CHUD.com Community › Forums › THE CHEWERS › The Chewers Catch-All › Consolidating Credit question
New Posts  All Forums:Forum Nav:

Consolidating Credit question

post #1 of 15
10/25/07 at 3:42pm
Thread Starter 
Well, here I am again throwing a question out to the chewer community because I believe I'll get better answers here than searching the 'net for hours on end. I'd like to think it's a reflection of how highly I respect the opinions and intelligence of the folks that post around here, but it's more likely a combination of ignorance and naivity on my part. Either way, here I am!

Anyway, over the last few years I have accumulated a certain amount of debt with a few credit card companies. Like millions of other people, I found myself charging everything I brought, from gas to video games, to Wendy's to movies, to plane tickets to...you get the point. I own 5 credit cards, 4 of which I used until recently. Combined, the debt is around $13,000. Now I know that's not going to send me into bankruptcy anytime soon, and it could be a lot worse, but I was recently denied a pay raise that would have helped out dramatically with paying my monthly credit card bills.

My question here is this: I've been receiving mailings about consolidating my credit into one monthly payment for X amount of months from different companies and have seriously been considering it. However, I'd hate to have this blemish my credit record, as I have never missed a payment and have "super-preferred" (according to Honda financiers) credit. Considering my situation, would consildation ease my woes and make things better in the long run?

I've been searching online for some answers and am considering consultation from other sources, but I thought I'd throw this out there for some real-life answers from anyone else who has experienced this.

Thanks in advance for any help or suggestions.
Reply
post #2 of 15
10/25/07 at 3:55pm
Basically, debt consolidation is similar to filing for bankruptcy. There are probably a couple ways of going about removing debt.

1. Debt snowballing, pay minimum on everything except your smallest debt and pay as much as you can till thats gone. Then roll that payment amount over to the next largest debt item. Etc, etc.

2. Get a large loan with a reasonable interest rate and pay off all your debt. Then you have one payment to make and with a reasonable interest rate.

There are other methods, but I think those are the most reasonable.

Always, if you debt is pretty bad then cut any unnecessary expenses. Sell that expensive car, get rid of cable TV, stop going out to eat and the movies, etc. Sell all the crap you don't really need.
Reply
post #3 of 15
10/25/07 at 4:09pm
Thread Starter 
Quote:
1. Debt snowballing, pay minimum on everything except your smallest debt and pay as much as you can till thats gone. Then roll that payment amount over to the next largest debt item. Etc, etc.
I have started doing that, as others have recommended it as well.

As for cutting back on the un-necessities, that's begun as well.

I will look into the loan as well, if I find over the next few months that the snowball method and cutting back on spending just isn't working. However, would that be similar to consolidation as I mentioned in my original post? Yes, I am SEVERELY ignorant when it comes to this sort of shit.

I appreciate the quick response. For some reason asking these questions here is much more comforting then asking them anywhere else. Silly, but true.
Reply
post #4 of 15
10/25/07 at 4:09pm
There's more. Getting out of credit card debt is like losing weight - you need to modify your everyday behavior, and that can be hard to do.

I recommend going to a credit counseling service and learning how to make long-term changes to your behavior patterns. Otherwise, you may wind up consolidating your current debts, only to accrue more new debt once you fall back into old habits.
Reply
post #5 of 15
10/25/07 at 4:18pm
Quote:
Originally Posted by Pvt. Spunkmeyer
I will look into the loan as well, if I find over the next few months that the snowball method and cutting back on spending just isn't working. However, would that be similar to consolidation as I mentioned in my original post? Yes, I am SEVERELY ignorant when it comes to this sort of shit.
Well yes and no. Yes it's consolidation into one debt. No, in that I was thinking about consolidation companies which do everything for you, but your credit gets ruined.
Reply
post #6 of 15
10/25/07 at 4:19pm
It's easier if you are truly ready to make a sacrifice.
Reply
post #7 of 15
10/25/07 at 4:27pm
I used to listen to Dave Ramsey on the AM when I was up to my eyeballs in debt after I got out of college.

He had a saying, "Beans and rice, rice and beans."


You've got to go after debt with a 50 pound sledge and a 5 foot chainsaw.
Reply
post #8 of 15
10/25/07 at 4:29pm
Lost another one to Ditech!
Reply
post #9 of 15
10/25/07 at 4:38pm
I recently consolidated my debt. It was close to the same amount, and I went to my credit union, where I have a great standing thanks to two car loans, and got a loan. Now I have a single payment (well two, but the other is a student loan that's almost gone) for my debt, and my credit cards are behind me. The only card I have is an ATM, and I don't even want to get a gas card at this point.
Reply
post #10 of 15
10/25/07 at 4:48pm
There are companies out there that will work with your creditors on your behalf, for a fee, to reduce/renegotiate your consumer debt. Generally, this is a very bad idea, especially if your credit is solid right now. These companies will often negotiate a payoff amount that is lower than what you owe, with the creditor writing off the rest of the debt as "noncollectable." This will be reported on your credit and severely drag down your score. This is generally only an option for those with ridiculous amounts of past-due consumer debts who don't want to or can't file bankruptcy. That is not the situation you described, so avoid these companies like the plague.

Otherwise, go with the advice that billylove and FC have already given. Change spending habits. Then either snowball (not in the Clerks kind of way) your debt or find a really good rate on a consolidation loan to pay off your consumer debt in full (like what BillyG described).
Reply
post #11 of 15
10/25/07 at 4:51pm
Quote:
Originally Posted by BillyG
I recently consolidated my debt. It was close to the same amount, and I went to my credit union, where I have a great standing thanks to two car loans, and got a loan. Now I have a single payment (well two, but the other is a student loan that's almost gone) for my debt, and my credit cards are behind me. The only card I have is an ATM, and I don't even want to get a gas card at this point.
Yeah, I was going to come in with the same advice. DO NOT use those mail consolidation offers. Just go to a bank where you've have an account in good standing for a while, ask to speak to someone there about a debt consolidation loan. Those mail offers make it "easy" for you to get your debt consolidated, but come with all kind of land mines in the jacked up rates and monstrous penalties if you fall behind.
Reply
post #12 of 15
10/25/07 at 5:10pm
Quote:
Originally Posted by FrankCobretti
I recommend going to a credit counseling service and learning how to make long-term changes to your behavior patterns. Otherwise, you may wind up consolidating your current debts, only to accrue more new debt once you fall back into old habits.
Which is exactly how I wound up filing for bankruptcy almost five years ago. Don't consolidate, it's way too easy to just rack up new debt up against the big pile you've consolidated. Go with the snowballing method, cut out anything you really don't need, and go to credit counseling services. You're not too far in that you can't get this cleaned up quickly.
Reply
post #13 of 15
10/25/07 at 8:21pm
Home equity loans are pretty good, depending on whatever interest rate you can get. I'd gotten a home equity loan a couple of years back to pay for some much needed repairs and remodeling at our home. I recently increased the loan so as to consolidate my credit cards and bills. I managed to also rework our budget so that, worse case scenario, we can pay off the entire loan within 5 years. If all goes according to plan, within 10 years my mortgage will also be paid off, and I'll be debt-free for good. Then, knowing my luck, I'll be crushed by a careening shit-wagon.

But take heed to Frank, Lisa, et. al. - once you consolidate, be VERY careful about accruing more debt. The temptations are definitely there. Best bet is to put up anything you could do without on eBay, re-evaluate all your monthly expenses, etc. Come up with a budget and stick to it as much as you can. Make some sacrifices (skip a party, pass on movies for awhile, etc. - I find it easier to wait for a movie to come out on DVD and rent it for $3 than spend $20 for me and the wife to go to a theater) and I'd say within a year or two you'll be close to debt-free.
Reply
post #14 of 15
10/25/07 at 8:33pm
Yeah, if you have the ability/will-power to avoid going into more debt, a reasonable loan that you then use to pay off your credit card bills is really the best way to go.

The interest on credit cards is usually obscenely high and the snowball method can easily involve you paying thousands of dollars more than you should due to the 20% interest rate or whatever the credit card company is charging.

Still, if you aren't 100% sure that you'll be able to keep yourself from abusing the credit you'd have available after getting it into that one bill, don't do it. I've had friends who've made that very mistake and now 4 years after getting out of school are just finally getting rid of that stupid debt.

I'm at the point where I despise the idea of throwing away money to credit card companies in interest that I won't ever consider carrying a balance.
Reply
post #15 of 15
10/25/07 at 10:14pm
Thread Starter 
Thanks for all the advice, seriously. Looks like I'll be going to my bank very soon to inquire about a debt consolidation loan. I'm in pretty good standing there, so I don't forsee any problems.

Thanks again.
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: The Chewers Catch-All
CHUD.com Community › Forums › THE CHEWERS › The Chewers Catch-All › Consolidating Credit question