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Debt Consolidation...tips?

Ichinisan

Ichinisan

Lifer
My brother and I owe about $7,000 to 5 different cards/bills. This would not be a problem, except that they all have different payment dates and methods. It wastes enormous amounts if time to try to keep up with this. Despite my best efforts, I miss payments because I cannot tell whether-or-not a payment has been made. I have tried to be more organized, but I have a memory problem which really makes this impossible. Furthermore, my family continues to interfere in such a way that I don't know what has been paid.

If I had a single monthly payment, I would be able to pay it off in less than two months.

I really need to get this done before I move into my apartment.

Is a debt consolidation loan any different from a regular loan? Would it affect your credit score negatively? It seems like the score should improve after 5 different cards/bills have been simultaneously paid off.

What type of lender should I use? My friends tell me that a bank would charge too much interest.
 
If you can get approved, you could open a new credit card and do a balance transfer at a low rate. Then it'd be all on one bill, and with less interest.

I'm not trying to avoid your question, but I don't know anything about debt consolidation loans. 😉
 
Originally posted by: Ichinisan
My brother and I owe about $7,000 to 5 different cards/bills. This would not be a problem, except that they all have different payment dates and methods. It wastes enormous amounts if time to try to keep up with this. Despite my best efforts, I miss payments because I cannot tell whether-or-not a payment has been made. I have tried to be more organized, but I have a memory problem which really makes this impossible. Furthermore, my family continues to interfere in such a way that I don't know what has been paid.

If I had a single monthly payment, I would be able to pay it off in less than two months.

I really need to get this done before I move into my apartment.

Is a debt consolidation loan any different from a regular loan? Would it affect your credit score negatively? It seems like the score should improve after 5 different cards/bills have been simultaneously paid off.

What type of lender should I use? My friends tell me that a bank would charge too much interest.
Click to expand...


1. Is a debt consolidation loan any different from a regular loan? It is usually a secured loan not a signiature loan.

2. Would it affect your credit score negatively? No. Make sure you cancel your cards because it will show as debt that is available to you.

You should check with one of the credit cards you currently have (lowest interest rate) and see if they will allow you to transfer balances. It is in their interest to let you since they will get the Interest payments off of that.
 
Originally posted by: Yossarian
if you can pay it off in less than 2 months, debt consolidation is a waste of your time.
Click to expand...
Agreed. Just pay them off in those 2 months and forget about it.

You asked for tips though:
1) Never, ever use a CC for a purchase you can't pay for immediately. Read this over and over again. Keep reading until you die or old age or until you agree with it. Whichever comes first.
2) Pay all bills in full the day they come in your mailbox. Nothing to forget. No problems with organization.
3) If you don't do #2 do this (it is what I do). Put all bills immediately into a basket by the door. Don't put them anywhere else and don't touch them. One day a week, when you have time, pay the bills. Open them all, pay them all off fully. Memory won't be an issue as you have them all there in front of you. The payment date will be once a week on the day of your choice that is most convenient.
4) Make the payment methods more uniform. Have your utilites automatically withdrawn (if you can handle the responsiblity to keep money in your account). If not, have the utilities automatically charged to a CC. Then you have fewer bills and no late fees.
5) Do whatever it takes so that your family members have NO access to your accounts (except legal rights such as a will for when you die). Why on earth would you have bills done in a way that they can interfere? They shouldn't be involved.


 
Originally posted by: Yossarian
if you can pay it off in less than 2 months, debt consolidation is a waste of your time.
Click to expand...

Well, I could include the education loan also (it is the most difficult to pay online). This would probably push it to around $15k
 
Originally posted by: TheGameIs21
1. Is a debt consolidation loan any different from a regular loan? It is usually a secured loan not a signiature loan.
Click to expand...
I don't know the difference. A signature loan requires a signature? What is different about a "secured loan?"

Originally posted by: TheGameIs21
2. Would it affect your credit score negatively? No. Make sure you cancel your cards because it will show as debt that is available to you.
Click to expand...

Before getting a loan? I didn't know that you could cancel a card with a balance on it.

/stupid stuff
 
Get all that debt on one card with the best rate you can find and then pay it off as quickly as you can. Cut the other 4 cards up once you've decided which one you will keep.

I paid off most of my CC debt with a personal loan before all these interest free transfers were so common. It was good for me because it was a fixed payment amount and the interest rate was much better than any CC company offered.

If you can really pay it off in 2 months then you just have to grab the bull by the horns and start doing it. If your memory is that bad, then just write it all down and check it every day or as often as necessary. Put together a spreadsheet with all the info you have on balances, billing cycles and so forth. Call, go online, do whatever you have to do so you don't miss any payments.

You can even just pay the minimums as soon as you get the bills and send a second payment for each card all at the same time to take the timing element out of the picture. Even if you don't have a specific bill or statement, you can still find the billing address and make a payment any time. Figure out exactly how much you need to send to each to get it done and send it out as soon as you get paid.
 
Originally posted by: dullard
Originally posted by: Yossarian
if you can pay it off in less than 2 months, debt consolidation is a waste of your time.
Click to expand...
Agreed. Just pay them off in those 2 months and forget about it.

You asked for tips though:
1) Never, ever use a CC for a purchase you can't pay for immediately. Read this over and over again. Keep reading until you die or old age or until you agree with it. Whichever comes first.
2) Pay all bills in full the day they come in your mailbox. Nothing to forget. No problems with organization.
3) If you don't do #2 do this (it is what I do). Put all bills immediately into a basket by the door. Don't put them anywhere else and don't touch them. One day a week, when you have time, pay the bills. Open them all, pay them all off fully. Memory won't be an issue as you have them all there in front of you. The payment date will be once a week on the day of your choice that is most convenient.
4) Make the payment methods more uniform. Have your utilites automatically withdrawn (if you can handle the responsiblity to keep money in your account). If not, have the utilities automatically charged to a CC. Then you have fewer bills and no late fees.
5) Do whatever it takes so that your family members have NO access to your accounts (except legal rights such as a will for when you die). Why on earth would you have bills done in a way that they can interfere? They shouldn't be involved.
Click to expand...
Excellent advice, and I'd just like to comment on #3: I get a lot of CC & other bills these days that don't give you a week to make payment - double check the date when the bill comes in.

Now, a serious question about #1: I racked up 6 figures of CC debt when my son was sick and needed a lot of emergency stuff etc - some of which (but not all) the insurance paid after much legal bs. Any advice on how to deal with this kind of thing in the future (hoping it never happens again to me or anyone else, of course, but . . . ) ? My kid is literally alive today because I had my credit cards on me at the time - any other ways of financing this kind of emergency??

 
Originally posted by: badmouse

Now, a serious question about #1: I racked up 6 figures of CC debt when my son was sick and needed a lot of emergency stuff etc - some of which (but not all) the insurance paid after much legal bs. Any advice on how to deal with this kind of thing in the future (hoping it never happens again to me or anyone else, of course, but . . . ) ? My kid is literally alive today because I had my credit cards on me at the time - any other ways of financing this kind of emergency??
Click to expand...

home equity loan?
 
Originally posted by: badmouse
I get a lot of CC & other bills these days that don't give you a week to make payment - double check the date when the bill comes in.

Now, a serious question about #1: I racked up 6 figures of CC debt when my son was sick and needed a lot of emergency stuff etc - some of which (but not all) the insurance paid after much legal bs. Any advice on how to deal with this kind of thing in the future (hoping it never happens again to me or anyone else, of course, but . . . ) ? My kid is literally alive today because I had my credit cards on me at the time - any other ways of financing this kind of emergency??
Click to expand...
I personally haven't seen any with less than a week to pay, but if you do have those bills all the more reason to use #2. Pay it immediately and you don't have to bother with late fees and forgotten bills. I just don't have that problem, so #3 works for me.

As for your second part, that is certainly a YMMV situation (your mileage may vary). Very few people will (a) have 6 figure CC limits and (b) have a hospitial refusing service even though you have insurance. A hospital will always let a son live and get paid later - no need to go on the CC. You may though have to move him to a hospital that would do the service (you might not always get your first choice). There are also plenty of sources for loans to pay off that debt when the CC bill comes rather than using the CC as a loan. Example: you can charge it in deperation, then get a second mortgage on your house to pay the CC bill immediately when it comes. Or convince the hospital to let you make payments. Etc.

 
As for your second part, that is certainly a YMMV situation (your mileage may vary). Very few people will (a) have 6 figure CC limits and (b) have a hospitial refusing service even though you have insurance. A hospital will always let a son live and get paid later - no need to go on the CC. You may though have to move him to a hospital that would do the service (you might not always get your first choice). There are also plenty of sources for loans to pay off that debt when the CC bill comes rather than using the CC as a loan. Example: you can charge it in deperation, then get a second mortgage on your house to pay the CC bill immediately when it comes. Or convince the hospital to let you make payments. Etc.
Click to expand...
It was a matter of moving him to the "best" hospital/surgeons vs staying at the "insurance-approved" place - as it turned out during the surgeries the complications envisioned by the referring dr's happened, he would not have survived the "approved" treatment.

Anyway, yeah, we did pay it off later w/a cheaper loan. I just meant while it was happening. That, and paying bail, are the only 2 things I can think of to use a CC for even if you don't have the money to pay, as per your excellent guidelines.
 
use online banking to pay your bills....avoid the hassles of having to fill out a check...buy stamps go to the postoffice etc.

plus you can have it auto pay on whatever day you choose.
 
Debt consolidation is for people who are bad at math. But that applies to credit card interest as well. I have had credit cards for more than 20 years and could buy a house with my combined available credit. I have NEVER paid one cent in interest on any credit card. Like dullard said, the key is never using tham for something you can't afford anyway. I use them for convenience (e-commerce) and to make returns easier (sorry arsehole retailer, but my credit card company's policy trumps your return policy) but always pay off the balance every month.
 
I just closed two cards (Target, Best Buy), both of which had no balance. Both of them verified my address and social security number before the cancellation.

Then I closed my Circuit City card (~$1000 balance). There was no way to speak with a representative (I called at 7:00PM EST). It let me cancel without entering my SS# *OR MY ACCOUNT NUMBER*. When I called, the system immediately prompted me for my Zip code (which could be either my old or new address). It told me that my old address was invalid, so I entered the new one. The only identifiable information that I entered was the Zip code of a densely-populated city. Their system must have associated my Caller ID information with my credit account, which could be very bad if I was calling from someone else's telephone!

Anyway, the system asked me whether I was closing the account due to inactivity, or debt consolidation. Why would they want to know? Would it really make a difference?
 
Originally posted by: Yossarian
why are you closing accounts w/no balance? just leave them open, it helps your credit.
Click to expand...

It doesn't help me increase the limit on the cheapest card. I need to transfer balance.

Limit increases don't work very well when you have too much "available" debt.
 
^
Anyway, the system asked me whether I was closing the account due to inactivity, or debt consolidation. Why would they want to know? Would it really make a difference?
 
Originally posted by: Ichinisan
Originally posted by: TheGameIs21
1. Is a debt consolidation loan any different from a regular loan? It is usually a secured loan not a signiature loan.
Click to expand...
I don't know the difference. A signature loan requires a signature? What is different about a "secured loan?"

Originally posted by: TheGameIs21
2. Would it affect your credit score negatively? No. Make sure you cancel your cards because it will show as debt that is available to you.
Click to expand...

Before getting a loan? I didn't know that you could cancel a card with a balance on it.

/stupid stuff
Click to expand...

Signature loan ='s They take your word that you'll pay them back. Usually used for small amounts (up to 10K). I acutally started a business with a 10K signature loan. I thought they'd laugh me out of the bank but they didnt. Secured loan ='s you have something of value that you keep unless you default on the loan. At the point of default, they take the item and sell it. A car loan or a Mortgage are secured by the actualy property.

You can always cancel your card at any time with or without a balance. You'll still be charged interest though. I was specifically suggesting AFTER the consolidation. When your "XYZ" card has a zero balance. Cancel it. Otherwise, future lenders will see the available balance of "$5,000" as a liability since you could pull $$ against that available balance at any time.

Now to address what I missed the first time reading your post... If you can pay this off in 2 months after Consolidating.... There is no financial reason you couldn't do it without a consolidation.

 
read up on credit.

whatever you do DON'T cancel cards you have. Length of credit is very important too and most times the debt/credit limit as well.

so one still has debt of 10K and credit of 20K. That's pushing the limits. Now have debt of 10K with credit of 10K - you're at 100%.

http://www.myfico.com/
 
No, you don't want to consolidate your student loans with your other bills...
Student loan interest is tax deductible... the other interest is not. If you pay it off with a credit card, it no longer is deductible.
 
Originally posted by: spidey07
read up on credit.

whatever you do DON'T cancel cards you have. Length of credit is very important too and most times the debt/credit limit as well.

so one still has debt of 10K and credit of 20K. That's pushing the limits. Now have debt of 10K with credit of 10K - you're at 100%.

http://www.myfico.com/
Click to expand...

Show me where it says to have too much available credit to ensure future loans? It only makes sense that you don't want to have 7K worth of debt sitting out there after getting another 7K consolidation loan wich any lender would see as having 14K available to you. Just because you cancel your account doesn't take it off of the reporting agancy.

Either way, if you can't handle the payments right now... what is going to change after the consolidation that you will magically be able to make these payment dates (when you run the cards back up because they are available to you) AND make the consolidated payment?

If you consolidate, cancel the cards. I would still suggest that you not consolidate anyway... Just buckle down and pay it off in 2 months.
 
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