). if you were to get a 401k loan i am sure that would be fine (i have 2 out right now) since you would pay youself back as long as it wasnt a hardship. Just make sure you know the impact it has on your pay. (if it is with your current employeer) 

----- IF you find my post helpful, Select the star in the KUDOS button! Smiley Happy
Starting Score: 512 10/2011 Current Score: EQ: 686 | TU: 689 | EX: 690
In My Wallet: SFCU Visa: $10,000 | UECU Visa: $5000 | WellsFargo: $3900 | Cap1 QS: $3500 | Cap1 QS: $3000 | Cap1 AU: $3250
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Regular Contributor
Posts: 143
Registered: ‎08-26-2009
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Re: Is debt consolidation a good idea?

Yeah I have different plan options I can do with it and can take one out for up to 5 years. But since I am young (only 22), my 401k loan doesnt have a huge vested balance and the loan would make but just a small impact. 


Starting Score: TU-710 EQ-717
Current Score: TU- 732 EQ-726
Goal Score: 780 (for both)

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Super Contributor
Posts: 9,674
Registered: ‎01-28-2010
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Re: Is debt consolidation a good idea?

 

The best thing that DMPs offer is a reduced interest rate.   You didn't list what any of your rates are on these cards, are they upwards of 20% or higher ??

 

It can be very difficult to dig yourself out from interest rates that are that high.  DMPs can usually get a better rate.   I'm not saying that you can't do it on your own like has been suggested, but many times it is nearly impossible to get your rates lowered without joining a replayment plan.

 

 

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Regular Contributor
Posts: 143
Registered: ‎08-26-2009
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Re: Is debt consolidation a good idea?

^they are all around 17-19%. I am trying to consolidate them all to two no interest balance transfer cards. 


Starting Score: TU-710 EQ-717
Current Score: TU- 732 EQ-726
Goal Score: 780 (for both)

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Contributor
Posts: 81
Registered: ‎10-12-2010
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Re: Is debt consolidation a good idea?

A DMP will trash your credit, as they negotiate with your creditors for less than the full balance. 

 

Although trashed credit may not be so bad for you as you have gotten yourself in a hole with credit (as i have too) so you don't need any more credit :-)  How much is your income?

 

You are going to need to get a second job or increase your earnings at your current job and Benjamin is right - attack the smallest first and then snowball it on the other ones.

 

Sell anything you can - eat beans and rice - and check out Dave Ramsey - changed by financial life :-)

07/23/12 - EQ - 733

Low Point - 558 in late 2009
Working towards being debt free! FICO Goal: 700+ and debt free!
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