Are there any good ones out there?

I've heard of Consumer Debt Relief, Debt Relief Clearinghouse, and Consumer Credit Counseling Services.

They can consolidate my debt and get it reduced by sometimes over 50%.

I know they may charge a small fee per month, but it's less than what I'm probably paying per month now.

I used to work for a debt consolidation place, and can help to explain how it works. It's definitely not the right move for some people and depends greatly on your personal situation (how much debt you have, what kind of payments you have, what kind of debt it is, etc.). Debt consolidation is also different from, and can be combined with settlements (which actually lower the amount you owe, but effect your finances/credit in a different way).

Anyway, pretty much all of the non-profit consolidation places work in the same way. They say that after you sign up "they negotiate with the creditors for you" to drop the interest rate or eliminate it all together. Truthfully the negotiation has already taken place between the government and those creditors, so once the debt consolidation place knows which companies you have credit with, they can pretty much figure out the rates they'll give you instantaneously. The whole point of which allows more of your payment to go toward principle rather than interest.

This is good and bad in a few ways. Yes you get potentially lower interest rates, and if you have accounts in collections and such, then harassing phone calls should stop and be completely routed through the debt consolidation company. The flip side of the coin is that you MUST close all the accounts that you wish to consolidate, so your credit cards or whatever will all be unavailable to you during your repayment and you'll have to re-apply for credit if you want it when it's all done. There is also a specific mark that is put on your credit report to indicate that you are participating in a consolidation program. That mark does make it a lot harder to qualify for new credit while you're paying off your current debt, but the mark is removed as soon as you're done with the program (as a tip, make sure to check your own credit report and ensure the mark is removed). So if you're looking to buy a house or something else big, it's probably best to wait until you're out of the program.

It's important to know that some kinds of debt simply can't be consolidated in the same fashion (such as medical bills and student loans), and you won't know what your interest rates will drop to until the consolidation company tells you. Even with the lowered rates, it will still take on average 4+ years or so to pay off everything, if I remember correctly.

The various consolidation companies out there all have to make money in some way or another just to run the business (even though they are non-profit), and that differs between the companies. Where I worked, basically our fee was one month's value of whatever your "negotiated" payment would be. So if we combined all your creditors in to one payment of $500 per month, the consolidation company would take the first $500 payment, and then after that all of the money would go toward the creditors. This also means that you have to take in to account whether or not your creditors are currently in good standing or not, since paying the first month basically means that you'd default on your credit cards for that month unless you could afford to pay them on your own aside from the fee the credit counseling place charges.

So, as you can see, there is a lot to think about and consider with making that move. I can tell you from experience that unless your total debt that you'd like to consolidate is over $5000, then it's probably not going to be worth the trouble unless you have just the right combination of specific creditors (no matter the account standing), and you'd be better off just picking a method like snowball payments and tackling the debt yourself. Beyond that, it's really best to talk with someone who knows what they're doing, knows the different options that are available, and are not just looking to sign you up...so I'd say do your research, figure out your options, see what a realistic timetable is for each, how it would potentially effect your credit, and go on from there...good luck!

--==EDIT==--
Small fixes for clarity...

Debt consolidation is nothing more than a "con" because you think you've done something about the debt problem. The debt is still there, as are the habits that caused it - you just moved it! You can't borrow your way out of debt.

Read More...

While I agree that the more important issue is fixing the bad habits that got the person in to the financial situation in the first place, I would disagree on saying that consolidation is a con. Yes, it does move your debt, but it's not borrowing money to pay off those debts and since the accounts must be closed, you can't use those same accounts to accrue more debt in the mean time. For a lot of people, just having one payment a month is much easier to manage than having to deal with sometimes dozens of individual creditors and different due dates/minimum payments. Also, many accounts that go in to default get skyrocketed interest rates that can be 30% or higher (which is criminal, if you ask me). It's definitely NOT for everyone (I'd even go as far to say that it's not the best option for MOST people), but I still think it has its place if the situation is right.

Thank you all for your help.

Right now I sit on ~$7500 of debt (not including student loans, as I don't have to pay those now). However, the bad part was that at the time of accruing this debt I was going through hard times. First, my father was diagnosed with Stage 4 lung cancer. I was a student at the time, so I quit my job and focused on learning and my father. Since he lived 4 hours away, it was gas, bills, etc all on credit card. Once my father passed, I had some emotional times and bought some stuff I shouldn't. Then it was hard to find a job.

Needless to say, my credit card companies didn't care when I told them the above story. All credit cards are in default and are at 29.99%.

For the past year now I've been making payments on time. However, my credit card companies (mainly CHASE) won't do a thing. I've begged. Spoke with all people. They all tell me to check debt consolidation.

Before a year ago, all my minimum payments were about $1k. Now, I'm at about $600. It's still tough... and I really can't pay any more than the minimum.

Anyway, I'm now facing a lot of doctor bills and it's becoming tougher. I've sent copies of my doctor bills to Chase... again, no sympathy.

I'm sick of Chase... and hope to avoid them (and credit cards) for the rest of my life. However, I don't know what to do.

I was thinking of looking through a company that's listed in http://www.nfcc.org/.

Thoughts?

that's true.. but in my mother's case.. it was the best thing for her to do.. she consolidated all her bills a couple of years ago.. she had thousands of dollars worth of credit card debt with high interest.. but she was able to consolidate that and her two mortgages into one big payment through wells fargo (with a lower interest rate).. so it was the best thing for her to do at the time

she still has a big mortgage to pay (considering the two homes and cc debt that went into it).. but her equity is still way above the balance.. i co-signed for her (which i'm kind of skeptical of still).. but i check my credit report every month to make sure she's paying the mortgage on time

GaterDrew,
JD sent me your question and he asked me to make a comment. (I'm NCN from No Credit Needed, a debt reduction blog...)
2 years ago, I had over $11.5K in debt and I managed to get out of debt in less than 10 months...
I would strongly advise AGAINST using a credit counseling service. I know that the minimums and and
interest rates are tough, but be patient, create a plan, and stick to it. You are very young, and using a credit
counseling company could potentially wreck your credit. Seriously, some lenders view it as bad as
a bankruptcy. And, $7K is not that much money, considering the massive amounts of debt that others
have paid off. For a detailed breakdown, you might want to check this post over on my site...
http://www.ncnblog.com/2007/04/16/debt- ... -card-web/
...
Just a few thoughts about your specific situation...
Are the medical bills yours?
Are you working full time? 2 jobs? married? kids?
Are the bills your dads? why do you have to pay them?
In school?
For $7,000, you could work a part time job and
be out of debt in less than a year...
I'm glad to see that you are wanting to be debt free, but there are no real short cuts...
you either have to make more money or spend less, that's the bottom line...
(There are SOME radical situations where debt consolidation MIGHT be the right answer,
but not for $7,000... if it is the rates that are killing you, could you get a personal
loan at a bank to lower the rates? how about calling the medical people..?)
I'll await your answer and we'll all try to help you walk through this!
Good luck!
NCN

I'd have to agree with NCN that with your particular situation, debt consolidation and/or settlement (as you alluded to in the original post) are not really the best options for you. It sounds like all of your debt is with the one Chase credit card...is that right? It's no surprise to me that Chase isn't sympathetic, but I think working hard and being creative will be your best bet here. Keep with it...sounds like you've just had some hard times.

P.S. The type of consolidation that kick_push mentioned with his mother is different than working with a non-profit debt consolidation company. His would be getting a consolidation loan, which also has it's own set of pros and cons. Usually if it's credit card debt, it's not good to do a consolidation loan that's tied to your home because all you've done is taken unsecured debt (credit cards) and turned it in to secured debt (associating it with your house), so if you still can't make payments, now your house is on the line. Granted you should get a better interest rate, but there's a lot more at stake as well. But once again, it all depends on the situation and a large number of individual factors...

Consider the possibility that what appears to be one BIG problem is actually many smaller ones. If you can visualize this, it'll be easier (with our help, of course) to tackle them one at a time. Ask some specific questions and I know there are lots of people here who will try to give you specific answers.

I've heard a lot of people with many bad things to say about credit counseling. This may be the only good one you hear, but here is my experience with it:

In college, like so many people, I ran up credit card debt. I graduated with more than $6500 in credit card debt and a small car loan. I tried to make the payments, but I got overwhelmed. So, with my $27000 a year job, I called Genus Credit Counseling. They “organized” my debt for me and electronically debited $187 from my checking account every month. They sent me a statement each month telling me where that $187 had gone, and I continued to get statements from all of my credit card accountholders. As the balances dropped, I paid off the smallest ones if I had the money, and then had the Genus payment that was going to the paid off account applied to the account with the highest interest rate. If I had paid only the Genus payment and nothing more, I would have had my debt paid off in 6 years, since they negotiated lowered interest rates. In the end, I had it paid off in three years, and now have a credit rating that is over 700, as does my husband.



I have known people who have had bad experiences with credit counseling, and to those who are considering it, I usually give the following advice:

1. Don’t use any “service” that isn’t transparent. You should still get your statements to verify that they are paying the bills if that is the agreement.
2. Don’t use an agency that requires a certified check or money order. The fees will eat up your “savings,” and the inconvenience will make it less likely that you will continue with the program. And, of course, this makes the money less traceable.
3. The service should make you make a budget. It’s usually simple, and it’s a first step to being accountable for your expenditures.
4. You shouldn’t have to deal with collectors if you are in credit counseling. Genus gave me a number to give to all of my creditors, and they did make them stop calling me.
5. Get a credit report periodically to make sure that the information that the agency has isn’t being misused. I checked mine, and the only thing I noticed was that the cards that had been in the program were marked as “closed by creditor” once they were paid off.

Genus is now American Financial Solutions, at http://www.myafs.org/. I verified with them that the service still automatically debits your account, pays your creditors after 8 days (legally required to hold the payment for that interval), and you still get your statements every month so you can verify that they are doing their job. However, something I did learn today is that some states (my state, Missouri is one) require you to use a counselor from your state.

Just a thought from someone with a good experience.

Well these days i have observed that many people are facing problems and having lists of queries. So i am here to resolve the same. Just ask me and i will be back.
==========
eva
Debt Consolidation

I had a couple one or two day late payments with Chase (by mistake), and once went over limit (didn't understand balance transfer fees) and they reset my card to 29.99%. I have another card with them at a reasonable rate, but they will never budge on the 29.99% on the other card even two years later. I would have just cancelled it, but it was my longest standing line of credit. Hilariously, Chase let me transfer most of my available credit from that account to the other account with a reasonable rate without any trouble. Furthermore, they had not problem sending out "Transfer a balance now for 5.99% for the life of the balance" checks. In the end, I used a couple of those to bleed some debt down that was on a higher interest rate. Crazy chase.

It's no surprise to me that Chase isn't sympathetic, but I think working hard and being creative will be your best bet here. Keep with it...sounds like you've just had some hard times.
------------------------
Sujith




Addiction Therapy

first, let's all stop whining and complaining how unsympathetic the credit card company is being. That doesn't do a damn thing and in reality it is your debt. own up to it and move on. Really, this is what GatorDrew has to do first. got it...Chase is bad, terrible, evil, rigid, whatever. Get it out of your system and move on. You are focusing all your efforts in the wrong direction.

second, there are distinctions between a non-profit credit counselor, debt consolidator, debt elimination, etc., companies. I presume that we are talking about consumer credit counseling since GatorDrew linked NFCC. credit counseling isn't all bad; however, there are caveats to going this route. It isn't the best, it isn't the worst. I disagree with NCN that creditors look at credit counseling as badly as bankruptcy. This is simply untrue. During your time with the credit counselor service, yes, your credit is frozen and you aren't going to get any more credit. This is a good thing since you shouldn't be getting more credit. At the same time, you can quit the credit counseling service at any time, and the caveats in your credit report will be removed. There is no way once the caveats are removed anyone will ever know you were under credit counseling. There are some companies that charge off debt (like amex) that is under credit counseling program, so that IS bad and is as bad as bankruptcy. so you must know how each creditor treats the debt that you want to put under the counseling program. You also do not have to put all your debt under the program (this is smart as it gives you opportunity to maintain the lonest standing in good standing credit card, for example; however, it is dangerous since you may be tempted to use the card that is out of the program). I would say in just about all cases of bad experience with credit counseling services, it is because of the misperception that your debt is no longer your responsibility and payment is on autopilot. For their part, credit counseling agencies do not emphasize or they don't emphasize enough your responsibility and role in the process when you sign up. You are still responsible for ensuring that the credit counseling service distributions get to the creditors on time. You still must actively manage your debt. with all this said, and i could say much more about credit counseling, it may not be the best choice for you. especially if you have managed to maintain a good payment history, albeit at he minimums.

third, as NCN asked, there are several unanswered questions. More importantly, no one has asked GatorDrew to layout the finances. It is impossible for anyone to give advice to him or anyone else without knowing the entire picture. Whereas NCN might have easily been able to payoff $11.5k in 2 years, gatordrew may not have sufficient resources or ability to be able to knock out the $7k debt because of income and/or inability to get another job.

How about a less traditional approach? I have had good luck getting a loan with Prosper.com. Or some other peer to peer lender. It would be fixed interest, a defined term of time. No interest rates raising because they feel like it. You state your case for the loan and the decision for lenders to fund you is not just based on credit scores. Its a little work for a first time borrower to get approved, but I had a really good experience with them. Barring that, I would try for the bank loan. Balance transfers can trap you into paying even more money.