Thursday, August 8, 2013
Browse »
home»
care
»
consolidators
»
debt
»
everything
»
of
»
promise
»
take
»
to
»
who
»
Debt Consolidators Who Promise to Take Care of Everything
Debt Consolidators Who Promise to Take Care of Everything
This is the fairy godmother fantasy. This Nice Big Debt Consolidation company comes along and swears theyll make your life soooo much easier. Theyll negotiate lower interest rates, reduce your monthly payments -- and all you have to do is make "one EZ payment."
In reality, many debt consolidators build in a fee as part of the monthly payment you make to them. Its usually about 10% of the payment (i.e. about $40 on a $400 monthly payment). They pass along your payments to the creditor -- some debit directly from your checking account -- and get back a 10% to 15% slice that the relieved creditor is only too happy to rebate to the consolidator.
Is it worth paying someone else to do what you can do on your own, i.e. negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first?
To desperate ears, this might sound like an ideal solution, especially when you talk to these people and they scare the bejeezus out of you. I interviewed two, Cambridge Credit and Counseling Services and Integrated Credit Solutions. Each offered similar services, and I dont recommend either of them. The senior credit counselor I spoke to at Integrated told me, in grave tones, that it would take me 379 months -- or 32 years -- to pay off my debt. With their services, however, they would "save me 27 years," and I could pay off my debt in just 53 months, or about 4 1/2 years.
Thats funny, because when I plugged my debt into the MSN Money Debt Consolidator -- a less biased source, since they aint getting no fee from me -- they said I could pay off my debt in 41 months, providing I make slightly higher minimum payments to each card: a total of just $60 extra per card.
Heres another risk with consolidators you should know about: they have been known, in some cases, to make late payments or even miss payments, thus worsening your plight (and your credit record).
After I got off the phone with Integrated, I had to ask myself: Is it worth paying someone else to do what you can do on your own? That is, negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? I dont think so.
In reality, many debt consolidators build in a fee as part of the monthly payment you make to them. Its usually about 10% of the payment (i.e. about $40 on a $400 monthly payment). They pass along your payments to the creditor -- some debit directly from your checking account -- and get back a 10% to 15% slice that the relieved creditor is only too happy to rebate to the consolidator.
Is it worth paying someone else to do what you can do on your own, i.e. negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first?
To desperate ears, this might sound like an ideal solution, especially when you talk to these people and they scare the bejeezus out of you. I interviewed two, Cambridge Credit and Counseling Services and Integrated Credit Solutions. Each offered similar services, and I dont recommend either of them. The senior credit counselor I spoke to at Integrated told me, in grave tones, that it would take me 379 months -- or 32 years -- to pay off my debt. With their services, however, they would "save me 27 years," and I could pay off my debt in just 53 months, or about 4 1/2 years.
Thats funny, because when I plugged my debt into the MSN Money Debt Consolidator -- a less biased source, since they aint getting no fee from me -- they said I could pay off my debt in 41 months, providing I make slightly higher minimum payments to each card: a total of just $60 extra per card.
Heres another risk with consolidators you should know about: they have been known, in some cases, to make late payments or even miss payments, thus worsening your plight (and your credit record).
After I got off the phone with Integrated, I had to ask myself: Is it worth paying someone else to do what you can do on your own? That is, negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? I dont think so.