Debt Consolidation (1 Viewer)

[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.

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.

It really is just a monthly fee for the company to basically do what Dave Ramsey tells you to do: negotiate lower interest rates and pay off cards in tiers. Once one was paid of you could tell them to apply that payment to the next one, etc.

I'd have done the Dave Ramsey thing, but there was no way my wife was going to do it as she is financially handicapped and stubborn.

We got lucky (if you can call a death in the family lucky) and came into a bit of money. The first check was to the debt company.

The discover thing sounds better if you can remain disciplined, especially because it sounds like it doesn't ding your credit like consolidation companies do.

 

[wilked]

I think you guys are a little optimistic that it is as simple as negotiating a reduction in debt with the credit card

Her: I am calling to get my credit card balanced reduced

CC: Perfect, will you be making your payment via online check or another means?

Her: No, I want it reduced without me paying. I am willing to pay for my charges this past year which is about 25% of the balance, but I would like the rest forgiven

CC: Let me check with my supervisor...[puts phone on desk, checks facebook] - we can't do that

Her: Well I am not able to pay otherwise

CC: I show here you have made payments on time for the last 36 months

Her: Yes but I have no savings at the end of the month

CC: Is there anything else I can help with?

something like that. Basically they won't help you unless they believe your ability to pay is at risk. They won't believe that unless you stop paying. There is no way to do it without trashing your credit

Again, Kee, if you want to help I would do the following:

-Get copies of her statements showing she hasn't charged anything in the last X months. If she has, this is the problem, not the debt itself

-Have her cut her cards up for you. Perhaps throw the cut up cards in the fireplace for effect

-Get a list of all debts, with interest rates

-Next step will be to attack the smallest debts while transferring the highest rate balances to a low interest card

and so on

 

[BroncoFreak_2K3]

I think you guys are a little optimistic that it is as simple as negotiating a reduction in debt with the credit card

Her: I am calling to get my credit card balanced reduced

CC: Perfect, will you be making your payment via online check or another means?

Her: No, I want it reduced without me paying. I am willing to pay for my charges this past year which is about 25% of the balance, but I would like the rest forgiven

CC: Let me check with my supervisor...[puts phone on desk, checks facebook] - we can't do that

Her: Well I am not able to pay otherwise

CC: I show here you have made payments on time for the last 36 months

Her: Yes but I have no savings at the end of the month

CC: Is there anything else I can help with?

something like that. Basically they won't help you unless they believe your ability to pay is at risk. They won't believe that unless you stop paying. There is no way to do it without trashing your credit

Again, Kee, if you want to help I would do the following:

-Get copies of her statements showing she hasn't charged anything in the last X months. If she has, this is the problem, not the debt itself

-Have her cut her cards up for you. Perhaps throw the cut up cards in the fireplace for effect

-Get a list of all debts, with interest rates

-Next step will be to attack the smallest debts while transferring the highest rate balances to a low interest card

and so on

Solid advice.

 

[Swing 51]

-Next step will be to attack the smallest debts while transferring the highest rate balances to a low interest card

This is what BofA is trying to get me to do. Except they won't let me transfer; they want me to get a new card (cash rewards, currently have just rewards) which is interest free for 18 months. On the new card, get a cash advance and use that to pay off my old card. Then I have 18 months with no interest to pay off the new card. I declined as this plan seems counterintuitive.?

 

[wilked]

-Next step will be to attack the smallest debts while transferring the highest rate balances to a low interest card

This is what BofA is trying to get me to do. Except they won't let me transfer; they want me to get a new card (cash rewards, currently have just rewards) which is interest free for 18 months. On the new card, get a cash advance and use that to pay off my old card. Then I have 18 months with no interest to pay off the new card. I declined as this plan seems counterintuitive.?

cash advances are typically treated very differently than balance transfers

I would use Discover, they have good cards / programs for this

 

[BroncoFreak_2K3]

Dave Ramsey's new budgeting book (free):

https://www.everydollar.com/?et_cid=4021903&et_rid=0&linkid=EveryDollar1

 

[SIDA!]

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?

Fair question, but kind of irrelevant in my opinion.

The primary purpose of having "good credit" is to ostensibly is to get financing in the first place and when you do get it, to get lower interest rates. Basically.. to save you money.

If you can whack out 28K in debt on a 40K balance...even in exchange for a BIG credit hit should take it.

 

[SIDA!]

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. These will not hurt your credit and merely impact them as traditional credit purchases (debt to income, open credit lines, etc).

 

[SIDA!]

One possible solution and it might not be popular here would be the use of a self directed IRA. I am not an expert on disqualified persons, but depending on the relationships she has with others, someone she knows could lend her money out of their self-directed IRA.

If she is paying more than 20% (which I am sure she is) on her credit card debt, it is conceivable that a friend or certain eligible family members might be willing to lend her the money at 5-12% interest. If I trusted someone, I wouldn't have a problem loaning money at 12%. If she has other assets (home, car) she could also use those as collateral to help assure the friend making the loan. Even if she couldn't find someone to loan her all of the money...she might be able to get a significant chunk loaned to her. She could then pay off one or more credit cards and hopefully one of them would send her a 0% balance transfer where she could then transfer the remaining balances to cards that were just paid off. Then she would have half at 0% and the other half loaned from the IRA only charging her 5-12%.

Just an idea.

The other idea...and I am just spitballing out loud here. If she had some 401K funds, traditional IRAs, ,etc. laying around. She could open her own self-directed IRA. She could...ahem..."loan" 40K to a friend who would then funnel that money back to her so that she could then pay off her credit cards. She would then "pay herself (IRA) back" through the friend instead of the credit card company....ahem...just an idea.

I have a self directed IRA...but have never tried the latter.

 

[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?

Fair question, but kind of irrelevant in my opinion.

The primary purpose of having "good credit" is to ostensibly is to get financing in the first place and when you do get it, to get lower interest rates. Basically.. to save you money.

If you can whack out 28K in debt on a 40K balance...even in exchange for a BIG credit hit should take it.

Also have to factor in the tax man when taking this route. A 1099 will show up for all that forgiven debt. If she's able to get the 50k down to 20k, she's looking at 30k extra income, that's another $7500+ she'll have to come up with in a lump sum unless she wants to work out a payment plan with the IRS.

 

[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.

Any guilt that you borrowed and then did not repay?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

 

[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?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

I bet it does feel good to ditch your debt and put it on someone else.

Here's a fun story

"But Vaughn’s journey to home ownership — from getting pre-approved for a mortgage to turning the key to her own front door — was complicated by financial obstacles, including a bankruptcy. Vaughn discovered she couldn’t qualify for a mortgage from local lenders because of her bad credit history. “I had too much debt on my credit cards and not enough income,” said Vaughn, a Metro Transit bus driver. “That’s how I got in trouble.”

After doing research, she decided that filing Chapter 7 bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."

 

[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.

Any guilt that you borrowed and then did not repay?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

I bet it does feel good to ditch your debt and put it on someone else.

Here's a fun story

"But Vaughn’s journey to home ownership — from getting pre-approved for a mortgage to turning the key to her own front door — was complicated by financial obstacles, including a bankruptcy. Vaughn discovered she couldn’t qualify for a mortgage from local lenders because of her bad credit history. “I had too much debt on my credit cards and not enough income,” said Vaughn, a Metro Transit bus driver. “That’s how I got in trouble.”

After doing research, she decided that filing Chapter 7 bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."

Yes it was the highlight of my life, I'm really proud of how I screwed the man!

 

[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?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

I bet it does feel good to ditch your debt and put it on someone else.

Here's a fun story

"But Vaughn’s journey to home ownership — from getting pre-approved for a mortgage to turning the key to her own front door — was complicated by financial obstacles, including a bankruptcy. Vaughn discovered she couldn’t qualify for a mortgage from local lenders because of her bad credit history. “I had too much debt on my credit cards and not enough income,” said Vaughn, a Metro Transit bus driver. “That’s how I got in trouble.”

After doing research, she decided that filing Chapter 7 bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."

Yes it was the highlight of my life, I'm really proud of how I screwed the man!

You made a point of mentioning how easy it really was (more than once) and said you didn't really feel bad

 

[Gawain]

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?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

I bet it does feel good to ditch your debt and put it on someone else.

Here's a fun story

"But Vaughn’s journey to home ownership — from getting pre-approved for a mortgage to turning the key to her own front door — was complicated by financial obstacles, including a bankruptcy. Vaughn discovered she couldn’t qualify for a mortgage from local lenders because of her bad credit history. “I had too much debt on my credit cards and not enough income,” said Vaughn, a Metro Transit bus driver. “That’s how I got in trouble.”

After doing research, she decided that filing Chapter 7 bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."

13K down on a 355K house at a 640 credit score? I thought those days were over.

 

[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?

Not really. Having the debt load off my shoulders crushed any guilt that I felt.

I bet it does feel good to ditch your debt and put it on someone else.

Here's a fun story

"But Vaughn’s journey to home ownership — from getting pre-approved for a mortgage to turning the key to her own front door — was complicated by financial obstacles, including a bankruptcy. Vaughn discovered she couldn’t qualify for a mortgage from local lenders because of her bad credit history. “I had too much debt on my credit cards and not enough income,” said Vaughn, a Metro Transit bus driver. “That’s how I got in trouble.”

After doing research, she decided that filing Chapter 7 bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."

13K down on a 355K house at a 640 credit score? I thought those days were over.

Me, too. Its funny...that story (I am assuming) was written to be a feel-good piece but there are so many things horribly wrong with it I seriously felt like puking after I read it.

 

[Gawain]

bankruptcy in spring 2011 was her best option, since she had no assets and couldn’t make the monthly credit-card payments. “It wiped out my debt and gave me a fresh start,” she said."
13K down on a 355K house at a 640 credit score? I thought those days were over.

Me, too. Its funny...that story (I am assuming) was written to be a feel-good piece but there are so many things horribly wrong with it I seriously felt like puking after I read it.

I do not agree with you the bankruptcy angle, I think BK is a legitimate option for people who are overextended and that if lenders are going to take advantage of the legal system in recovering debts people would be foolish not to also use the legal system to recover from past mistakes.

However, the home story makes zero sense. She got the handle "The Overtime Queen" working to pay off cards and save for a down payment, so she adds a payment that has to be as much in the form of a mortgage and puts less than 4% down? If housing prices go down at all, it will make sense for her to abandon the home and if she doesn't work prohibitive OT, how can she afford her payment?

30 year, 340K at 4%, she's looking at 1600+PMI+taxes, so likely 2600 after all is said and done. That's a pretty healthy payment for a single mom who drives a bus with a couple kids.

 

[whiskey7]

bankruptcy in spring 2011 was her best option, since she had no assets and couldnt make the monthly credit-card payments. It wiped out my debt and gave me a fresh start, she said."

13K down on a 355K house at a 640 credit score? I thought those days were over.

Me, too. Its funny...that story (I am assuming) was written to be a feel-good piece but there are so many things horribly wrong with it I seriously felt like puking after I read it.

I do not agree with you the bankruptcy angle, I think BK is a legitimate option for people who are overextended and that if lenders are going to take advantage of the legal system in recovering debts people would be foolish not to also use the legal system to recover from past mistakes.

However, the home story makes zero sense. She got the handle "The Overtime Queen" working to pay off cards and save for a down payment, so she adds a payment that has to be as much in the form of a mortgage and puts less than 4% down? If housing prices go down at all, it will make sense for her to abandon the home and if she doesn't work prohibitive OT, how can she afford her payment?

30 year, 340K at 4%, she's looking at 1600+PMI+taxes, so likely 2600 after all is said and done. That's a pretty healthy payment for a single mom who drives a bus with a couple kids.

And that's IF they gave her as good as 4%. With a BK, 640, and single income heavily dependent on OT, I would think she'd be looking at a rate north of 4 obviously meaning an even bigger monthly payment. Not to mention the homeowners insurance has to be quite a bit more than the $0 I am guessing she was paying before when she filed for BK. And previously living with her folks, I bet there was some free childcare. Who is watching the 3 kids now while she's working all the OT?

I honestly have no earthly idea how anyone whose job it is to counsel people with financial difficulty still has a job after being party to a single mom of 3 kids (who couldn't pay her bills while living in shared rental properties with her parents in St Paul) being allowed to buy a $350K home in the NW burbs about 30 miles from where she drives a bus for a living. SMH