Debt Consolidation Issues

[kurtanselmo]

People with huge debts on their accounts really need to take debt consolidation seriously. If not, they may be forced to seek bankruptcy sooner or later just to be set free from the debts they owed. Always remember that filing for bankruptcy is a last resort and that a record of bankruptcy can be very damaging to your credit history. In this article, we’ll be focusing on some of the debt consolidation options you can choose to overcome debt problems.

Debt settlement

Debt settlement means negotiating with your creditors so that your debts can be cut down or reduced, depending on your creditor’s decision. Through this arrangement, it is possible to slash off about 40% to 60% percent of your original debt. Nevertheless, once a debt settlement has been agreed, you are expected to pay off your creditor the entire sum of money at once.

Debt consolidation loan

A debt consolidation loan is extended to those with outstanding debts or credit card balances. The loan is used to pay off all existing debts from your creditors. Afterwards, the borrower must pay back his debts to his lending company.

One advantage of a debt consolidation loan is that it cuts off the interest fees to just a single interest payment. Typically, a debt consolidation loan is secured by submitting one’s home or property as collateral. However, it is also possible to find unsecured debt consolidations loans from several lenders.

Caution must be done when taking out a consolidation loan. Make sure that you are aware of the rates and terms required by your lender. Therefore, completely read and understand your debt consolidation contract before signing up for the loan.

Credit Counseling or Debt Management Plan

This involves helping the borrower to execute an efficient budget plan or debt management plan not only to get free from debts but also to avoid getting stuck in debt all over again. If you find it difficult to manage your finances or control your spending, the problem may be a lot more serious than you think.

Seeking credit counseling should be able to help you take control of your finances. Just remember to check the background and reputation of the credit counseling agency you’ll run to. Some false credit counseling agencies do not offer help at all and charge unreasonable fees for their services. Therefore, check the company’s track record and choose one that is accredited by the government and national organizations.

read more [url removed}

[JRScott]

In Debt Settlement you have to realize that you may be responsible for taxes on any forgiven amount and will receive most likely a 1099 the following year.

A Debt Consolidation loan generally does not help people. The only way it can help is if you cancel the credit cards or other debt that you need consolidated now. Otherwise around 80% of people run up debt again. It is generally a bad idea to trade unsecured debt for secured debt.

DMP are really a scam. Almost no one completes such a program. They charge to high of handling/processing fees. They lead to increased marks on your credit report due to late payments and credit card companies can refuse to agree to them.

[Stilltheone]

We looked into debt consolidation programs, but they never worked for us. Our total credit card monthly payments were $1500 and the debt consolidation programs only lowered it a few hundred dollars...We STILL couldn't afford the "new lower" payment.

Also, debt consolidation STILL goes on your credit report and doesn't help it. If you're going to ruin your credit anyways, why not be debt free and start over?

As for your "that a record of bankruptcy can be very damaging to your credit history" comment, it doesn't necessarily always hurt your credit. Now, after a bankruptcy, you're debt free, your debt to income ratio is higher. I just got a new Capital One credit card in the mail today with a $1k limit...with 8.65% interest!! I've never had an interest rate that low in my life.

[jenopher]

I did not find a single consolidation program with any benefits over 7 or 13 BK.

[Minnymouth]

If you are deeply in debt, debt consolidation often just keeps you struggling to still make ends meet, where as filing BK wipes out all the debt unless you qualify for a Chapter 13 partial repayment plan.

Both "hit" the credit report, and even debt conslidation is often treated like a bankruptcy on your credit report. The blow is just as bad...

[needingsomehelp]

We tried det settlement and a debt management program before filing. With the debt settlement, we ended up loosing about $700.00 that they refused to give us back, since it was payments for their negotiations. However, they hadn't started any negotiations yet. Furthemore, I think it is important to know that if you are looking into one of these programs, you really need to understand what it is that they are doing. They are NOT paying your bills right away. They give you a payment amount and you pay them a certain percentage, and then put the remainder in an account of your own. You then notify them with how much money you have in the account, and they THEN begin to negotiate with one of your creditors to settle. Your accounts are not paid, and as a result your credit is getting marked with lates, etc. Plus, in our case the amount we were paying them was about 3/4 of our actual payment.
With dmp, they work with your creditors to try to get you interest rates down, thus reducing your payment. While it may help, I found that it didn't lower my payments enough. As Minny stated as well, it does not report kindly on your credit report as well.

Hope this helps a bit!!! =)

[liz417]

I did not find a single consolidation program with any benefits over 7 or 13 BK.

Funny, before we decided to file bk, I looked into those debt consolidation/neg. companies and their biggest line was, "it looks better than a bk on your credit report!" Apparently, they think that on your credit report it shows that your are "attempting" to pay back your debts instead of trying to eliminate them in a BK....
It wasn't until I researched and found out that it doesn't matter which is on your credit report....a bk or a debt settlement! They are BOTH bad!