Consolidating Debt

iVillage Member
Registered: 01-02-2008
Consolidating Debt
7
Wed, 09-12-2012 - 10:28am

I am trying to decide the best course of action on my debts. Not that much but I am in collections and thinking is this the best way to go? I just dont know do I take out a loan and pay off the debts and then pay the loan? How do i consolidate them.. I would only be paying the loan out of my savings anyway but its better than these high interest rates I am thinking??

I could get a passbook loan at low interest rate.

 

 

iVillage Member
Registered: 03-15-2012
Wed, 09-12-2012 - 5:59pm

When you say you could get the loan does that mean you have been approved?  If not, you may not get approved seeing how your are defaulting on your current payments.  It will have affected your credit rating which affects your ability to get a loan and more specifically a loan at a good rate. 

Although consolidation looks good, most often lowering your monthly payments it can get you even more trouble.  If you consolidate to pay credit cards than close those accounts otherwise you could be tempted to charge them up again.

Also you said you would be paying out of savngs?  Does that mean you have money in your account right now?  Why not just pay them off right now and then there is no interest.

Consolidation is not a bad thing but you must read the fine print, look for hidden fees and pay attention to the interest rate.  Becasue you will have affected your credit rating negatively you may not get the intererst rate deal you think you will.   I am sure others here will have more info and advise.  There certainly is pro and cons to consilidating debt.

 

Sandra

iVillage Member
Registered: 12-31-2010
Wed, 09-12-2012 - 6:40pm
One thing you might consider is sitting down with a couple debt or bankruptcy lawyers. Only they can tell you how your situation and the laws of your state play out.
For instance, if you live in a non-recourse state, and your debt is over a five years old, letting it go for two more years might be more in your favor than opening the sleeping dog and starting the 7 years on your credit report again. After 7 years the items may no longer show on your report and affect your credit score.
I know, it seems weird to say that you might consider not paying, but sometimes paying hurts you more as it would restart the 7 year clock.
First thing, no matter what , is to get yourself an emergency fund built up of at least $1k to 9 months of total payments so you don't have to use credit again.
I have worked with people that amassed enough money and then called each creditor in turn and offered them a settlement payoff of about 35% of the total and the credit company took it. There are taxes to be paid on the dismissed amount, but again, these things all have many ramifications which is why you really should talk to a lawyer.
#Marie
Community Leader
Registered: 08-25-2006
Thu, 09-13-2012 - 12:22pm

Not sure what "not that much" is to you.  :smileyhappy:  But yea, definately depends what your goal is. 

When I called my credit union to see if I could get a better rate on my transmission loan (which is through one of those high interest places that also do personal, unsercured loans) and my credit union could not do any better.  Partially, I think, because of my credit score. 

Oh, and get this!  Me and SO picked out a new bed on Tuesday and he did not qualify for financing.  The guy has no debt, with the exception of making monthly payments to the IRS.  Now, it could have just been a glitch or bad timing, as he just paid off his transmission loan.  Regardless, we were suprised.  Luckily he was able to pay for it in full. 

Point being, you really just don't know what you may, or may not, qualify for. 

At the end of the day, I think it depends.  Are just trying to salvage what you can of your credit score and start over fresh with on-time payments, even if in the long run you pay more in interest?  Are you just wanting to lower your monthly payments, again, even if it costs you more in the long run?  Or are you truly trying to lower your overall debt? 

I understand the battle, as I could save over $100 a month in gas and insurance if I bought the car I test drove the other day, but....I would be into another 5 year loan to keep the payment low, when I only have 16 months left on my current loan. 

It is tough, I know.

Serenity
iVillage Member
Registered: 01-02-2008
Thu, 09-13-2012 - 12:41pm

thank you everyone

Serinity;; I think I would agree with your first idea .. I would like to just start over with a clean slate and salvage whatever I can with my debt while holding onto the money I have in savings because now I live off a settlement and have limited income.. I really am not a person who cares about credit scores because I am almost 59 and I doubt I will be buying anything like a car or house or whatever but never say never right.. Its just highly unlikely at this stage of my life...

My total debt is about 13,000 which includes four credit cards and one cell phone. .. I figure if I just take out one lump sum loan such as passbook because there would be no other way to do it and I might get it and I might not... . Although I am leaning more towards trying to settle but so far I have only tried to settle with one card and they wont b udge.. I live in NY a true litigation state so I could be slapped with judgements and we all know about them.

thank you

 

 

Community Leader
Registered: 08-25-2006
Thu, 09-13-2012 - 1:14pm
Hmmm....the fixed income definately adds another variable to the equation. FICO score may not be everything, but they do effect our insurance rates and even trying to rent a house or apartment. Just something to consider, thats all.

I can understand wanting to hold on to your savings if you are on a fixed income. On the other hand, that fixed income is guaranteed, correct? You don't have to worry about loosing a job or insurance. So I guess that argument could go either way.

I know what a pain it all is. You have get way behind before they will offer you help sometimes.

I guess it also depends if you are behind in all 4 cards, just some, is the cell phone the only thing in collections, etc. etc. Hit one card and let the rest go, I mean there are so many options!

My unqualified opinion, without knowing all the details, would be to get anything in third party collections out of the way, hopefully with a lowered settlement amount, with your savings, if necessary. I am guessing this would be your cell phone bill. At least that can then start the count down of eventually coming off your credit report.

Just my 2 cents.
Serenity
iVillage Member
Registered: 01-02-2008
Thu, 09-13-2012 - 1:39pm

oh; I love your two cents (lol)

well lets see... I am behind in two cards .. One is in collections which I will probably try and do a settlement.. Cell phone is the only one telling me a judgement is coming by end of month if I dont pay 490.00.............I am going to call and try to settle.

Yes; I forgot about the debt and the way it affects other things. My car insurance right now is l,400 a year. it went up 200 this  year.

I have the guaranteed income and lost job last year.. Not to keep repeating and sorry if I did but I think I mentioned this awhile ago on another thread..

My dilemma is that I am trying to hold onto savings because I live off of it and I see no other income right now yet in sight.. but that could change.. I am dealing with the here and now and now cell phone wants 490.00 and one collections wont budge and take a settlement but I am going to let that one go for now. they have sold  my account three times and I have spoken to them so much that I have a file a mile thick..

thank you

Community Leader
Registered: 08-25-2006
Thu, 09-13-2012 - 2:16pm
It has been years, but I was able to settle with my cell phone that went to collections. Just be careful, as I never got the confirmation they promised and years later when I went to refinance my house, it still showed a balance due.

I refuded it and it went away, but what a pain to have to do at all.
Serenity