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Debt Consolidation

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hpertrain
Regular Contributor

Debt Consolidation

I'm a little more than confused. What else is new! Smiley Happy    I have about $45K in debt to CC's and Personal loans.

A company sent me a letter pre-approved to $18K at a low interest rate. I called out of curiosity and was told

that because my credit score was so low they could put me in their debt consolidation program.  $740 per month

as opposed to the $2500 I've been paying!   I've been making all my payments each month albeit difficult every month.

As the rep stated my credit is already "in the toilet" so another hit won't hurt as opposed to someone who actually had

a good credit score.      Yes of course the $740 versus $2500 sounds wonderful, but is too good to be true??!?

   The monthly payments are kicking my a$$ and this would be great if these companies actually do as they say and

work. This particular company reeled me in with a "loan offer" and then steered me toward debt consolidation. I get

it as with my debt to income there's no way I'm getting another loan. 

  This particular company did a soft credit check and we discussed the loans I had and payments. The rep was thorough,

answered my questions, but I still felt rushed into any signings of docs. So I didn't sign and reviewing and my DD.  I want

and need to get out of these monthly payments asap and the lower amount is alluring of course.    Just not sure if too good

to be true.       Any advice or suggestions if I should go with this or any of these companies?  Thanks.

Message 1 of 8
7 REPLIES 7
FlaDude
Established Contributor

Re: Debt Consolidation

It sounds like they are proposing a program that would involve you negotiating paying less then the amount owed. From what I've read, the first step is to allow everything to become 120 days late or more because lenders won't negotiate with people who are current. This will trash your credit for at least 7 years and you will likely be hounded by creditors. What kind of derogatory items are currently on your report? How much of the $740/mo are they keeping vs what is going to be paid to your creditors?

 

If you really can't pay amounts owed, bankrupcy might be an option, although it can stay on your reports for up to 10 years.

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 8
SlideOrInsert
Regular Contributor

Re: Debt Consolidation

"A debt management plan is NOT a loan. In a typical program, debt management companies work with creditors on your behalf to reduce your monthly payment and interest rates on your debt and waive or reduce any penalties. The parties agree on an affordable payment schedule that allows 3-to-5 years to pay off your debt."


sounds predatory that they tried to hit you with the bait and switch. $740 for how long? even at zero interest 45000/740 is five years.  unless the only two options are the plan or start missing payments you are better off continuing the $2500 payments as long as you can. even with a blended high-ish rate, excel tells us that you can pay off $45000 in two years.

ratepmtpv=nper(rate,pmt,pv)=cumipmt(rate,nper,pv,start,end,type)
20−25004500021.6−8,704
21−25004500021.8−9162
22−25004500022.0−10089
23−25004500022.3−10576
24−25004500022.5−11065
25−25004500022.8−11557
26−25004500023.1−12616
27−25004500023.3−13137
28−25004500023.6−13661
29−25004500023.9−14187


listing your accounts in this format if you want more detailed advice:

 balanceratemin pmt
acct 1   
acct 2   
acct n   
upgrade
9/2022
$30000
nfcu
8/2020
$20000
nfcu
12/2018
$30000
bofa
8/2016
$30000
citi
3/2016
$21000
discover
5/2014
$20000
chase
10/2007
$8900
Message 3 of 8
hpertrain
Regular Contributor

Re: Debt Consolidation


@FlaDude wrote:

It sounds like they are proposing a program that would involve you negotiating paying less then the amount owed. From what I've read, the first step is to allow everything to become 120 days late or more because lenders won't negotiate with people who are current. This will trash your credit for at least 7 years and you will likely be hounded by creditors. What kind of derogatory items are currently on your report? How much of the $740/mo are they keeping vs what is going to be paid to your creditors?

 

If you really can't pay amounts owed, bankrupcy might be an option, although it can stay on your reports for up to 10 years.


I can make the monthly payments to the debts, I just don't want to continue paying so much.  I noticed the rep I was speaking with yesterday 

was in a big hurry to get me to sign and initial the 18 pages of paperwork!  Of course I didn't and read much closer today.   Basically hey

"negotiate" on my behalf with creditors. I have to set aside a monthly amount ($740) plus a fee and in x amount of months debts should

be "settled".      All I see is me paying out more in the long run and completely trashing my credit.  I want to get these paid off asap but not

at this risk.   I appreciate your post as it solidified my thinking and I nearly lost my head and made a foolish mistake.  I got myself in the

mess, I'll dig my way out! Smiley Happy

Message 4 of 8
hpertrain
Regular Contributor

Re: Debt Consolidation


@SlideOrInsert wrote:

"A debt management plan is NOT a loan. In a typical program, debt management companies work with creditors on your behalf to reduce your monthly payment and interest rates on your debt and waive or reduce any penalties. The parties agree on an affordable payment schedule that allows 3-to-5 years to pay off your debt."


sounds predatory that they tried to hit you with the bait and switch. $740 for how long? even at zero interest 45000/740 is five years.  unless the only two options are the plan or start missing payments you are better off continuing the $2500 payments as long as you can. even with a blended high-ish rate, excel tells us that you can pay off $45000 in two years.

ratepmtpv=nper(rate,pmt,pv)=cumipmt(rate,nper,pv,start,end,type)
20−25004500021.6−8,704
21−25004500021.8−9162
22−25004500022.0−10089
23−25004500022.3−10576
24−25004500022.5−11065
25−25004500022.8−11557
26−25004500023.1−12616
27−25004500023.3−13137
28−25004500023.6−13661
29−25004500023.9−14187


listing your accounts in this format if you want more detailed advice:

 balanceratemin pmt
acct 1   
acct 2   
acct n   

That was my initial hope, that they negotiate to lower payments.   I agree the $740 I understood as I believed it to be my only payment versus the $2500, but it comes with too much risk to include collection letters, trashed credit, etc.  I'll have to bite the bullet and continuing to pay and add more here & there when I can.    Thanks.

Message 5 of 8
FlaDude
Established Contributor

Re: Debt Consolidation


@hpertrain wrote:
 I appreciate your post as it solidified my thinking and I nearly lost my head and made a foolish mistake.  I got myself in the

mess, I'll dig my way out! Smiley Happy


Good luck! A lot of people here have been in the same boat. My DW and I carried huge amounts of CC debt for over 20 years, reaching a $80k a little over 3 years ago. Thanks to some improvements in our finances, we were finally able to create a serious plan to dig our way out, now it is around $17k and hopefully will be zero about February. As my score improved, I as able to refi into lower interest rate loans and 0% balance transfers to fairly quickly reduce the monthly interest from $950 to under $200 (around $50/month now) which really helped.

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 6 of 8
M_Smart007
Legendary Contributor

Re: Debt Consolidation


@FlaDude wrote:

@hpertrain wrote:
 I appreciate your post as it solidified my thinking and I nearly lost my head and made a foolish mistake.  I got myself in the

mess, I'll dig my way out! Smiley Happy


Good luck! A lot of people here have been in the same boat. My DW and I carried huge amounts of CC debt for over 20 years, reaching a $80k a little over 3 years ago. Thanks to some improvements in our finances, we were finally able to create a serious plan to dig our way out, now it is around $17k and hopefully will be zero about February. As my score improved, I as able to refi into lower interest rate loans and 0% balance transfers to fairly quickly reduce the monthly interest from $950 to under $200 (around $50/month now) which really helped.


@FlaDude, Great success story, Thank you for sharing!

I am sure it will give other hopeSmiley Happy

Message 7 of 8
hpertrain
Regular Contributor

Re: Debt Consolidation


@FlaDude wrote:

@hpertrain wrote:
 I appreciate your post as it solidified my thinking and I nearly lost my head and made a foolish mistake.  I got myself in the

mess, I'll dig my way out! Smiley Happy


Good luck! A lot of people here have been in the same boat. My DW and I carried huge amounts of CC debt for over 20 years, reaching a $80k a little over 3 years ago. Thanks to some improvements in our finances, we were finally able to create a serious plan to dig our way out, now it is around $17k and hopefully will be zero about February. As my score improved, I as able to refi into lower interest rate loans and 0% balance transfers to fairly quickly reduce the monthly interest from $950 to under $200 (around $50/month now) which really helped.


Also excellent job on that.

 

I'm seriously considering talking to my CU and discuss either a debt consolidation or refi my house with cash out.

My debt to income ratio may be a little out of whack and credit score down, but that is all due to the current loans. 

 

Message 8 of 8
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