I am $16,000 in credit debt but do not want to use a Debt Consolidation Plan because of the ramifications on my credit. I easily pay my monthly payment (in fact I pay almost twice the minimum due) but I would like to consolidate to a lower interest rate so that I can get my debt paid off sooner. I am no longer using the card but have not closed the account yet. Please advice me on what my options are in this situation. Thank you, Tami
Dear Tami:
Have you tried to get a new credit card that has a lower interest rate than your current cards? You could then transfer your balance to the lower interest card.
There is an organization that can supply you with a list of credit card companies that offer low interest cards. They are: CardTrak of America, P.O. Box 1700, Frederick, MD 21702, Phone 1-800-344-7714. A small fee is charged for this list.
Dear Susan & Co.,
Me and my wife are wanting to get a consolidation loan for about $25,000 for credit card debt. We do not own a house, so how can we manage to get a loan - "In Deep"
Dear "In Deep":
You will have an extremely difficult time getting a $25,000 loan without adequate collateral. No creditor is in the habit of making a loan of that size without having the borrower put up some asset to guarantee repayment.
As an alternative, you can call CCCS to explore the possibility of enrolling in CCCS Debt Management Program (DMP). The DMP works similar to a consolidation loan in that you make only one payment each month and that payment is to CCCS. You agree to deposit funds with CCCS each month which CCCS will then disburse to your creditors until you become debt free. Some creditors also agree to make adjustments on their finance charges and/or other fees for clients on a DMP.
To locate the closest CCCS office and explore the possibility of a DMP, call 1-800-388-2227. If it is inconvenient for you to visit a CCCS office, call our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers the same service as CCCS except MMI counseling is done over the phone, by mail, fax and the Internet. Counselors are available 24 hours a day, 7 days a week. Good luck.
Dear Susan & Co.,
My husband and I are discussing applying for a consolidation loan for our credit cards so that we can pay them off quicker and with less interest, but I am concerned that we may be denied. We have already determined that a $200 payment a month for the loan is within our capabilities but the bank has the final say-so. Can you please explain to me the procedures and any other information that may be helpful. Thank you, Nicole
Dear Nicole:
The procedure is for you to contact your bank by phone or in person and apply for a loan to consolidate your bills. Your banker will ask you to fill out a credit application. Once your banker has received your completed credit application, a decision will be made as to whether you qualify for the size loan you are seeking. If so, you will be granted the loan. If not, your banker will give you the reason/s why the loan could not be made.
If you are denied the loan, you might ask your banker if they would consider your loan if you had somebody co-sign with you. A co-signer is a person with qualifications that you might be lacking that will guarantee payments will be made on the loan. Good luck.
Dear Susan & Co.,
Are there any finance companies or banks for consumers with credit problems to apply for a unsecured debt consolidation loans. Deborah
Dear Deborah:
Unfortunately I am not aware of any bank, finance company or any other type of creditor that will issue unsecured credit to somebody with credit problems. The reason for this is creditors feel if you are having problems paying your current creditors, you will probably have problems paying future creditors. And they do not want to extend credit to anyone they feel will be a problem in collecting on the outstanding balance.
Dear Susan & Co.,
I am in a mess. I have a lot of outstanding credit card bills and other bills that are way behind. With being a student and not really having a good job now I don't think I will ever be able to get caught up, pay my rent and car insurance without someone coming after me. I recently applied for a $3200.00 loan. That should cover everything.
I want to just pay off everything and start fresh with one bill to repay. I know my credit is bad though and I am will not be getting this. What can I do to convince them that I will pay them on time and they are my only link back to good credit? I cant sleep at night and I have been making myself sick with worry! Brandi
Dear Brandi:
You need to contact a CCCS office to set an appointment to speak to a counselor about your dilemma. During your counseling session, a trained professional counselor will analyze your income, expenses and overall financial situation; discuss possible solutions; and make recommendations for you to consider. If your debts are truly unmanageable, your counselor will explore the possibility of a Debt Management Program (DMP) which allows you to make reduced payments to your creditors. The DMP is a voluntary arrangement between you, CCCS and your creditors. You agree to deposit funds with CCCS each month which CCCS will then distribute to your creditors until you become debt free. The DMP serves the dual role of helping you repay your debts and helping creditors collect money owed them.
When you enroll in a DMP, some creditors will stop or reduce their finance charges and/or fees. Others will not. This is an individual creditor policy and these policies may change over the course of a DMP. Your counselor can advise you of what your specific creditor's policy is towards this area.
To locate the closest CCCS office call 1-800-388-2227. If it is not convenient for you to visit a CCCS office, call our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers the same service as CCCS except MMI counseling is done by phone, fax, mail and the Internet. Counselors are available 24 hours a day, 7 days a week. Good luck.
Dear Susan & Co.,
Is there a way to consolidate without a second mortgage?? Randy
Dear Randy:
It's difficult to answer your question without knowing more information. How much are you trying to borrow? Do you have other collateral to put up as security on the loan? What are your basic qualifications (i.e.: income, time on job, type of job, etc.)?
Yes, you can get a consolidation loan without a second mortgage provided you meet the creditors other basic criteria. Since each creditor sets their own guidelines in approving someone for credit, there is no way I can give you a more specific answer. As a general rule, the larger the loan request, the more stringent the loan requirements.
Dear Susan & Co.,
My fiancee and I recently graduated collage and are now planning our wedding. We have a lot of credit card debt from school and the payments are killing us. We can't seem to get ahead. I have been considering consolidating our credit cards and bringing down our interest rate. I was wondering how a consolidation loan effects a persons credit rating. Thanks a lot, Chad
Dear Chad:
A consolidation loan has absolutely no affect on a consumer's credit rating. These types of loans are made all the time. The lender where you obtain the consolidation loan will most likely report the loan and payment history to the credit reporting agencies. All this does is show another trade line on your credit bureau file. This could result in a plus and not a minus to your credit, provided you make all your payments on time.
Dear Susan & Co.,
My mother recently became disabled and helping her with her debts has damaged my credit somewhat. I have been making my payments on time but I was wondering how can I consolidate my debts to finally be rid of this burden and help my mother more despite my damaged credit rating? RLW
Dear RLW:
To find a company that makes these kind of loans, look in your phone company yellow pages under "Loans". Call various lenders listed and tell them what you are trying to accomplish. See if they can comply with your request.
If you are unable to get the consolidation loan you are seeking, consider calling our affiliate Money Management International (MMI) at 1-800-762-2271. Ask to speak to a counselor and explain your dilemma to the counselor. This trained, professional counselor will analyze your income, expenses and overall financial situation; discuss possible solutions; and make recommendations for you to consider. If your debts are truly unmanageable, your counselor will explore the possibility of a Debt Management Program (DMP). A DMP is a voluntary arrangement between you, MMI and your creditors. It serves the dual role of helping you repay your debts and helping creditors collect the money owed to them. You agree to deposit funds to MMI each month which MMI will then distribute to your creditors until you become debt free.
MMI counselors are available 24 hours a day, 7 days a week. Give them a call. The counselor can answer any other question you might have. It might be the best call you make that day. Good luck.
Dear Susan & Co.,
I am looking for a way to get my wife and me back out of debt and on our feet again. Do you know what we should do, maybe debt consolidation? Any help would be appreciated. Thank you. Too Many Bills
Dear Too Many:
The first thing you need to do is contact our affiliate Money Management International (MMI) at 1-800-762-2271 and talk to a financial counselor about your debt situation. MMI is a non-profit, community action organization designed to help people help themselves to solve their debt problems. Counselors are on duty 24 hours a day, 7 days a week. MMI services are at no fee or cost to you, the consumer.
When you call MMI, a trained professional counselor will analyze your overall financial situation, discuss possible solutions and make recommendations for you to consider. If you are having difficulty making regular payments to creditors, are behind on bills or anticipate a problem in the near future, MMI can help. MMI has a Debt Management Program (DMP) which is a voluntary arrangement between you, MMI and your creditors. The purpose of the DMP is to help you repay your creditors, get you out of debt and help creditors collect the money owed them. You agree to deposit funds with MMI each month which MMI will then distribute to your creditors until you become debt free. The DMP is a positive solution to an individual's debt problem.
With the DMP, if necessary, many creditors will accept reduced payments for a short period of time. Some creditors will make adjustments on finance charges and/or other fees. This is an individual creditor policy that your counselor can explain to you further. The counselor can answer any other question you might have about MMI or the DMP. Please call now. A solution to your dilemma is probably only a phone call away. Good luck.
Dear Susan & Co.,
I would like to know that if each pre-closed existing account with entire balance owed can be transferred into one account with low interest. If it's true or not, can you explain me how to do? Thanks, Tim
Dear Tim:
What you appear to be inquiring about is whether you can get a consolidation loan to combine all your debts. To find a company that makes these kind of loans, look in your phone company yellow pages under "Loans".
Call various lenders listed here and tell them what you are trying to accomplish. See if they can comply with your request.
If the specific lender you are talking to cannot consider you for the loan you are seeking, ask them if they can recommend another lender that would consider you for this type of loan. Good luck in your pursuit.
Dear Susan & Co.,
I currently owe 40,000 in credit cards and loans. I already am on lower interest and payments with some of my credit cards as well as have two months late on my credit. I'm unable to make my payments and have money left over for food. I have tried with several banks to get a loan to lower my monthly payments, yet no one will accommodate my needs with my high balances and low payments. Is there anyone out there that can help me or is bankruptcy the only alternative due to my credit already being ruined?
Thanks for you input, Vicki
Dear Vicki:
Without knowing more about your debt situation (i.e.: specifically what creditors do you owe, what concession have been made by them, etc.), I don't know what advice to give you.
What I do suggest is you contact CCCS to set an appointment to speak to a financial counselor about your dilemma. During your counseling session, a trained, professional counselor will analyze your income, expenses and overall financial situation; discuss possible solutions; and make recommendations for you to consider. If your debts are truly unmanageable, your counselor will explore the possibility of a CCCS Debt Management Program (DMP) which allows you to make reduced monthly payments to creditors. The DMP serves the dual role of helping you repay your debts and helping creditors collect the money owed to them.
If it is inconvenient for you to visit a CCCS office, consider calling our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers counseling over the phone, by mail, email and fax. MMI counselors are available 24 hours a day, 7 days a week. Good luck.
Dear Susan & Co.,
Could you help me understand the math? How is it calculated?
If I consolidated, got a second mortgage for $10,000.00 to cover debts, and $8,000.00 more to absorb the current second mortgage, making the total of the second mortgage $18,000.00, financed for 15 years at 10% - I'd be paying back $34,810.00. (Much worse of course if financed for 30 years). That's almost double what I've actually used/borrowed. So this is how the lender makes money? Gee, I want to become a lender!
Don't you think it sort of takes advantage of a person's misfortune...knowing their choices are limited? Anyway, if you could help me understand the math - even a little - it would be greatly appreciated. Angela
Dear Angela:
What you are referring to is what is called the "time value of money". In the example you gave, getting an $18,000 loan for 15 years at 10% interest, your payments would be $193.43. Let's reverse the situation. What if you invested $193.43 per month at 10% return for 15 years, you would have a return of $80,170.55. Do you think that is taking advantage of somebody by YOUR getting that type of return?
Dear Susan & Co.,
We are currently working with a credit counselor and paying a portion of our debt through them. It seems to take forever and I would like to pay off these creditors more quickly. Would it be more beneficial to get a second mortgage on our home and pay off everyone, leaving only one payment or should we stick to the counselor and give it time. Thanks for any input. WJ
Dear WJ:
That's a hard question to answer without knowing more about your total indebtedness and how much longer your program has to go before you are out of debt. Just remember this. You cannot borrow yourself out of debt. If you get a second mortgage, all you are doing is borrowing from one creditor to pay off another creditor. And your second mortgage loan will probably extend your indebtedness longer than your debt management program has to run.
Based on the limited information you have given me, my feelings are you should stick with your debt management program unless you can convince me another course of action would be more beneficial to you.
Dear Susan & Co.,
I am graduating from a family practice residency in June. My educational debt is over $70,000 at rates that vary between 6% and 8%. However, I have a personal loan of $30,000 at 14% with a lending institution that allows me to make only interest payments until August. Fortunately, I have a job that will pay quite well and I have no credit card debt. I am selling my house, getting married, moving to another state, and renting until getting on my financial feet. Now for the question...A phone caller offered a 6% consolidation loan after I told him all of the above information. Is it possible that a lending institution could make such an offer without some kind of trick involved? If so, is this because they are watering at the mouth because of my anticipated future earnings?
I come from humble beginnings, never learning much about sound financial living until the last few years after meeting my wonderful fiancee and reading such books as The Millionaire Next Door and Your Money or Your Life. Now, I am trying to change my ways. One more question: my future wife will be going to medical school. Given my financial picture, how would you recommend I pay for her education? Getting Started
Dear Getting Started:
There is a saying, 'If a deal sounds too good to be true, it generally is'. In my opinion, that seems to be the case with your offer of an unsecured loan for $30,000 at 6% interest. What you need to do is inquire if they are going to ask for an 'up front fee' to further pursue your getting the loan. Also, if there is no up front fee, is this 6% interest fixed and for the life of the loan. By law, the lender must furnish you with a completed contract (no blank spaces) before you are required to sign for a loan. If they show you a completed contract at 6% interest, without you having to pay any fee to get the loan, I say you have a deal that I have never heard of before and you should go for it.
In regard to your future wife's education, if at all possible, try to make it a 'pay as you go' education. Live as frugal a lifestyle as possible now so you can pay cash for the education. In that way you won't be burdened with student loans, like your $70,000 debt, when she graduates. But if this isn't possible, finance the education through student loans and not credit card cash advances.
Dear Susan & Co.,
Please forward information regarding help for consolidation of bills and what the closest office to go and talk to someone in person regarding this matter.
We are located in Michigan and would greatly appreciate your assistance in this matter. Thanks, ALY
Dear ALY:
Please call the National Foundation for Consumer Credit (NFCC) at 1-800-388-2227 to find out the location of the nearest CCCS office is to where you live. If there isn't an office convenient to you, please call our affiliate Money Management International (MMI)at 1-800-762-2271. MMI offers counseling service over the phone, by mail, fax or email.
Dear Susan & Co.,
Please send me information on a debt consolidation loan. I currently owe $48,000 on loans and credit cards. I am current on all payments, but would like to pay a lower interest and eliminate all credit cards. Belinda
Dear Belinda:
In order to get a debt consolidation loan you will need to contact a lender that makes those types of loans. We suggest you look in your phone book yellow pages under 'Loans’. Call various lenders and tell them what you are trying to do. See if they can comply with your request.
If you are unable to get a lender to extend you credit to accomplish your goal, call MMI at 10800-762-2271 and speak to one of our counselors. Perhaps a counselor can offer another solution to your problem.
Dear Susan & Co.,
I would like more information on your services of debt consolidation. Please contact me at the above address with any information I might need to send to you. Thank you, Bob
Dear Bob:
CCCS offers a program called a Debt Management Program (DMP) where CCCS evaluates your overall financial situation and helps you come up with the best alternatives to solve your debt problem. If your debts are unmanageable, CCCS will attempt to restructure payments to your creditors to an amount that is both affordable on your part and acceptable on your creditor's part. If this can be achieved, CCCS will strongly suggest you enter into a DMP where you permit CCCS to assume control of your debts. You make one payment to CCCS and CCCS in turn disburses this payment to all of your creditors so they all get paid.
If it sounds like you would benefit from a program like this, call your nearest CCCS office to set an appointment with a CCCS counselor. The counselor can go over more specifics of the program with you. If there isn't a CCCS office near you or if it is difficult for you to schedule time to set an appointment, call our affiliate Money Management International (MMI) at 1-800-762-2271. MMI offers counseling 24 hours a day, 7 days a week over the phone, by fax, mail or email.
Dear Susan & Co.,
What I am looking for is a consolidation loan to get out of debt. But I have found that the only way to do that is to have a house for equity and to be residing in that home. I am in the Air Force and move around a lot. But am willing to set up a payment plan that will cater to my lender at the same time helping me to get out of debt. My credit rating is not to bad and I have about 500 dollars that I can allot to this loan. I mean take it straight from my paycheck. This way I don't have to worry about my payments being late. If you can help me or know of anyone that can. Please let me know.
Sincerely "Dedicated to Being Debt-free"
Dear Dedicated:
CCCS generally can't help you get a loan or other types of credit. Our service is to educate the public on budgeting skills, sound financial management practices and offer debt management assistance.
If any of these services would be of help to you, please call us at 1-800-762-2271 and ask to speak to a counselor.
Dear Susan & Co.,
Please forward information regarding help for consolidation of bills and what the closest office to go and talk to someone in person regarding this matter. We are located in Michigan and would greatly appreciate your assistance in this matter. Aaron
Dear Aaron:
Please call the National Foundation for Consumer Credit (NFCC) at-800-388-2227 to find out the location of the nearest CCCS office is to where you live. If there isn't an office convenient to you, please call our affiliate Money Management International (MMI)at 1-800-762-2271. MMI offers counseling service over the phone, by mail, fax or email.
Dear Susan & Co.,
I am interested in info on a debt consolidation loan, the problem that I have is that I am not a homeowner or have real property. Is it still possible toget a debt consolidation loan. If so, please e mail me with information. Thanks, Lee
An alternative to you having collateral is a creditor might accept a cosigner (perhaps with collateral) who will guarantee repayment of the loan in case you default on your payments.
Dear Susan & Co.,
I am a 32 year old man. I live in New York City. I am in $14,000 of debt, all credit cards. I am looking into getting a loan.
The particular loan I am referring to is a "consolidation" loan. It is from an organization that is primarily a lender for academic loans, not a credit repair agency. It is a loan for the purposes of:
I was recently turned down when I applied to rent some artist's space (because of the high outstanding debt to income ratio, I believe)
My question is this: I have heard that when you get a "debt consolidation" loan that it is has an extremely negative effect on your credit rating. It is almost like saying I cannot pay or I am declaring bankruptcy and your credit is shot (and the lender and the people you currently owe money to negotiate without you having any say.). Is this correct or is that the case only when you DO declare bankruptcy AND then get a debt consolidation loan? I am in no immediate danger of bankruptcy and do NOT want to ruin my perfectly good credit rating. However this loan would really be perfect for me in many ways.
Can you please let me know what the deal is and if I am under a false impression regarding this matter. I have attempted to supply all needed information. Thanks, Chuck
On the other hand, a bankruptcy will be a blemish on your credit report for up to ten years. You want to avoid bankruptcy if at all possible.
Dear Susan & Co.,
I am looking for a consolidation loan to pay off some of the loans I have ranging between 11.75% Auto loan to 24% other loans. My debt total is $25,000. I do not own a home and need to know if you can refer me to someone who might be able to help. My total monthly payments now run about $1,100 and I am willing to stay at that rate if I could have lower interest. I would like the loan for 5 years. I tried a bank at 9.5% but they say I don't have enough collateral. Can you help me? Kathy
Dear Susan & Co.,
I am ready to consolidate all my credit cards including my line of credit but there are questions in my mind that need clarification. Should I decide to consolidate:
Thanks for your time. Questions
A consolidation loan may or may not be reported on the credit report. This depends on the lender, so ask them if they report to the credit bureau when you’re doing your research. You may want to seek the loan from your own bank or credit union where you have already established a relationship. And remember, to get the desired results from a consolidation loan, you have to discontinue use of the credit cards, or soon you’ll be back in the same situation!
Dear Susan & Co.,
My credit is pretty good in my books. I don’t have creditors calling or anything, but it seems awful hard to keep up with the bills sometimes and still enjoy life.
I have recently got some flyers from some mortgage companies for second mortgages. I just purchased my home about 9 months ago. I would like to look into this to combine all my debts except primary mortgage to lower monthly payments. Does this sound like a good idea?
I have also recently seen many furniture companies advertising no interest for two years, etc. Are there scams to these or do they just count on you not paying up in that length of time? Thanks, Tim.
To get the fullest advantage of consolidation loans, it is very important to use the extra breathing space wisely and not get cocky and incur additional debt just because you now have some money left over at the end of the month.
The answer to the second part of your questions is that yes, companies offering no interest loans are counting on you not paying off the debt. Additionally, all that interest that has been averted gets added on when the grace period is up. It’s a good deal if you play the game and pay off the loan before the due date.
Thanks for writing.
Dear Susan & Co.,
I have managed to bring 3 credit card bills down to one and don’t use the cards anymore at all. The one remaining bill is around $5000 and I am paying it off at a rate of $300-$400 a month. I own my own home and would qualify for a home equity loan to get rid of this debt. Is it something I should do? That way the interest rate is lower and it’s tax deductible. Michelle
Thanks for writing and good luck.
Dear Susan & Co.,
I am interested in consolidating a number of credit card debts. Any recommendations on qualified agencies that can help me with this? In Debt
Dear In Debt:
Consider Consumer Credit Counseling Service. This is a non-profit counseling agency which can offer you free financial counseling. Your session is completely confidential and your financial counselor can help you look at all your options for consolidating your credit card debt. Our toll-free number is 1-800-873-2227.
Dear Susan & Co.,
I have a bankruptcy that is almost three years old. Since then, I have had one high interest auto loan that was paid on time and was paid in full early. One garnishment shows on my credit that is a year old and relates to a dispute over an auto repair bill. I have had medical problems that have resulted in many, many medical bills. I have made payment arrangements for all of them but it is taking over half of my income. Is there any kind of loan I could qualify for to consolidate some of these bills? Cris
Dear Cris:
If you do not have a car loan to pay, and are paying over half your income toward your medical bills, you may have set up an unrealistic payment arrangement. See if the hospitals are non-profit, charitable hospitals and can write off some of the bills. Perhaps you can consolidate multiple bills from the same hospital and reduce the payments. You may want to consider meeting with a debt management counselor to help you renegotiate some of your balances or work as a liaison between you and your creditors. To talk with a debt management counselor about your specific situation, please call 1-800-762-2271 and talk to a telephone counselor.
Good luck and thanks for writing.
Dear Susan & Co.,
Does transferring high balances to lower rate credit cards make sense? What is the best resource for finding lower rate cards? (I realize this is only one step to the payoff of these balances!) RG
Dear RG:
Yes, it does make some sense, but beware! Some of the low rates are for a limited time. If you are unable to pay the balance in full by the time the offer expires, you can end up with a higher rate and gain nothing. In some instances, a late payment may also cause the rates to increase immediately.
If you accept the offer, be sure to close the account you are transferring from, and destroy the card. Ask the creditor to note in your credit report that you have closed the account voluntarily. Sources for lower rate cards are:
RAM Research Corporation Card Trak
Box 1700
Frederick MD 21702Consumer Credit Card Rating Service
Box 5219 (Ocean Park Station)
Santa Monica CA 90409
The companies may charge for their services, so be sure to get an understanding before committing yourself.
Good luck on your path to financial freedom.
Dear Susan & Co.,
Can you explain the benefits and or pitfalls of taking out a low interest rate (simple interest) loan for approx. $10,000.00 as opposed to putting the $10,000.00 on a low interest credit card? (The credit card has a 5.9% apr for 1 year and the loan has a 7% apr for the term of the loan.) C.
Dear C:
To make it simple, the things to watch for in a low interest credit card is: when will the rates revert up; what penalties are incurred with a late payment. Some cards will automatically revert to a much higher interest with the first late payment. There is also the strong temptation to add more debt to a low interest credit card. With a consolidation loan, this is not an option. Also, with a low interest loan, you have more assurance that the rules will stay the same throughout the duration of the loan period.
Good luck on your plans for financial freedom.
Dear Susan & Co.,
I owe quite a bit of money to credit card companies, school loan lenders, and the IRS. I barely make the minimum monthly payments each month. I have cut up my credit cards, except for the one with the lowest interest. Lately, I have trouble scraping money together to buy groceries or even go out once a week.
Some good news is that my car loan is paid off next month. I plan to put this money towards my credit card payments. I am considering applying for a loan to consolidate my debts. I've heard that the interest rates on these loans are quite high. What is the average range for a debt consolidation loan? Would you say that applying for a loan is a wise choice in my situation? Thanks for your help, Scott.
Dear Scott:
Congratulations on taking some action about your credit card debt by tearing up your credit cards and planning to put your car payment money toward the balances.
To figure out if a loan is a wise choice, you should first sit down with pen, paper and a calculator, and get a clear picture of what your debt actually is. Then on another piece of paper, tally up your monthly expenses - rent, insurance, car expenses, food, utilities, etc., minus your credit card debt. In another column, add up you monthly income. The difference between your income and your monthly expenses is what you have to pay on your credit card debt or to a consolidation loan payment.
To explore loan rates, call your local credit union and local banks, or check on the Internet at www.cnsweb.com/index.html for a listing of local consumer interest rates. Then compute how much money you would be spending in interest through a consolidation loan, and through paying off your credit cards one by one. Since you want to keep as much money as you can in your pocket, go with the decision that has the lowest interest overall.
There are many ways to spend your time, and it isn't always about spending money - so explore some new activities. The best way out of a financial situation isn't necessarily the quickest way, so hang in there. You'll make it.
Thanks for writing.
Dear Susan & Co.,
I am an army service member with 5.5 years before I retire. We have 2 Visa cards, 2 Mastercards, one line of credit and a high interest loan from a local financial institution. My goal is to consolidate these payments into one payment and close all the accounts. We are having a hard time finding an organization that will offer us an unsecured consolidation loan. I really want to pay off these credit card bills before I retire. What can we do to achieve this goal? What financial organization will help us resolve our problem? Anthony
Dear Anthony:
An unsecured loan means that a lender has few options for collecting that money if you can't or won't pay. Therefore, loan officers have limits on unsecured monies they can lend. The amount of debt you are carrying may be beyond the limits of what an officer can offer.
Your next choice is finding an agency who will consolidate all your payments into one monthly deposit. The creditors will close your accounts if you make this choice, and you may even have interest lowered on some accounts. For a phone appointment call 1-800-762-2271. Debt management services are free or very low cost.
But whatever you do, get some help budgeting. You need to find healthier ways of handling your finances than through borrowed money. Also, you need to make a plan for exiting the military economy and entering civilian life. It can be a big culture shock. Check with your chaplain for financial counseling that may be offered on base.
Do not charge anymore. Cut up the cards and close the accounts. Talk with a reliable third party. You'll achieve your goal. Best wishes.
Dear Susan & Co.,
We've never been late on our mortgage in the 3 years we have lived in this house. We need to move next year, though, and we would like to get rid of some credit card balances. My car will be paid off next month.
My plan is to consolidate everything except for one or two credit cards and only have my school loan and living expenses. Is this a smart thing to do? The interest rates on the credit cards vary from 13 - 21% . Wouldn't it be better to pay a monthly bill of $150+ monthly for 3 or 4 years with a fixed rate than paying 3 or more credit cards with varying interest and $45 - $55 payments for I don't know how long? What do you think? On the Move
Dear On the Move:
I know the question is, "To consolidate or not to consolidate?" But the counselor in me has to speak to one issue first. Bear with me.
The paid off car. Yeah! Now, what are you going to do with that chunk of money each month? If you leave it in the checking account, it will be sucked into the black hole of miscellaneous spending. Get it into your savings and then make a specific plan. (Okay, I feel better.)
Your question: "Is consolidating debt at a fixed rate smart?" Well, I don't know. What fixed rate? 12%? 18%? And is this an installment loan or revolving like credit cards? What are the exact terms of the loan you're being offered? $150+ could be $175 or $350.
Furthermore, if you choose consolidation, will you ensure your success by
Closing all consolidated accounts and returning the cards.
Stopping new credit charges altogether.
Paying off the card balances you're keeping?
Ignorance is not bliss when it comes to borrowing money. You need to get clear on the terms of the loan before you make it a part of your budget.
Dear Susan & Co.,
I have done my homework on low interest credit cards and have done fairly well in locating them. I now have an opportunity to consolidate the charges to a loan with a fixed interest at 12.99% I would like to do this because I know in the two-three years of a fixed loan, the loan would be paid off. I have a hard time paying off the three separate cards because I try to pay too much to try to get them paid off and then end up charging more.
If I do this, I know I still have to be very careful not to run the charges back up. Do you think a fixed loan is OK? Needing Direction
Dear Direction:
No plan for debt repayment is going to work until you know what you can afford on a long term basis. You discovered that when you overpaid the cards and didn't have the cash for living expenses.
To succeed, you need a realistic, written plan that takes into account your resources and expenses. Yes, a budget. Running a household without one is like piloting an airplane without a flight plan or fuel gauges. You don't know where you'll end up or when.
You can get budget forms from resource books or from CCCS and do it yourself at home. I recommend our free budgeting workshops (1-800-873-2227). They provide the structure and accountability for getting the job done. Within an hour and a half you have two visual guides in hand: a budget and a payout schedule of your debts.
Armed with the facts you can answer your own question: Is a fixed loan payment my answer or can I budget a larger, fixed payment to every card each month and accomplish the same thing?
You've done your homework. Now make your plan. And thanks for writing.
Dear Susan & Co.,
About a year ago I tried to consolidate my own debt by moving everything onto one credit card. They were offering a 6.9% introductory offer. The intro period is now over, and it has bounced up to 14%. Now I can hardly pay the interest that is charged every month. I have heard that I could just call them and ask them to lower my rate. Is this true? Is there a possibility that I could get back down to 6.9%? How do I handle this? Do I threaten that I will move to a lower rate card? Fed Up With Debt
Dear Fed Up:
You could call and ask, but since they will be losing money by lowering your interest, the answer will probably be "no". And you certainly shouldn't threaten anything you are not prepared to carry out.
The fact is, in the world of credit cards, 14% interest is not bad. What if you hopped over to another low interest intro card, and then in three months your interest was 19.8%? Eeeeek.
What you need is a plan that works regardless of the interest rate. Picture this:
Let's say you owe a balance of $2800 on your card. Your finance charge is 14% and your monthly payment is $59. If you never pay less than $59 a month, it will still be April, 2002 - 69 months from now before you're paid out. You will have spent a total of $4,019.29 with interest amounting to $1,219.29! And what will you have to show for it?
Now, let's say you gave up eating out and going to movies and doubled your payment. Same interest rate, same balance, $118 payment. You're paid out in November, 1998 - 28 months from now. Total spent? $3,248.78. Interest? $448.78.
Which picture do you like? What are you willing to do to make it your reality? The solution lies with you.
Dear Susan & Co.,
I have a few questions that I am interested in if you would have any advice to offer. Since my credit is quite in shambles, I am curious as to if you think Consumer Credit could be the answer for me. Would I be better off to go to a bank and try to consolidate? If I decide to go with Consumer Credit, do I add all my debt including open credit? Thanks for the help. Kellie.
Dear Kellie:
To CCCS or not to CCCS. That is the question. The answer? Yes and Maybe. Yes, come work out a budget. Maybe use our debt management plan.
You want something more definite?
Okay, this much I can say for sure: If you want to repay your creditors, you’ll need a plan. After one CCCS budgeting session you’ll know
a. how much money you can dedicate to debt repayment
b. what your debt repayment choices are and
c. whether the CCCS Debt Management Plan is for you.
Working from a written plan helps enormously in making your decision.
You can certainly ask a bank or two about a consolidation loan. Remember, though, banks have lending guidelines they have to follow, and your bad credit history may act against you.
Generally, CCCS puts all accounts on the Debt Management Plan. However, we do recognize that some situations, such as business accounts for salespersons and the self-employed, require that clients pay a certain creditor directly. A counselor will take your whole situation into account.
Thanks for your question.
Dear Susan & Co.,
I never miss or am late with a payment. I tried to get a consolidation loan, but have too much debt. I'm not in trouble with creditors, but at this rate I can never get ahead. Does anybody specialize in my kind of loan? I want to pay my creditors, but at this rate I'll never get ahead of the interest. Help! John
Dear John:
If you keep looking for a consolidation loan, you might find a lender, but the interest would probably be high. Which would defeat the purpose.
Fortunately, a consolidated loan is not your only answer to getting debt free. You can create your own version of a consolidated loan without borrowing more money.
Step one. Quit charging. You can't get out of a hole by digging it deeper.
Step two. Create your own monthly "consolidated loan" payment. Your payment is the total of all your current minimum payments. If that total is $250, then your monthly debt payment from now until you are debt free is $250.
Step three. Pay more than the minimum payment. Give everyone a little extra or aim at the lowest or highest balances first. Whatever. Like the Nike people say, just do it.
Step four. As one balance pays off, split the payment among the other creditors to increase their monthly payments.
As you pay off balances, close the accounts. Closed accounts, decreased debt and a good payment history could make you a better candidate for a consolidation loan in a year or two if you're still interested then. Good luck!
Dear Susan & Co.,
I need information on debt consolidation for my credit cards.
Thanks, Steve
Dear Steve:
Simply consolidating your debt into one payment will not solve your debt problem. As a matter of fact, it can make matters worse *unless* you follow these steps:
With loan consolidation, a third party makes you a loan to pay off the balances of several smaller accounts. Most loans are monthly installment notes with a fixed interest rate.
If you consolidate by moving your balances to a low interest credit card, be aware that the interest rate is not fixed and usually short-term. In 6 months, what will the interest rate be? What happens if you miss a payment? (I've seen missed payments jump from 5.9% to 22% in one month.)
With single payment consolidation, no loan is made. You send a deposit monthly to a third party who then is responsible for disbursing the correct amounts to your creditors monthly.
Then, of course, there's do it yourself consolidation. Dedicate a certain amount of money to debt repayment and pay that amount every month until everyone is paid in full. As one creditor pays off, apply that creditor payment to another balance, etc. It works!
In all cases, sign nothing you don't understand. Thanks for writing.