Debt Consolidation (1 Viewer)

[Keerock]

My SIL is pretty deep in credit card debt. She lost her job a couple years ago and needed to use the credit cards to stay afloat. She has since found another job, and while it's a good, steady one, she is still basically living check-to-check because of the debt and the interest she is being charged on it.

Oddly enough, she has a decent credit score (720ish) and has never missed a payment. She's about $50K in debt (total) to 4 different cards.

Without really badly affecting her credit score, are there any good/reputable ways to consolidate this to get a better rate and maybe put it on payments? A reduction would be nice, but I'm pretty sure that would put a hit on her score.

Anyone?

TIA

 

[dancingbones]

I'm pretty sure anything she does is going to pull her credit score way down.

I did a program like that in the 90s that hit my credit pretty hard & made it difficult to get my first home. What ultimately got me out from under was buying a home & rolling the existing debt into a refi after a few years. (bought at the right time).

What the program did was basically have you pay one big payment to that company, & they would then disburse to your creditors. In that process, all of my creditors started getting paid late (I had always paid on time). Some offered reduced interest rates, but not all. Overall, I think the program screwed up my credit more than if I had not used them.

If I had it to do again, I would do the Dave Ramsey "snowball" of debt - pick as big of a monthly number as you can & pay minimums on all but the smallest balance & pay all extra on that one account (without regard to interest rate). Once that is paid off, keep paying that high number & pick off the next lowest balance, etc.

And stop living off of credit cards, of course.

Don't know what the bankruptcy laws are with regard to credit card debt now, but I think they are worse than the were then - so the creditors may be less willing to negotiate a better rate. I'm pretty sure people like your SIL are where they make most of their profits.

Good luck, it is a long road but it can be done.

 

[MarcO]

Discover has a debt consolidation "loan" - where you basically roll over your credit cards into a fixed monthly payment for 5 years - I think the interest rate starts at 6.9%.

 

[SacramentoBob]

Take out a traditional unsecured loan for as much as possible/reasonable and pay off the cards. Don't go to any special company because it likely will have ramifications on your credit. Pay off the cards with the highest interest rates and don't use them anymore. Lock them in a safe deposit box or something. Don't close them unless you have no self control.

 

[(HULK)]

Does she own a home she can take equity out of? She'd get a better rate and a tax shield going that route.

 

[MarcO]

Take out a traditional unsecured loan for as much as possible/reasonable and pay off the cards. Don't go to any special company because it likely will have ramifications on your credit. Pay off the cards with the highest interest rates and don't use them anymore. Lock them in a safe deposit box or something. Don't close them unless you have no self control.

in general probably not bad advice but I'm not sure how many banks will lend you a substantial amount of unsecured money with $50k in cc debt. The discover loan is for the purpose of paying off credit card debt - so they know exactly what the money is for and in fact handle the transactions, I think that's why they will lend up to $25k. it didn't affect my credit in a negative way.

 

[El Floppo]

.

 

[larch]

Take out a traditional unsecured loan for as much as possible/reasonable and pay off the cards. Don't go to any special company because it likely will have ramifications on your credit. Pay off the cards with the highest interest rates and don't use them anymore. Lock them in a safe deposit box or something. Don't close them unless you have no self control.

in general probably not bad advice but I'm not sure how many banks will lend you a substantial amount of unsecured money with $50k in cc debt. The discover loan is for the purpose of paying off credit card debt - so they know exactly what the money is for and in fact handle the transactions, I think that's why they will lend up to $25k. it didn't affect my credit in a negative way.

Would it better to go through a credit union instead of a bank?

 

[SacramentoBob]

Take out a traditional unsecured loan for as much as possible/reasonable and pay off the cards. Don't go to any special company because it likely will have ramifications on your credit. Pay off the cards with the highest interest rates and don't use them anymore. Lock them in a safe deposit box or something. Don't close them unless you have no self control.

in general probably not bad advice but I'm not sure how many banks will lend you a substantial amount of unsecured money with $50k in cc debt. The discover loan is for the purpose of paying off credit card debt - so they know exactly what the money is for and in fact handle the transactions, I think that's why they will lend up to $25k. it didn't affect my credit in a negative way.

Right, if you're able to go to a traditional lender to get a loan for this purpose it's fine. Don't go to one of those credit repair companies.

 

[gianmarco]

Discover actually had some recent balance transfer promotion of interest free consolidation for 18 months, I think. I'd look into that kind of route. Especially if she has that credit score.

 

[Chadstroma]

I have a product we use for debt consolidation all the time. There is a promotional offer on it right now at 6.99% APR a 48 month term up to $25K. The bad side of this product is that you need to have had some sort of account, loan, credit card etc with us established- they do not approve it for new customers. It may or may not work for her. We do use it for debt consolidation all the time but the Debt to Income ratio knocks more than a few people out of approval that are looking to use it for debt consolidation. If it sounds like it may make sense for her to try- PM me and I will let you know where I work. If she has something with us then we can try.

 

[Keerock]

Take out a traditional unsecured loan for as much as possible/reasonable and pay off the cards. Don't go to any special company because it likely will have ramifications on your credit. Pay off the cards with the highest interest rates and don't use them anymore. Lock them in a safe deposit box or something. Don't close them unless you have no self control.

in general probably not bad advice but I'm not sure how many banks will lend you a substantial amount of unsecured money with $50k in cc debt. The discover loan is for the purpose of paying off credit card debt - so they know exactly what the money is for and in fact handle the transactions, I think that's why they will lend up to $25k. it didn't affect my credit in a negative way.

Thanks... I'll have her look into that!

 

[Keerock]

Does she own a home she can take equity out of? She'd get a better rate and a tax shield going that route.

She does own a home, but there's not even close to $50K equity in it anymore.

 

[The Big Guy]

The bank I work for has a similar unsecured loan that we do,but as others have mentioned that her debt to income ratio will be hard to get in line. However it can be very possible if she is willing to close the cards that she is paying off when opening the loan. Sounds like a worse idea then it actually is since you pay off the worst cards in her wallet and they are the ones that you don't want to use in the future anyway

 

[(HULK)]

Does she own a home she can take equity out of? She'd get a better rate and a tax shield going that route.

She does own a home, but there's not even close to $50K equity in it anymore.

Sometimes you can get up to 125% LTV on these. Rates aren't as pretty, but I bet it still beats a credit card and it still offers a tax shield. Worth looking into.

 

[Keerock]

Does she own a home she can take equity out of? She'd get a better rate and a tax shield going that route.

She does own a home, but there's not even close to $50K equity in it anymore.

Sometimes you can get up to 125% LTV on these. Rates aren't as pretty, but I bet it still beats a credit card and it still offers a tax shield. Worth looking into.

thanks!

 

[BroncoFreak_2K3]

Was talking about bills and such with my BIL and told him about the Discover Loan program mentioned above and he said he would check it out.

Turns out he told me he applied online and was approved in one-day for a $13,000 loan to pay off all his credit cards within 3 years at 6.99% fixed, as opposed to the 21% variable rate he was paying. He was really happy with how the how process went and highly recommended it. Said the staff person online was very helpful. He also said the only documentation they asked for was a copy of his most recent paystub for proof of employment. He said he liked being able to lock into a known rate for a fixed period of time rather than trying to just keep up with paying the minimum and never getting ahead.

Sounds like a really good way to dig oneself out of the credit card hole if need be.

Just wanted to pass along his success story for those wondering about this program.

 

[dino259]

Credit union unsecured for as much as possible with lowest interest rate possible and snowball as quick as possible

 

[VA703]

does the 50k debt include a vehicle

 

[ragincajun]

Check out the money Moustache forums. Pretty good insight there.

 

[DocHolliday]

There has been some good advice but has the SIL thought about getting a second job for a couple of years to dig herself out of the money hole faster?

 

[Keerock]

There has been some good advice but has the SIL thought about getting a second job for a couple of years to dig herself out of the money hole faster?

She already does some house cleaning on the side to bring in some extra cash.

 

[lumpy19]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

 

[glumpy]

 

[El Floppo]

Was talking about bills and such with my BIL and told him about the Discover Loan program mentioned above and he said he would check it out.

Turns out he told me he applied online and was approved in one-day for a $13,000 loan to pay off all his credit cards within 3 years at 6.99% fixed, as opposed to the 21% variable rate he was paying. He was really happy with how the how process went and highly recommended it. Said the staff person online was very helpful. He also said the only documentation they asked for was a copy of his most recent paystub for proof of employment. He said he liked being able to lock into a known rate for a fixed period of time rather than trying to just keep up with paying the minimum and never getting ahead.

Sounds like a really good way to dig oneself out of the credit card hole if need be.

Just wanted to pass along his success story for those wondering about this program.

what would the down-side of this be? after 3 years, if un-paid, what does the rate jump to?

 

[Keerock]

Was talking about bills and such with my BIL and told him about the Discover Loan program mentioned above and he said he would check it out.

Turns out he told me he applied online and was approved in one-day for a $13,000 loan to pay off all his credit cards within 3 years at 6.99% fixed, as opposed to the 21% variable rate he was paying. He was really happy with how the how process went and highly recommended it. Said the staff person online was very helpful. He also said the only documentation they asked for was a copy of his most recent paystub for proof of employment. He said he liked being able to lock into a known rate for a fixed period of time rather than trying to just keep up with paying the minimum and never getting ahead.

Sounds like a really good way to dig oneself out of the credit card hole if need be.

Just wanted to pass along his success story for those wondering about this program.

what would the down-side of this be? after 3 years, if un-paid, what does the rate jump to?

I assume it's on a payment plan. Must pay every month.

 

[Gawain]

Was talking about bills and such with my BIL and told him about the Discover Loan program mentioned above and he said he would check it out.

Turns out he told me he applied online and was approved in one-day for a $13,000 loan to pay off all his credit cards within 3 years at 6.99% fixed, as opposed to the 21% variable rate he was paying. He was really happy with how the how process went and highly recommended it. Said the staff person online was very helpful. He also said the only documentation they asked for was a copy of his most recent paystub for proof of employment. He said he liked being able to lock into a known rate for a fixed period of time rather than trying to just keep up with paying the minimum and never getting ahead.

Sounds like a really good way to dig oneself out of the credit card hole if need be.

Just wanted to pass along his success story for those wondering about this program.

what would the down-side of this be? after 3 years, if un-paid, what does the rate jump to?

Discover sends us checks once a month for stuff like this. There's a 4% loan fee, but 0% APR for a year IIRC.

Double check to make sure that Discover offer doesn't have that same origination fee.

Ask her if she wants to trade for 120K in student debt ranging between 2.875 and 6%.

 

[General Malaise]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

 

[Keerock]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

 

[General Malaise]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

Did some quick reading on this and it sounds like it will damage your score, but would be curious to hear from Lumpy. What's the catch? Seems too good to be true.

 

[CletiusMaximus]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

 

[VA703]

how do you get 40k on credit cards??

 

[FairWarning]

Know a couple who used this site with good luck, worth a call

https://www.faircredit.org/

 

[General Malaise]

how do you get 40k on credit cards??

Hookers and blow?

 

[D in the D]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Are there any tax implications for you on the 28k that the cc company "wrote off" ?

 

[BroncoFreak_2K3]

Was talking about bills and such with my BIL and told him about the Discover Loan program mentioned above and he said he would check it out.

Turns out he told me he applied online and was approved in one-day for a $13,000 loan to pay off all his credit cards within 3 years at 6.99% fixed, as opposed to the 21% variable rate he was paying. He was really happy with how the how process went and highly recommended it. Said the staff person online was very helpful. He also said the only documentation they asked for was a copy of his most recent paystub for proof of employment. He said he liked being able to lock into a known rate for a fixed period of time rather than trying to just keep up with paying the minimum and never getting ahead.

Sounds like a really good way to dig oneself out of the credit card hole if need be.

Just wanted to pass along his success story for those wondering about this program.

what would the down-side of this be? after 3 years, if un-paid, what does the rate jump to?

I assume it's on a payment plan. Must pay every month.

Yep payment plan. He says no origination fee. No early pay-off fee.

Sounds like he simply reorganized the debt at a lower APR.

ETA: He says by doing this Discover Loan program he was able to knock off an amount that was equivalent to about 5 payments that would have been essentially only interest on the debt.

 

[metoo]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Are there any tax implications for you on the 28k that the cc company "wrote off" ?

A 1099.

 

[None_More_Black]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

You are going to have to miss payments and basically threaten BK in order to settle debt this way. Your credit will be badly damaged.

 

[jason12vb]

If she owns her vehicle she might be able to take out a loan to basically buy the car from herself and use the funds to pay off some CC debt. I had my wife do that before we got married. Turned an 11% revolving account into a 3% fixed 5 year loan. Were we to have made the same CC payments as we do the 3% car loan, we'd still owe more than 7k on the CC when the 5 years is up. Obviously 50k is a different story...but several smaller steps might be necessary.

If she doesn't already know it...she should never use any of those cards again while they have a balance on them. It doesn't do you much good to pay $500 a month on your balance and add $300 a month to it.

 

[lumpy19]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

Yes it's not minor...all taxable income. As for my credit score I'm sure it damaged it(I know it was ~800 before) but I already had a house and since then no trouble getting car loans. credit companies don't want to give me 50k credit cards anymore but still no problem getting cards.

I missed a few payments and they were on the phone with me offering to settle the 40k debt for 24k....did some research and then called and started negotiating and settled on 12k but it had to be immediately. Actually I think i tried a debt consolidation company first to see what they could get me and then after they showed me what they could do I tried it myself and cut the debt consolidation company right out of the loop.

Shocking to me how easy the whole process was.

Based on my experience discover was really tough but chase was really easy.

 

[lumpy19]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

You are going to have to miss payments and basically threaten BK in order to settle debt this way. Your credit will be badly damaged.

I never threatened BK

 

[whiskey7]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

Yes it's not minor...all taxable income. As for my credit score I'm sure it damaged it(I know it was ~800 before) but I already had a house and since then no trouble getting car loans. credit companies don't want to give me 50k credit cards anymore but still no problem getting cards.

I missed a few payments and they were on the phone with me offering to settle the 40k debt for 24k....did some research and then called and started negotiating and settled on 12k but it had to be immediately. Actually I think i tried a debt consolidation company first to see what they could get me and then after they showed me what they could do I tried it myself and cut the debt consolidation company right out of the loop.

Shocking to me how easy the whole process was.

Based on my experience discover was really tough but chase was really easy.

Any guilt that you borrowed and then did not repay?

 

[SpurrierisisGod]

Debt consolidation companies will kill your credit. Went from a 740 to 520 in a matter of days. Might as well have filed BK. That was over 7 years ago. Just got my 1st cc in years to pay house bills to take advantage of rewards points since it just now got back over 700.

 

[El Floppo]

Debt consolidation companies will kill your credit. Went from a 740 to 520 in a matter of days. Might as well have filed BK. That was over 7 years ago. Just got my 1st cc in years to pay house bills to take advantage of rewards points since it just now got back over 700.

Does this include the checks Discover, Chase etc send out that are 0% interest for x amount of time?

 

[None_More_Black]

She should start by calling the cc companies and negotiating with them direct. I'd avoid debt consolidation companies at all costs. I'd bet she could knock that # in half pretty easily. I was shocked how little I had to pay on my cc's when I went thru this. I had one card with 40k that I paid off in a lump sum payment of 12k.

Wow. Did it damage your credit?

:goodquestion:

A minor issue I'm sure, but she should consider that debt forgiveness is likely taxable income.

You are going to have to miss payments and basically threaten BK in order to settle debt this way. Your credit will be badly damaged.

I never threatened BK

The fear of getting nothing is why they negotiated with you.

 

[BroncoFreak_2K3]

My BIL says he had the option of how he wanted it dispersed with this Discover plan. He chose to have them set it up as a personal loan and had the check sent to him directly. So maybe this is a better option.

 

[The Big Guy]

My BIL says he had the option of how he wanted it dispersed with this Discover plan. He chose to have them set it up as a personal loan and had the check sent to him directly. So maybe this is a better option.

If the person does use the personal loan for the purposes intended then it is fine. Too many people will mostly pay things off and not do a 100% job which only makes their total solution become a halfass solution. As long as he can use the 25K correctly than he will be good and just make his monthly payments and clear it up.

 

[dino259]

Debt consolidation companies will kill your credit. Went from a 740 to 520 in a matter of days. Might as well have filed BK. That was over 7 years ago. Just got my 1st cc in years to pay house bills to take advantage of rewards points since it just now got back over 700.

Does this include the checks Discover, Chase etc send out that are 0% interest for x amount of time?

No. Those consolidation companis usually charge you a bunch to settle with the credit card company.

 

[wilked]

When's the last time she charged to credit?

If she hasn't cutbher cards up yet she isn't ready to get serious about her debt issue...

Post her debts, itemized with rates, and can advise from there. She could consider defaulting on these as some advise above (and working out a 'deal' with the company is the same thing). She already has a house so it is a 7 year gamble. What is her approximate earnings? Does the 50k represent more than her gross earnings?

Basically you would need to paint the full picture in detail before I could advise

 

[glvsav37]

Well if we win the GD lottery anytime soon you can pay it off for her Kee!!!

I know nobody wants to start the Dave Ramsey discussion, but honestly she can do it w/o trying to borrow herself out of this.

Sell the car, sell the extra crap in the basement, sell anything thats not nailed down and not used everyday.

Attack them 1 at a time and roll one payment into another as they go away. Create a spreadsheet that shows all payments and when cards will be paid off and hang it on the fridge. She will see traction once she pays off that first card and the rest will fall quickly after that.

It may take longer but its safer then trying to move this debt to your house, or other cards or some other type of loan. Stay away from any 'company' they won't do anything that you can't do yourself.