Opinion on debt consolidation

[lordairgtar]

What is your opinions about debt consolidation loans or programs? Not for me, I'm not in debt except for the car and minor credit card amounts.

[theavenger333]

in general, debt consolidation is a good thing. simple, you're paying a wide range of interest amounts, a wide range of payments in general, and to a very wide range of companies. most loans have a payoff amount (cheaper then what is owed) so the consolidating company/bank/firm pays it off at the cheaper rate. most times the consolidator also locks you in at a fair rate. IE my student loans with wells fargo. 4 companies, 3%, 5%, 8.5% and 7% were my interest rates on various amounts. the little 3% was the smallest loan. Wells Fargo consolidated them all, cut some off the top, locked me in at 5.5% interest for the entire duration.

now i don't know if you're thinking of some infomercial or some credit counselor or what, but banks and credit unions do this stuff ALL the time. you just need to prove you can actually make the payments, like any other loan.

[GTSLOW]

Be weary as there are many scam "debt consolidations" out there.

[05caddyext]

One problem with debt consolidation loans is that usually the bank requires you to close your credit card accounts which actually hurts your credit for a while. You are paying down debt, but you don't have much available credit until the loan is paid off. If you have a lot of debt on high interest cards, playing the revolving credit cards interest rates isn't very good either. The biggest thing with a consolidation loan is that you don't accumulate more debt during the time you are paying down the other debt. Sounds simple but you will have more disposable income, or so it seems, and people tend to spend, not save.

[95mustang302]

Home equity loan if you can even get one...

[Al]

Be weary as there are many scam "debt consolidations" out there.

I'll second that.

I'd say go to your bank first.

[PureSound15]

1 - the best and easiest way to do it is to secure a large loan on something (i.e. home equity) and pay off the credit cards and debt witht that loan (which would be a very low rate), some financials might let you do it with a car - but they'll look at the credit report and realize that it's not a good deal for them.

2 - There are some debt consolidation companies that basically haggle with the credit card company to lower the balance. It is possible to do this yourself as well, but it's not going to help a credit score at all

like others said - there are a million scams. Right now it's going to be very difficult to get a loan to consolidate debt without it being incredibly secure. It's a bit different with school loans because that's consolidation for ease of payment rather than consolidating to allow for more cashflow.

it all depends.

[PureSound15]

in general, debt consolidation is a good thing. simple

now i don't know if you're thinking of some infomercial or some credit counselor or what, but banks and credit unions do this stuff ALL the time. you just need to prove you can actually make the payments, like any other loan.

This isn't entirely true at all. We don't do it ALL the time - the most common would be to pay off credit cards using equity from a home.

Debt consolidation also is not generally a good thing because in 90% of the cases it means that someone has extended themselves too far and now need to reorganize to pay it all off.

It IS good for the debtor though, I'm not envious of those who have $50k plus on credit cards and what not.

[theavenger333]

i've done it with student loans twice, and with a bad credit card and loan i got once. both times it worked out great. just going off what i experienced.

[PureSound15]

i've done it with student loans twice, and with a bad credit card and loan i got once. both times it worked out great. just going off what i experienced.

I'm not saying it's not worth it or that it doesn't work.

I'm just saying that if you're consolidating for rate and to make it easier - that makes sense.

It's those who are trying to consolidate because they're up to their eye balls in debt, that will struggle.