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My husband and I are trying desperately to get out of debt, but unfortunatley we can't seem to find the light at the end of the tunnel. I want to buy a new house in about 4 years and with the rate we are going my dream may never come true. We don't want to get a second mortgage so we have looked into a non-profit organization called Credit Advisors, which claim to get us out of debt in 51 months.
Has anyone heard of this company or better yet used/using them? Do you know if it'll hurt our credit score, if they help us out, say as if you file bankruptcy? If you feel more comfortable pm'ing me, I understand. Any info would greatly be appriciated! Thank you!!!
I just went through this whole ordeal after loosing my job. I looked into a lot of these credit agencies and here is what I found out-
1. Yes it hurts your credit. Its not as damaging as bancruptcy, but it does ping you pretty badly.
2. It is rare that those companies can really help you like they say they can. Basically all they do is call your creditor- cancel your line of credit, stop your bills from coming to you, try to negotiate a lower interest rate (which YOU can call your creditor and do), and then tell your creditor how much they will pay on your balance each month- even if it is MUCH less than the minimum payment. This can actually cause you more problems as you get further and further behind on payments from the creditor only getting a partial payment- and you are never made aware of it since all the bills, and calls have to be stopped under the agencies agreement with the creditor. This dings your credit even more.
3. You end up not only paying the interest to your creditor (in full BTW), but you also pay the credit agency for their "help".
4. There is no gurantee you will be out of debt when they say you will- in fact you usually arent.
5. The agency dictates how much you pay them per month- and most times its not much different than what you are already paying your creditors- but what IS different is the amount of your payment that the creditors get. They agency divies up the payment sent to the creditors, typically making less than minimum payments to them, and keeping the rest for themselves as a "processing fee".
Basically everything Ive heard and read is that these companies arent all they are cracked up to be, and in most cases are more harm than good. A good rule of thumb I was given for deciding whether to use them or not was this-
1. Are you more than 60 days late on your payments?
2. Can you no longer afford to make at LEAST the minimum payment on all of your debts?
3. Have you contacted each creditor and asked for a reduced interest rate, or a credit plan with them internally (they HAVE to offer this by law, just tell them you need help repaying your debt, and need their assistance or you will need to file for bancruptcy. This scares them and they will enact their credit repayment plan with you, they all call it something different like repayment, extenuating circumstance, debt reduction, ect...) and they were unwilling or unable to offer any type of assistance to you?
4. Have you looked into getting a debt consolidation personal loan at a lower FIXED interest rate over a fixed term (like a car loan or mortgage loan would be set up) and been denied?
5. Have you exhausted every option and possibility to pay down the debt? There are different approaches to this like paying the minimum on everything except the lowest debt till its paid off- then taking that payment and adding it to the next lowest debt payment till its paid off and so on up the line (called ballooning payoff). Or doing the same thing but instead of paying off the lowest debt amount- you do it by interest charged and pay off the debt with the huighest interest first, then roll that payment into the next highest and so forth down the line. These tend to be pretty effective, albeit still a slow process.
If you can answer YES to all of those questions, it may be a good solution to use a credit counselling agency. In order to make sure you use a reputable one- check them out at the Better Business Bureau and check them out on the National Foundation of Credit Counseling (www.nfcc.org).
HTH and good luck! Ill be right there with ya struggling to pay it down!
Check out the Financial Planning and Budgeting board here. They can work a budget for you (either through the board or through PM's if you're more comfortable doing it that way.) They'll show you areas where you can cut back, etc. in order to maximize your debt payoff. We don't have much debt (just house, DH's car, and student loans) but I used it when we were trying to figure out how in the world we were going to pay for DH to go to grad school without adding more debt. I was amazed and what we figured out and it's worked GREAT for us! 2 semesters down and we already have the $$ in savings to pay for 2 more meaning we're only saving to pay for his last semester. A year ago I NEVER would have thought that would even be a possibility! Or, if you don't think you need help...all the resources are there too for you to figure out how to do it on your own.
I second using the budgeting board first. They have a handy questionnaire that allows you to make a note of everything you spend to see where your money is going. If you have them actually help you and give feedback on your budget, they have very good advice, but sometimes it's impractical (I notice they always tell people to cut back on their cell phone plans...I know that certainly would not be feasible for me personally) depending on your personal situation, but you can always pick and choose what advice of theirs to take.
Emily also has great advice about whether companies like that can truly help you or if you're better off helping yourself without them.
My husband and I paid off $38K worth of debt over the course of 25 months, so I do know a little bit about budgeting and getting out of debt myself. Please feel free to PM me anytime if you want to talk about it.
Thank you Emily for all your wonderful advice, I really, really, really appriciate it. I never imagined getting out of debt would be this hard, fustrating and time consuming. I figured getting help wouldn't be as easy as they say it will be. Again, thank you!
DoblersGirl: I didn't even know we had something like that on JM, I will look into it. Thank you.
I used Credit Advisors before. They are fine, reputable or whatever. It can be really helpful because the interest is so high on credit cards that you can never really "get ahead" without paying WAAAAAY more than the minimum, but Emily is right that if you're not really hurting it's probably best not to go this route because it damages your credit.
I know some of the things Emily said are true, I'm not sure about the part about getting out of debt when they say. I wasn't able to complete the program and filed bankruptcy. But, it did help having only one payment, and it alleviated a lot of stress, so if your situation is bad enough, it might be an option for you, it's a tool that's there if you need it, and it's not as damaging in the long run as bankruptcy!
Oh, I just have to add- I consulted the Financial Planning & Budgeting board here too. And it was a HUGE waste of time for me. They basically told me what I already know (we are in debt- no ####!) and told me to take out MORE loans to pay it off, find cheaper housing (Um I live in a DC suburb, $1200 a month IS cheap, LMAO), have DH find a new job closer to home (even though his commuting expenses are reimbursed), cancel our cell phones and internet (cells are paid by DHs company and the internet is a business expense for him since he runs a home based business with it), and spend less on groceries (cause $150 a month for groceries is too much money). They also told me to sell our cars to use public transport (which we DO NOT have here and I told them that), then they said to sell one car, which isnt an option as we owe more on them than they are worth- so if we sold them, we would end up owing more than we made and then we would be out more money, and vehicles! They also INSISTED that we HAD to have money in our budget for entertainment and fun stuff- but my opinion is that if I am trying to pay off debt and stick to a bare bones budget that there isnt any entertainment and fun stuff that costs money to budget for- you just find FREE entertainment for the time being. They also REFUSED to listen to reason or explanations from me as to why those suggestions werent options and I finally just stopped responding to the BS they were spewing. It really wasnt a help to me at all...
If you are aware of your finances and somewhat financially nimble and capable and able to look at your bills and expenses- you can make a budget very easily. I thought these people were actual financial advisors IRL that volunteered their time and expertise and would look at YOUR REAL situation to come up with things you may be missing- not just regular people taking a "stab" at your financial situation without knowing the whole story or accepting real life complications with what they have suggested. So if I could make a suggestion on that board- use the tools they have already provided. Print out their budget list and fill it out for your situation, use the debt repayment step post, and create a budget that works for your situation to spend less and put more towards debt by ANY means necessary. HTH!
I don't have a lot to add...Emily has pretty much said everything I would have said. I would just add that if you qualify for a 0% interest credit card, try to get one and roll over your debt. DH and I are down to $5,000 credit card debt (I know, I can't believe I'm actually proud to be $5000 in debt ), from about $22,000, and we haven't paid interest in 2 years. We put everything on a 0% card 2 years ago, and then rolled what was left onto another 0% card when the promotional interest rate expired last year. We just rolled the last $5000 onto yet another 0% interest card that will expire in April of next year. Our goal is to be debt free (other than the house and cars) before the end of the year, and I know we can do it! At first I told dh there was no way we could qualify for the card, and I wasn't going to call the number just to be rejected. I'm so glad he called on his own, or else we would still be paying down the interest on our debt. If you have a mortgage and have made regular payments I think you have a good chance to qualify. Good luck...I know it sucks.
I am sorry to hear what you are going through. DH and I at one time were heavily in debt over 40k and the only way we got out of it was to stop charging period. That means everything. I am not sure what kind of bills you have but ours were 2 car payments, a student loan and lots of department stores and credit cards. We negotiated our own interest rates and paid the lower balance cards first. Doing this gave us more money to pay the higher ones later.
We stopped eating out (went to BK on Fridays for the big night out) and started cooking at home. If we couldn't pay with cash for whatever it is we wanted we didn't buy it. That means we didn't have the best and latest technological things like a big screen HD TV (we still don't have one but now it is by choice). We didn't get new clothes or other "must have items". It was tough but we struggled throught it.
We researched the agencies and came to the same conclusions as Emily and just did everything ourselves. We did tell credit cards that we got lower interest rates from others to get our rate down and it worked. It can happen and we got our debts paid off in 4 years. DH worked like crazy and we are now homeowners. Our only debt is the mortgage.
Thank you Gwynbynfoefyn for my fabulous new siggie