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

[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....

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 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 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 ulative 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.