T Nation

Debt Consolidation Services

A good friend of mine is running about $10K in credit card debt. Knowing that I’ve done a bit of financial research, he asked me about debt consolidation services. I took a look and they seem like very reasonable and reputable services, but I don’t know of anyone who has used them.

Does anybody have any experience with these services? They are non-profit organizations that work with your creditors to negotiate lower interest rates and payments.

If you don’t want to respond publically, I welcome any feedback via PM.

He should consolidate his credit card debt with someone reputable. 10K in CC debt will accrue interests so fast, it’ll make his head spin.

BTW – I hope he understands that if the CC says it has the APR of 12%, the ACTUAL interest paid is HIGHER than 12% due to the monthly compounding.

Jason

I don’t have any personal experience with these services but I have heard a lot of BAD things about them. Check out the web site creditinfocenter.com, they list some of the less reputable companies and there is a link to a business week article about this also. It also says being “Non-profit” still has people paying for operating fees. If your friend is willing to do some work on this, he can consolidate his credit card bills himself and cut out the middle man. Hope this helps.

My wife has done this with her credit card debt before we got married. It did help her get it taken care of and at a faster rate than on her own. Seemed to work like a charm, just pick a reputable company and it should all be fine.

I have no advice. I just want to say congradultations on the decision to do something about it. It is so critically important to not have needless extraneous debt. I wish you well.

Well, maybe I have a little advice. IF you own a home, look at refinancing and incorperating your debt. Also you could get a line of credit. A second mortgage wouldn't bad, (UNDER CERTAIN CONDITIONS). Also if you do have some money saved up that would be nice, it's always good to pay about 10% more than the balance due; it would do wonders for your credit. It is definately good to go to one of those companys' that specialize in debt consolodation. You have to do you research and contact the Better Business Burogh(sp!) when you narrow some down. Make sure they have a good reputation. Just take you time and do it right. Believe me, once the debt is gone you will be the happiest man on earth. It is such a relief. The ideas I gave are only some possibities. Research them all and make the best decision for you. GOOD LUCK!

Jason,
I guess the first questions i have to ask is whether or not your friend’s credit has been blemished at all. If it has not and they are homeowner’s i would also suggest using the equity they have in their house to pay these bills off. Yes, it may 15,20 years that they pay it off but they must also keep in mind that it is tax deductible interest they will be paying. However, if they they need to borrow more than what there house is worth, they need to keep in mind that they will have to live there a while. Depending on how quickly their investment appreciates in the next few years.
If that is not an option; then credit counseling may not be a bad idea. All though, be very careful in who they pick because there are many out there that do not help you out at all and actually hurt you more. I will have to say that coming from a lender or a banks point of view; we look at credit counseling the same way we look at chapter 11 bankruptcy. In essence it is the same thing except there are no court orders. Just a Thought. Also i have heard of times where the CC say they have worked out a plan with the creditor’s and set you up with your monthly payment with them; when in fact the creditor never agreed to the terms and month after month you will be underpaying your bills resulting in 30,60,90 day late payments. If you want send a PM to me and if you want to call me i can give you my number so i can give you more info. I hope i have helped a bit here and not add any confusion. I happen to know of a couple of companies that have done a decent job with some people i know. I can get the names and numbers and have them ready for you.

Thanks for the great advice so far. We sat down today and discussed a bit of his options. He and his wife are a young couple, who are in their late 20s and renting. So borrowing against their home is not an option, cause they don’t have a home.

Basically, it was just poor decisions and a little mismanagement here and there that really added up over the year.

Anyway, I think they are going to try to avoid the debt consolidation services (this seems like a last resort). Looking thru their budget, there look like they will be able to pay a minimum of $500 to $1200 a month towards the credit card and stick with a very reasonable budget for the other expenses. $1000-1200 is their goal to pay it off, but in months where taxes and car insurance have to be paid, they will obviously be near the $500 mark.

All I can say is that it has made me look twice at accruing any credit card debt. My wife and I accrued a little over the last year and I didn’t pay much attention, but we are quickly going to address this in the next two months and get back to debt free living.

Actually, $10,000 isn’t a crazy amount of credit card debt. There is no need to consolidate. If your friends can put at least $500 a month toward the credit card debt they’ll have it paid off in no time, if, and that’s a big if, they’re able to control further credit card spending, which is usually a problem for most people in serious credit card debt.

There’s always the option of getting a new credit card with the “6 months 0% introductory rate” and do a balance transfer. That’ll buy them 6 months of no interest to pay it down before trying it again. As stated alsewhere, though, the actual problem needs to be addressed – why the was debt created. If you can guarantee that the debt won’t increase, then the rotating credit cards will go a long ways to paying down the debt quickly. Also, if there’s a credit union that they can join, there may be some option for home-equity lines of credit that can be accessed at will with some VERY low interest rates.

Brider is right. The rollover gives them a chance to bank some cash and make a real dent in the CC balance. It is also a cheap lesson in CC management that will not blemish their credit rating.

Needless to say, while this is going on they will NOT add to the CC balance!!!

One of our agencies is Consumer Credit Counseling Service. They are highly recommended.

Just because they are non profit it doesn’t mean they are reputable! There are many that say they are non profit, but that is misleading. So be careful who you choose.

Check out Consumer Credit Counseling’s web site. They have them located all over, but this one will point you in the right direction: http://www.cccsmidflorida.com

www.fool.com/ccc/debt/debt.htm
Might be some tips in there if you want to read through it.

Thanks again - more good info.

As a side note, fool.com is a fantastic site. I kinda consider them the T-Mag of the financial world.

My roomate was very very happy with this service - a true non-profit agency that provides a ton of information and services -