Debt consolidation loans... I have questions for those in the "know"

[phyzik]

I dont have a significant ammount of debt (at least in my mind) and can make the payments I currently have, but doing so is making me live almost paycheck to paycheck so I was thinking about a debt consolidation loan.

I am roughly about $40,000 in debt. No house payment, no kids, nothing like that, so I CAN afford it with my pay grade.... but I want to save up money as well. Currently, my monthly payments on just debt alone (not including utilities or things like cable TV) is around $1,500 a month.

Does anyone have experience with debt consolidation loans who can tell me the benifits and downfalls of it?

Again, Im not exactly hurting for cash but I would like to be able to save alot more if possible.

I have a pretty good credit score, never missed a payment. My main concern is if it is worth going for debt consolidation. It looks good on paper (would most likely drop my payments more than $500 less than what Im paying each loan individually) but Im sceptical about it. Are there any catches that I should be aware of?

[Dr. Gonzo]

I'm in the "know".

[cantthinkofanything]

Buy a house and then get an equity loan to pay off your debt.

[ashbeeigh]

It lowers your credit. All that counseling and consolidation does is just hit your credit harder. Or, so I've heard.

[Fabbs]

Ben Dover (not joking that is his name, at least his author name). His second book has lots to say. Bottom line can be and is much better dealing with creditors directly. But you need to learn the do's and don't when settling, and there are many.

Life After Debt: The Blueprint for Surviving America’s Credit Society and Back Off! The Definitive Guide To Stopping Collection Agency Harassment.

[PM5K]

creditboards.com

[SnakeBoy]

You have too much debt. Make some sacrifices in your lifestlye, pay it off as fast as you can, then save. It would make no sense to try and save money when the interest you would earn is less than the interest you are paying.

[Wild Cobra]

I don't have an answer for you except to say I agree with snake.

You have too much debt for it not to include a house.

No idea what your interest rates are, but even at low interest, that's too much money you tip the bankers with.

Careful...

There are some people in these forums who would kill to make as much money as you pay in debt each month!

They probable also think you can afford to pay a 50% tax rate or more also, so there's more money floating in the government trough for them.

[Wild Cobra]

My credit union offered me a low interest rate signature loan last year. I jumped on it and paid off my small debt that was at a higher interest rate.

[RGMCSE]

It lowers your credit. All that counseling and consolidation does is just hit your credit harder. Or, so I've heard.


STFU! This man asked advice from people that know. You obviously don't know shit. Your so fucking obnoxious. Son of a bitch!! If your a dumb fuck like your self to go call one of these scam debt counseling companies from a tv commercial, then you deserve to get fucked.

I went to my CU and asked for a consolidation loan. They evaluated my debt then approved the loan. I payed my CU one nice affordable payment for 3 years and was done. My debt was less than 40 large though. Go to your bank or CU before going anywhere else. Good Luck

[xellos88330]

Never tried it before.

[Drachen]

Just to try to save off some of the confusion here, there is nothing wrong with a debt consolidation loan, provided it lowers your interest rate. I think that ashbeee thinks you are talking about credit counseling whochiz indeed bad (viewed as a bankruptcy by some banks). A debt consolidation loan is literally nothing more than a signature loan that you get from your bank. I am on my phone so I am not expounding much, but if you have any other questions, please ask.

[ploto]

Just be sure you don't get a debt consolidation loan and then start running back up those now empty credit cards! I see it happen with people who take out a home equity loan to pay off credit card debt, and then they run right out and run those credit cards back up! I also agree that $40,000 in debt is a lot if it does not include vehicles or student loans.

[Spursfan092120]

It really depends on the interest rates you're paying on your debt, and if you have collateral. Obviously, your credit score comes into play, because if you get a debt consolidation loan, and it's a higher interest rate than most of the bills you're paying, it wouldn't make a hell of a lot of sense. It doesn't hurt your credit to get another loan if you let the bank know it's for consolidation, because that will be part of the process when they put in the application, and they'll know you'll be eliminating other bills. $40,000 is a lot of debt, and one of the major things the underwriters look at is your DIR..debt to income ratio. If it doesn't look feasible in their eyes that you can make that payment, they won't lend it. If you have a collateral, it'd be good, because a $40,000 unsecured loan is definitely not easy to get. In case you're wondering, I'm a banker/personal loan officer.

[ALVAREZ6]

You have too much debt. Make some sacrifices in your lifestlye, pay it off as fast as you can, then save. It would make no sense to try and save money when the interest you would earn is less than the interest you are paying.

[Koolaid_Man]

I dont have a significant ammount of debt (at least in my mind) and can make the payments I currently have, but doing so is making me live almost paycheck to paycheck so I was thinking about a debt consolidation loan.

I am roughly about $40,000 in debt. No house payment, no kids, nothing like that, so I CAN afford it with my pay grade.... but I want to save up money as well. Currently, my monthly payments on just debt alone (not including utilities or things like cable TV) is around $1,500 a month.

Does anyone have experience with debt consolidation loans who can tell me the benifits and downfalls of it?

Again, Im not exactly hurting for cash but I would like to be able to save alot more if possible.

I have a pretty good credit score, never missed a payment. My main concern is if it is worth going for debt consolidation. It looks good on paper (would most likely drop my payments more than $500 less than what Im paying each loan individually) but Im sceptical about it. Are there any catches that I should be aware of?

You need to cut some services you don't need. If I were you the hookers would be the last thing to go....:lol

Stop being lazy and do a little research before asking the Spurtalk Motley Krew Bums on Skid-row...:lol

http://www.debtconsolidation-credit.com/faq.html

[phyzik]

Just be sure you don't get a debt consolidation loan and then start running back up those now empty credit cards! I see it happen with people who take out a home equity loan to pay off credit card debt, and then they run right out and run those credit cards back up! I also agree that $40,000 in debt is a lot if it does not include vehicles or student loans.

This is probably the most apt advise for me TBH.... :lol

I will be cutting them the day they are paid off, seriously. Dont even use them anymore anyway.

I did an estimate with my CU without actually applying and, with my credit score, may be able to get a loan with a payment thats $200 less than just my car payment alone.... That would be awesome... They want me to get exact payoff figures before I actually apply, obviously.

BTW, Im not seriously looking for "advice" on Spurstalk with money issues, I just thought it would be a cool topic and wanted to get various views on debt consolidation...

Lots of good takes... Thank you all.

[phyzik]

You have too much debt. Make some sacrifices in your lifestlye, pay it off as fast as you can, then save. It would make no sense to try and save money when the interest you would earn is less than the interest you are paying.

I agree with you. I DO have to much debt. The main part of it is my car, and it's not so easy to get rid of a car when you are still owe just about at blue-book value for it in this economy.

Besides that, I want to keep my car. You dont just let go of on of the last modern muscle car that will ever be produced from a storied badge in automotive history that is now gone forever. To think, I have 1 of just 3,681 2009 Panther Black G8 GT's produced in the world.... Some people might think that vain or insane, I dont. The investment is worth it to me.

other than that, the only other lifestyle changes I can make to lower my debt footprint would be to turn off my AC, cancel cable (which costs me like $80... not a big dent IMO) and stop taking showers, which might be an option for some, but not me.

[MannyIsGod]

80 dollars a month going to pay off a high interest debt account IS substantial as hell. I don't think you understand how severe your debt problem is right now but having that much debt and not having it come from a house is pretty damn serious.

I would think at this point cutting off cable should be something you not only consider, but do. To be honest, the inability to live without freaking cable doesn't lend confidence to your long term ability to lower your debt. It is going to involve making sacrifices and that seems like the best place for you to start.

[Drachen]

80 dollars a month going to pay off a high interest debt account IS substantial as hell. I don't think you understand how severe your debt problem is right now but having that much debt and not having it come from a house is pretty damn serious.

I would think at this point cutting off cable should be something you not only consider, but do. To be honest, the inability to live without freaking cable doesn't lend confidence to your long term ability to lower your debt. It is going to involve making sacrifices and that seems like the best place for you to start.

(edit: sorry, I quoted you to piggyback off of your post, but this is directed at OP)

netflix is a tenth of your cable bill and while it may not have EVERYTHING you want to watch, there is plenty of good stuff where you can kill some time. Also, as far as your credit cards go, I don't care if you cut them, but if you want to preserve your credit score it would be a good idea to keep them open. (about 30% of your credit score is based on the percentage used of your revolving credit).

[SnakeBoy]

(edit: sorry, I quoted you to piggyback off of your post, but this is directed at OP)

netflix is a tenth of your cable bill and while it may not have EVERYTHING you want to watch, there is plenty of good stuff where you can kill some time. Also, as far as your credit cards go, I don't care if you cut them, but if you want to preserve your credit score it would be a good idea to keep them open. (about 30% of your credit score is based on the percentage used of your revolving credit).

(sorry, I quoted you to piggyback off of your post, but this is directed at OP)

It's not just monthly billls like cable that count. I guarantee if you spend the next month tracking every single penny you spend (every soda, every bag of chips etc.) that you'll be able to easily cut $100-200 per month that your spending on things you wouldn't even miss.

[stxspurs]

Read Dave ramsey..../thread

[Soul_Patch]

Does that 40K include any student loan or vehicles? If not, that is a lot of unsecured debt.

To tie it in to your question, 40k of unsecured debt is probably at a pretty high interest rate, so yes, a consolidation loan (if you can get one for that ammount) is highly advisable, if you can lower the interest substantially and get it paid down faster.

I say do it, even if it takes a hit to your credit. You need to reduce that ammount by at least 75% soon.

[BacktoBasics]

Read Dave ramsey..../threadI certainly agree with this. A consolidation is fine but most people don't close those original accounts so they end up running the debt back up. 40k in debt requires more a lifestyle change than a interest rate/consolidation change.

[Bender]

Does that 40K include any student loan or vehicles? If not, that is a lot of unsecured debt.
OP said that that it did include his loan on his fancy car

[Soul_Patch]

OP said that that it did include his loan on his fancy car

Ah, if that is the case then it probably isnt that bad.

Most cars these days are 25 to 35 thousand dollars....

We are terrible with spending money (my wife and I) and we are probably 5 to 6 thousand in unsecured debt. Dont even ask me about student loans though....

[coyotes_geek]

This is probably the most apt advise for me TBH.... :lol

I will be cutting them the day they are paid off, seriously. Dont even use them anymore anyway.

I did an estimate with my CU without actually applying and, with my credit score, may be able to get a loan with a payment thats $200 less than just my car payment alone.... That would be awesome... They want me to get exact payoff figures before I actually apply, obviously.

BTW, Im not seriously looking for "advice" on Spurstalk with money issues, I just thought it would be a cool topic and wanted to get various views on debt consolidation...

Lots of good takes... Thank you all.

Cut up your cards now. No need to wait until they're paid off. Do the loan, but instead of pocketing that $200 savings apply it to the loan to pay it off faster. As stated by others, there's not much point in saving when you're carrying a bunch of debt at a higher interest rate.

And +1 on dumping the cable. An extra $80/month on that loan will save you a nice chunk of interest plus several months of payments.

[RandomGuy]

I dont have a significant ammount of debt (at least in my mind) and can make the payments I currently have, but doing so is making me live almost paycheck to paycheck so I was thinking about a debt consolidation loan.

I am roughly about $40,000 in debt. No house payment, no kids, nothing like that, so I CAN afford it with my pay grade.... but I want to save up money as well. Currently, my monthly payments on just debt alone (not including utilities or things like cable TV) is around $1,500 a month.

Does anyone have experience with debt consolidation loans who can tell me the benifits and downfalls of it?

Again, Im not exactly hurting for cash but I would like to be able to save alot more if possible.

I have a pretty good credit score, never missed a payment. My main concern is if it is worth going for debt consolidation. It looks good on paper (would most likely drop my payments more than $500 less than what Im paying each loan individually) but Im sceptical about it. Are there any catches that I should be aware of?

Whether or not it is a good thing depends on the interest rates involved.

They might be lowering your payments, but that usually involved stretching out the payment horizon, and even with lower interest rates, could mean you end up paying more for interest in the long run.

One good strategy that is fairly simple and easy to stick to:
Take all your spare cash and throw it at the smallest debt first until it goes away. Then take the freed up cash flow and what you were doing before, then apply that to the next one. Ignore the interest rates.

That has some pros and cons.
Pro = easy and straightforward
con =you probably would pay *slightly* more in interest by picking the smallest debt, rather than the one with the highest interest rate.

The hidden cost for a consolidation loan is probably a handling fee that adds to the principal. "Sure, for a small fee, we will consolidate your debts and you can just pay us."

Don't know the specifics of your loan, but that is my guess.

Debt consolidation loans IMO, are not worth the time, unless you get an overall lower interest rate.

A good savings plan that I would recommend to anyone:

Get a savings account and save up two months of cash.

After that start buying long term CD's in amounts of $100 per month with two year maturities.

When the first one matures, keep sticking that $100 per month in AND re-investing the principal and interest.

Stop when the monthly maturities equal your living expenses. This will give you two years worth of cash flows in case you get hit with illness or unemployment.

At some point, definitely get yourself into a Roth IRA as well.

[phyzik]

Cut up your cards now. No need to wait until they're paid off. Do the loan, but instead of pocketing that $200 savings apply it to the loan to pay it off faster. As stated by others, there's not much point in saving when you're carrying a bunch of debt at a higher interest rate.

And +1 on dumping the cable. An extra $80/month on that loan will save you a nice chunk of interest plus several months of payments.

My problem right now is that I've reached a point where I can pay my current bills and just barely get by paycheck to paycheck. My main problem is my car. That alone is costing close to $700 a month.

I havnt used my CC in 3 years.

Keep in mind, I havnt tried to refinance ANY of my loans. It is what it is. $80 dollars (for cable) isnt going to make a dent in almost $1400 a month payments. Having said that, as I said in my previous post, I havnt missed a payment on ANY bill... My credit is pretty good and Im saving a little money here and there, but its miniscule. I think getting a debt consolidation loan would be in my best interest, especially after talking to a specialist at my local CU. We will see though.

I will apply and update you all on IF I am saving anything and how much..... I just need to get my shit together (Actual payoff amounts) and apply for it.

[CubanMustGo]

Respectfully, if you're having problems meeting debt obligations of $1400/month, half of which are coming from your car, you should seriously think about ditching the Rolls Royce in favor of something more in-line with your income.

[coyotes_geek]

My problem right now is that I've reached a point where I can pay my current bills and just barely get by paycheck to paycheck. My main problem is my car. That alone is costing close to $700 a month.

I havnt used my CC in 3 years.

Keep in mind, I havnt tried to refinance ANY of my loans. It is what it is. $80 dollars (for cable) isnt going to make a dent in almost $1400 a month payments. Having said that, as I said in my previous post, I havnt missed a payment on ANY bill... My credit is pretty good and Im saving a little money here and there, but its miniscule. I think getting a debt consolidation loan would be in my best interest, especially after talking to a specialist at my local CU. We will see though.

I will apply and update you all on IF I am saving anything and how much..... I just need to get my shit together (Actual payoff amounts) and apply for it.

Well, if you're dead set on keeping the car it sounds like what you need to do is consolidate your non-car debt and stretch the term out to lower your cumulative payment on that portion of your debt. Then just plow the difference into your auto loan. If your car's an '09 and you bought new, you can't have more than a couple of years left on that car note anyways. Get that paid off and then you can start saving a little bit each month while using the bulk of your former car payment to attack your consolidation loan with.

Still think you should ditch the cable. :)