Advice on debt consolation?

RandomEvent · #1 12-10-2007, 11:58 PM

Recently (since today at work, lol), I've been thinking of going to the bank and getting a loan to consolidate my debt. I don't have much, 3 accounts that have a balance. But the thing is, one of them is a CompUSA account. I just feel like I should pay it off now and be rid of it before all of the stores close down and someone else is trying to get the payments. I don't know if policies can change in this type of situation, but I'd just rather not have the hassle.

I'm pretty ignorant about this stuff, so I'm wondering if fellow TBer's can chime in on this situation. What I'm really wondering is if consolidating debt looks bad on credit reports? I checked my credit score in August, and it's very high. I don't want to screw up my good credit rating. Thanks in advance for any advice you can give me.

Munjibunga · #2 12-11-2007, 12:15 AM

Well, if you do it the way you said, your credit report will show three debts paid off and one outstanding loan. It shouldn't hurt you. All you have to do is convince the bank to do it for you. Hopefully you can get a lower interest rate than what you're paying on the other three loans.

Under no circumstances go to one of those "debt consolidation" charlatans out there.

Jeremy Crockett · #3 12-11-2007, 12:17 AM

Quote:

Originally Posted by Munjibunga

...
Under no circumstances go to one of those "debt consolidation" charlatans out there.

I've always thought those were phony. There used to be a company called Consumer Credit Counseling Service that I was lead to believe was legit (this was about 10 years ago now).

Do you know anything of them?

RandomEvent · #4 12-11-2007, 12:19 AM

I ONLY like to do business with my bank personally. Thanks for the quick replies.

MJ5150 · #5 12-11-2007, 12:38 AM

Quote:

Originally Posted by OctoberMooN

There used to be a company called Consumer Credit Counseling Service that I was lead to believe was legit (this was about 10 years ago now).

Do you know anything of them?

I believe they were subsidized by some of the major retailers around the country, so they never always had the consumers best interest in the dealings. Plus, you could contact the lender and negotiate the same deal or better yourself.

Just what I heard, I have no links or proof to offer you.

Correction...I do have a link for you regarding credit counseling. It comes from the FTC even. If you trust the FTC, read this.

-Mike

bluestarbass · #6 12-11-2007, 06:51 AM

From my point of view, loan officer for a mortgage company, debt consolidation wont hurt you at all. In fact it makes it look like you are being smart and trying to take care of your debts. I know customers who have used them before, but i coudlnt reccomend one or the other. Your bank is probably the smartest place though.

**WillPlay4Food** · #7 12-11-2007, 07:03 AM

Quote:

Originally Posted by OctoberMooN

I've always thought those were phony. There used to be a company called Consumer Credit Counseling Service that I was lead to believe was legit (this was about 10 years ago now).

Do you know anything of them?

CCCS is a non-profit entity that negotiates lower interest rates with your credit card holders on your behalf. They restructure your debt, you send them a single monthly payment and they pay your bills for you.

I know someone who used them (before the '05 bankruptcy law change which could be important) and CCCS was able to reduce almost all of the credit card interest rates to zero. Some cards would only go as low as 1.9% and others wouldn't budge at all.

The problem the person I knew had was that CCCS wasn't always on top of getting the payments sent out to the credit card companies so there ongoing issues of fighting with CCCS / credit card companies over late payments. I don't believe the credit card companies waived the fees and CCCS didn't reimburse them for these late fees either.

You may fare better if you can play your credit cards against each other and get some kind of 5.9% until it's paid off balance transfer offer, then use it to pay off the higher interest stuff. I don't know if you would be able to get a matching rate from debt consolidation, but I doubt it, especially those "1.9% for the next 12 months" type of deals.

Pay off your credit cards. Don't charge on them again. Keep them for emergency use only and save up for things you want and you won't find yourself in credit card debt.

Bruce Lindfield · #8 12-11-2007, 07:18 AM

I'd like some consolation (sic) for having so much debt!!

i_got_a_mohawk · #9 12-11-2007, 07:20 AM

Here's some advice, dont take that loan and spend it on other stuff

A friend of mine did that, took out a loan so he could clear his credit card. Ended up spendingthe loan on random crap. Now has twice the debt.

Not the smartest guy with money

Bassic83 · #10 12-11-2007, 07:50 AM

As long as your credit balance is less than 30% of your available credit, you're fine. Not worth the fees to set up the loan. CompUSA credit is extended through a third-party credit service anyway, so it's unlikely to be sold just because Senor Shady Slim closes all his stores.

fenderjazz68 · #11 12-11-2007, 08:23 AM

If you own a home, get a home equity loan or line, that way the interest is usually tax deductable...

RandomEvent · #12 12-11-2007, 11:48 AM

I have three small accounts, two of them were to buy a PC and a Laptop, and my one single credit card. I'm only 23, so it's not a bajillion dollars debt. Truth be told it isn't over 3 thousand. I'm going to my bank, Navy Federal tomorrow to ask about signature loans, which I guess is there version of a loan for things like this based on your credit history.

pointbass · #13 12-11-2007, 12:03 PM

If you have a relationship with your bank, that's the very best place to start. Just be up front with them about your debt consolidation and I'm sure they'll be able to recommend a method to balance everything out.

BTW, it's refreshing to see someone a bit on the younger side acting responsibly about their debt. The best time to get your credit act together is when you're young .... I didn't do that and it took me a pretty long time to get straightened out. Good job on your part ....

RandomEvent · #14 12-11-2007, 12:14 PM

Yeah, half of it is the fact that I have a CompUSA card, which I just want to get rid of and never see again, and the other half is that I'd rather have one payment instead of 3 payments. The interest would also be a bit lower than 2 of my credit accounts, so I think it's something that would make my life easier. I'll probably keep my other 2 open, because generally long lasting accounts help your credit score.

And I've always thought having good credit is important, and I've already payed off a car loan that took my 3 of the 5 years, and I've never missed a payment. I like to have a bit of credit, but I believe it's nice to have a good score and report in case I need a large sum of money later in life, or if I'm searching for a house.

Jeremy Crockett · #15 12-11-2007, 12:17 PM

Quote:

Originally Posted by WillPlay4Food

CCCS is a non-profit entity that negotiates lower interest rates with your credit card holders on your behalf. They restructure your debt, you send them a single monthly payment and they pay your bills for you.

I know someone who used them (before the '05 bankruptcy law change which could be important) and CCCS was able to reduce almost all of the credit card interest rates to zero. Some cards would only go as low as 1.9% and others wouldn't budge at all.

The problem the person I knew had was that CCCS wasn't always on top of getting the payments sent out to the credit card companies so there ongoing issues of fighting with CCCS / credit card companies over late payments. I don't believe the credit card companies waived the fees and CCCS didn't reimburse them for these late fees either.

You may fare better if you can play your credit cards against each other and get some kind of 5.9% until it's paid off balance transfer offer, then use it to pay off the higher interest stuff. I don't know if you would be able to get a matching rate from debt consolidation, but I doubt it, especially those "1.9% for the next 12 months" type of deals.

Pay off your credit cards. Don't charge on them again. Keep them for emergency use only and save up for things you want and you won't find yourself in credit card debt.

Ah, lots of good stuff here.

Yes, I am a money idiot. Now, there is too much riding on me to continue this trend and I'm in seriously, deep trouble.

The state is going to garnish my wages. I have yet to register my truck, I need to get Christmas gifts for my family and we owe the Fed about $1000 in taxes for '06.

Do you imagine that I'd be best served by taking money out of my house for debt consolidation? I don't even know what kind of loan I'd qualify for because I've tooled my credit so badly.

How bad is bankruptcy?

Man, now I'm really depressed.

SteveC · #16 12-11-2007, 12:17 PM

I transfered my high interest card to a lower interest card. That helps. I paid on off with part of a Home Equity loan - tax deductable interest.

Don't use a scam service. Just cut your expenses, cut up all but one card (you really need something for an emergency - not gear - and for reservations, etc.) and pay as much over the minimum as you can each month.

No magic formular, no quick fix, but it works. I had a lot of CC debt 2 years ago and I'm down to about half of that now. Patience and consistency.

need4mospd · #17 12-11-2007, 12:55 PM

Another option is a side job to help pay it down, like playing in a paying band.

RandomEvent · #18 12-11-2007, 01:00 PM

I am actually looking for a second job. I just really feel like I want to get rid of everything now and start fresh.

Also, now that I just thought of it, how would this kind of loan work on my taxes next year? Say I went to the bank and got the loan tomorrow. What usually happens when I have to report something like this on my tax report?

Bassic83 · #19 12-11-2007, 01:09 PM

Quote:

Originally Posted by RandomEvent

I am actually looking for a second job. I just really feel like I want to get rid of everything now and start fresh.

Also, now that I just thought of it, how would this kind of loan work on my taxes next year? Say I went to the bank and got the loan tomorrow. What usually happens when I have to report something like this on my tax report?

If it is a HELOC, you'd get a statement from the bank on interest paid. That goes into your deductions bucket when you do taxes. Any other loan (except certain student loans) is NOT income, unless you are foolish and try to tap into your 401k. Do NOT do that. It's not worth it. You end up losing in both the front end, when you reduce the amount in your 401k that could be compounding, and in the back end, which is where Uncle Sam sticks it to you with taxes.

RandomEvent · #20 12-11-2007, 01:28 PM

Thanks. Sometimes funny things can happen with taxes, and I generally get a return every year, and I didn't want to have some sort of surprise this coming tax report.