NJ Credit Card Debt Consolidation? Any advice?
Can anyone recommend a good, legit credit card debt consolidation for the state of NJ. I need to consolidate a few cards and I always hear bad things about these services but i really need one payment for all cards. Any recommendations in NJ?
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- Credit Card Debt Consolidation?
“Debt consolidation” can refer to two completely different things: The first is getting a loan to pay off all debts to consolidate your bills into one lower payment. If you do this, go through a local bank that you know and trust. Stay away from online firms. You need to have good credit to get this type of loan. Many people who get debt consolidation loans quickly find themselves in twice as much debt as when they started….because it’s simply too tempting to start using all that newly available credit that was paid by the consolidation loan. If you get this type of loan, contact your credit card companies and request voluntary credit limit reductions to under $1,000 to avoid this temptation.
Debt consolidation also refers to a risky practice of debt settlement: deliberately defaulting on your credit cards to try to force your creditors to settle for less.
Stay away from any “debt consolidation” company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.
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One option is entering in to a debt management plan with a non-profit. Contact your local Red Cross for a referral to the local Consumer Credit Counseling Services (CCCS). They can negotiate reduced interest and payments. They will require you to stop using all credit and to cut up your cards. Your credit report will be updated to “enrolled in debt management.” This does not damage your credit, but it may make it difficult to obtain new credit while you are enrolled in their program….so don’t use this service if you anticipate applying for a new apartment, car loan or mortgage anytime soon, as you would might be denied while you’re enrolled in the CCCS debt management program…
To add more info:
Debt consolidation actually costs you more in interest charges. Let’s say you have a card or two that will be paid off in 1 year. If you incorporate those cards into a 5 year debt consolidation plah, you’ll extend the pay off date an additonal 5 years. You’ll be paying interest on those cards for that time. If you have more cards, the cost is much higher. Take a closer look at your cards and the anticipated time it will take you to pay them off. You may be able work out something better in your favor.
Debt consolidation is an indication that you have money management problems (at least to a lender). You may have to come up with some collateral (house, expensive car, etc) to cover the lender’s risk.