consolidation
Get Out Of Debt With A Debt Consolidation Loan
Why has ‘debt consolidation’ become such a common phrase nowadays? Unfortunately, the answer’s straightforward – it’s because debt has become a way of life for so many. It’s a sorry reality for even the youngest adults in our society, as illustrated in a recent publication from Rainer, the national charity for under-supported young people.
Published in May 2008, the report looks at credit, debt and other financial issues confronting today’s youngsters. It ‘picks apart some of these challenges and, drawing on the direct experience of the young people facing them, sets out the action required to overcome them’.
‘Unavoidable route into debt’
Joyce Moseley, Rainer’s Chief Executive, talks of the ‘often unavoidable route into debt’. On Rainer’s behalf, research and consulting organisation YouGov found that 90% of the young people questioned were in debt by the age of 21. One in five 18-24 year-olds had already found themselves more than £10,000 in debt.
As they start their adult lives, most young people find themselves with very little disposable income anyway, so once debt repayments start taking a ‘slice’, it’s all too easy for their finances to deteriorate rapidly. This goes a long way towards explaining the popularity of debt consolidation loans among young people…
Consolidation – a route out of debt
For many young borrowers, the most important benefit of debt consolidation is simply a reduction of monthly outgoings. Replacing multiple debts with a single consolidation loan gives them a chance to arrange affordable repayment terms. This can mean the debt will take longer to pay off – and possibly cost more in the long run – but cost less each month.
At the same time, a consolidation loan may well come with a lower interest rate than the debts they’re paying off, especially if they’re high-interest debts from (for example) credit cards, store cards and overdrafts.
Consolidating debt also makes it simpler to manage. Remembering one payment per month is much easier than remembering five. Lenders often issue penalty charges for late / missed payments, so a consolidation loan can actually help people keep their debts from growing.
Consolidation – do it the right way
However, there are risks involved with debt consolidation. When someone pays off their debts (overdraft, credit / store cards, etc.), they have to be careful they don’t let these debts start growing again. In fact, it’s often a good idea to cancel cards and overdraft facilities, since it’s all too easy to borrow a bit here and a bit there until they’re in a worse situation than they were before they consolidated their debts – they’ll have to make payments to the consolidation loan every month as well as to the new debts they’ve run up!
Wasiu Ayinde (Consolidation)
What is a legitimate credit card consolidation company?
I know they are not the best choice. Please don’t tell me how to manage my credit cards. I am beyond that stage. This is the last option for me. I know some of the companies are fradulent and some effect your credit more negatively than others. I just need to know the names of CC Consolidation companies that are legimate and maybe won’t hurt your credit as much as others.
STAY AWAY from any “debt consolidation” company that promises to cut your debt in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
None of these “debt consolidation” firms have the power to force your creditors to accept settlements. Your creditors have the right to refuse these terms and take you to court.
If you have already defaulted on your cards or they’re past due, then you can negotiate directly with your creditors. See Suze Orman’s advise:
http://www.youtube.com/watch?v=jS43XFa3KGU
====================
Plan B is entering a Debt Management Plan (DMP) with a non-profit credit counselor like CCCS (Consumer Credit Counseling Services). Contact your local Red Cross for a referral. They can negotiate lower payments and interest rates. They do not negotiate settlements.
They will require you to stop using all credit and to cut up your cards. Your credit report will be updated to “enrolled in debt management.” This does not damage your credit, but it may make it impossible to obtain new credit while you are enrolled in their program….so don’t use this service if you anticipate applying for a new apartment, car loan or mortgage anytime soon, as you would probably be denied while you’re enrolled in the CCCS debt management program…. Otherwise, it can be a very good way to deal with your debt.
===============
Plan C is filing for Chapter 7 bankruptcy. Keep all options open and do what is best for you.