cancel
Showing results for 
Search instead for 
Did you mean: 

Should I go with a debt reduction program?

tacosaban
New Visitor

Should I go with a debt reduction program?

Ok I'm new here obviously. Glad to be here. Hoping for some good advice. My credit score is around 620 and has been dropping for the last few months.


Basically I've gotten in over my head and the overtime at work has not been there like in the past. I can't get anyone to qualify me for a debt consolidation loan. Pretty much tried them all. I have way too many credit cards (7) payments scattered all throughout the month. I've not missed a single payment in over 2 years on any account. 2 years being the oldest of any account. I've finally hit a spot where making the minimum payments appear as though could become the problem.

 

Obviously going with a debt reduction program is my last hope. That or even possibly bankruptcy? If I could get my auto loan forgiveness for the covid 19 waived for a couple months. Or 1 for that fact in the matter. I could possibly get out of a little bit of the mess I have gotten myself in. I was unemployed from April til June. So I'm not sure they would consider me in that program since I'm now back at work. I have $17,000 credit debt 7 credit cards and another loan with Affirm. I thought about One Main Financial. They offered 10k but I think that would even be a worse option as I still wouldn't be free of all my CC's then tacking on a ridiculously expensive interest rate loan from OM. 
Other options would be to trade my vehicle which I have a lot of positive equity in on something cheaper (less payment). Freeing up more money to pay my CCs off quicker. 
Ok sorry about the long rambling first post. I'm definitely in a mess. I think with the right choice I can get out of this. I'm just not sure what that choice is. Any advice would be greatly appreciated!

Message 1 of 11
10 REPLIES 10
FlaDude
Established Contributor

Re: Should I go with a debt reduction program?

The "credit repair" and "debt reduction" companies don't do anything you can't do yourself with free help from forums like this one. I've never used one, but from what I've read, debt reduction outfits work like this:

1) they tell you to stop paying your credit cards and and possibly other loans, especially non-secured ones.

2) once the accounts go to collections, they negotiate lower balances to pay off, the rest is considered a charge off.

 

Late payments and charge offs can (and usually do) stay on your credit reports for 7 years and will drag your scores down the whole time, although the effect will lessen a little as they age. If you already have late payments, the damage to your scores would be less because they are already dinged by those.

 

BK is certainly another option, although they can stay on your report for up to 10 years.

 

Any option that involves not paying the entire debt will likely cost you in higher interest rates and difficulty getting credit for years.

 

Personally, if there was any way I could make it work, even if I had to live frugally for a couple of years, I would aim for paying everything without having any late payments. I would only do a consolidation loan if the interest rate is lower than what you have on your cards. It might not get you anywhere, but you can call your current lenders and ask if there is any possibly of an interest rate reduction, occasionlly it works. Downgrading your vehicle is certainly an option if you can get a reliable cheaper one.

 

Hopefully others will weigh in with more suggestions.

 

 

 

Scores: March 21 FICO 8: EX 810, TU 808, EQ 813
AoOA: closed: 36 years, open: 25 years; AAoA: 11.8 years
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Freedom Unlimited, Chase Amazon, Chase CSP, Chase United Explorer, Citi AA Plat, Sync Lowes, Sync JC Penney - total CL 145k
Loans: Chase car loan (35k/6yrs 0.9%)
Message 2 of 11
tacosaban
New Visitor

Re: Should I go with a debt reduction program?

Hey! I certainly do appreciate you taking time out of your day to reply. I certainly don't want to go the way of debt reduction program. It is a last resort for sure. Honestly never thought I would be in this much debt off credit cards. I did get my auto loan cut in half for the next 3 months today. From the covid program. I'm financed through PNC bank. While not the fully waived payment I was hoping for. It is a big help. Going to try and use that extra money to pay down on my cards. I might even look around for a part time job. It's gonna be tough.

Message 3 of 11
Face_Value
New Contributor

Re: Should I go with a debt reduction program?

  Hi taco,

      I am sorry to read about your current credit problems. Times are tough and made only worse by the current state of things (covid). I agree with the above post in that those "credit repair" outfits are probably not the best route. They cant do anything for you that you cant do yourself. And while I know it seems overwhelming at times, you CAN do it. These forums contain a wealth of knowledge from people who have been there and done that. While I am not a financial advisor and I'm sure there are many more here who can give you better advice. Not being aware of your full situation and assuming you have no opportunity to move debt to a low intro rate banlance transfer card I would suggest doing the following......

 

          1.) STOP using the credit cards. 

                 I know thats easier said than done, but at least try and limit their use to absolute necessities.

 

          2.) Start with your highest interest rate debt first and pay it all the way down while making minimums on the others.When one is paid                      off move to the next highest interest rate debt and do the same until they are all paid off.

 

          3.) Stop applying for things you know you will get turned down for. Adding unneccessary inquiries to your credit report isnt going to                        help.

 

         4.) As I stated above I am not a financial advisor and many here know more than I. So in your next post give them more information                       about your credit history such as scores, AAoA, AooA, #of tradelines, any lates, any derogatories, #of inquiries, etc. The more info                    you give them, the better the advice you will get.                 

 

 

          Hang in there it will get better.

 

 

 

      

Message 4 of 11
Slabenstein
Valued Contributor

Re: Should I go with a debt reduction program?

Agree with the others that you wouldn't want to do a debt management program.  I wouldn't even call them a last resort, since you can wreck your credit on your own for free if you want to.  When you were shopping debt consolidation loans, did you check any of your local credit unions?  They usually have lower rates, which will help w/ your monthly payment some, and can be more open lenders than the big banks.


Message 5 of 11
tacosaban
New Visitor

Re: Should I go with a debt reduction program?

Thanks again to everyone who has taken time out of their day to respond to my situation/questions. I have not tried a local credit union. I guess I'm just automatically thinking I will get turned down. When I get more free time. Possibly in the next few days. I will submit my overall situation. I know I didn't provide alot. Even if I can keep all my accounts from going late. At some point I have to get things consolidated or more organized at least. I have no one to blame but myself.

Message 6 of 11
AZ-Jeff
Valued Member

Re: Should I go with a debt reduction program?

Search the internet for "Debt Snowball Spreadsheet" and you can create a plan that @Face_Value stated in #2. This will help you set goals and decide if you want to either tackle the smallest balance first or the highest interest rate first. Bankruptcy and those debt reduction companies are a last resort. You can certainly do it if you keep on track!



          
Gardening Until Aug 2021

Message 7 of 11
CreditInspired
Super Contributor

Re: Should I go with a debt reduction program?


@FlaDude wrote:

The "credit repair" and "debt reduction" companies don't do anything you can't do yourself with free help from forums like this one. I've never used one, but from what I've read, debt reduction outfits work like this:

1) they tell you to stop paying your credit cards and and possibly other loans, especially non-secured ones.

2) once the accounts go to collections, they negotiate lower balances to pay off, the rest is considered a charge off.

 

Late payments and charge offs can (and usually do) stay on your credit reports for 7 years and will drag your scores down the whole time, although the effect will lessen a little as they age. If you already have late payments, the damage to your scores would be less because they are already dinged by those.

 

BK is certainly another option, although they can stay on your report for up to 10 years.

 

Any option that involves not paying the entire debt will likely cost you in higher interest rates and difficulty getting credit for years.

 

Personally, if there was any way I could make it work, even if I had to live frugally for a couple of years, I would aim for paying everything without having any late payments. I would only do a consolidation loan if the interest rate is lower than what you have on your cards. It might not get you anywhere, but you can call your current lenders and ask if there is any possibly of an interest rate reduction, occasionlly it works. Downgrading your vehicle is certainly an option if you can get a reliable cheaper one.

 

Hopefully others will weigh in with more suggestions.

 


^^^ definitely ask about APR reductions. Also call your other CCCs and ask about hardship programs that you may be able to take advantage of.

 

And no need to blame yourself. We've all been there one time or another. 😁.

 

Start today anew and kudos to you for recognizing you need help, asking for help, and ready to grab the bull by the horns. 

GL2U


DEC 2019: EX 816, TU 820, EQ 810
DEC 2018: EX 777, TU 783, EQ 799

|| AmX Cash Magnet $40.5K || NFCU CashRewards $30K || Discover IT $24.7K || Macy's $20K || NFCU CLOC $15K || CitiCostco $12.7K || NFCU Platinum $12.5K || Apple Card $6.5K ||
Message 8 of 11
FlaDude
Established Contributor

Re: Should I go with a debt reduction program?

As mentioned above there are several approaches to working on your debt. 1) Highest interest first. 2) Lowest balance first. 3) Another is to work on your utilization. If you have cards above 90%, try to get those below 88.9% first, then 68.9, 48.9, 28.9. This approach will help you gain score faster by getting below scoring thresholds and might improve your options for lower interest rate loans. That said, the various approaches are all valid depending on your circumstances and goals.

Scores: March 21 FICO 8: EX 810, TU 808, EQ 813
AoOA: closed: 36 years, open: 25 years; AAoA: 11.8 years
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Freedom Unlimited, Chase Amazon, Chase CSP, Chase United Explorer, Citi AA Plat, Sync Lowes, Sync JC Penney - total CL 145k
Loans: Chase car loan (35k/6yrs 0.9%)
Message 9 of 11
tacosaban
New Visitor

Re: Should I go with a debt reduction program?

I want to thank each and everyone of you for giving me advice yesterday. Im reading your suggestions over and over. I feel much better today than I did yesterday. Now to put in the work. I will come back in a few months and give some updates! Hopefully the news will be good. Have a great day!

Message 10 of 11
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.