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Old 06-17-2010, 04:31 PM
resrev resrev is offline
Junior Member
Join Date: Jun 2010
Location: Texas/Dallas United States
Posts: 10
Default Re: debt consolidator

Debt consolidation can be effective but there is a premise on that program. There are several solutions. Lets go over different options that there are in each paragraph starting with consolidation.

Debt Consolidation - Like I said before there is a premise for this program. These companies will take your debts, lump them up together and work strictly on your interest rates. They will typically adjust your rates about 2 - 3 points then charge you a service fee. So your payments would be about the same as your minimum or around 2.5% of the total enrolled balance. They will make payments for you every single month. Pros - Typically most programs will get you out of debt in 5 years. You will pay less then what you would, if you were paying back the credit card companies. You will not receive creditor calls and your payments would be made every single month. Cons - Most of the programs out there (I am not saying all) will go on your credit as a TPI (Third Party Intervention) and stay on your credit for about 7-10 years. Now TPI is viewed on your credit report as a little brother to bankruptcy.

Debt Settlement - This type of program is made for people that are really struggling, about to fall behind, are already behind and keep people out of bankruptcy. This is a process where you pay the company and they hold it in a Savings account that does not bare interest. Once your savings reaches a certain level then they will negotiate with your creditor and get a portion of your debt forgiven. Pros - Your payment will be about 1.4% - 1.9% (Typically your minimums are around 3% of your balance). Get you out of debt in 4 years or less. (If a company is saying more then 5 years then step away from them. This type of program should never be drawn out over 4 and should realistically be done in 3). You save a big portion off of what you owe. Cons - Your credit would be impacted while in the program. You can not finance anything during period of being in the program. Accounts will be closed. You will recieve creditor calls. There is a risk of litigation. Note - Be very careful with choosing these companies go to my other post on here that talks about the concerns you should address when looking at these companies. (It does not talk about any specific company but just concerns you should have in your choosing process). Click on my name and go to that thread though the threads I have created.

Consolidating on to a card or loan - This is prety much self explanitory. Pros - No credit affect. Lower interest rate and payment. You would pay it off in a shorter period. Cons - Your using debt to pay off debt. If you close your other accounts it will hurt your credit score. Note -If you have to much debt you may not qualify to do this even if you have a good credit score.

Equity Loan - Again this is self explanitory. Pros - Lower interest rate because it is a secured credit and has an asset tied to it. Know around when it will be paid off. Cons - It is tied to your most prized asset. If you default you could loose your house.

Bankruptcy - (First off - I am not an attorney nor am I giving legal advice. If you are considering this always consult with an attorney). This should always be the last option that one considers. Most people qualify for the Bankruptcy that only reorganizes the debt. Not the one that dissmisses the debt. I am not going into a lot on this as an attorney should be the one that goes over this with you.

Always weigh out all options. If you are able to make more then the minimum payment then the best option is to do this. Pay the minimums on the lowest interest cards and pay as much as you can to the highest interest card. Once the highest interest one is paid off then, go to the next highest one, while keeping the total amount going to the debt the same until all debts are paid off.

If there are any other ones, feel free to ask me and we will weigh them together.
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