Three Tales of Debt Consolidation Programs

These are the stories of three different people who considered debt consolidation as an option to manage their debts- Scott Salva, Susan Smith and Daniel Jones. All three people found there’s no substitute for doing research and legwork when it comes to debt consolidation- they are vital steps in not only choosing a debt consolidation program, but also finding out if debt consolidation will work.

Scott Salva’s Tale of Debt Consolidation

The Christmas season did it. Lulled into complacency by credit card transfer deals, the existing debt seemed to be safely parked. The news said the job market was improving. All the stores were running excellent sales, and the temptation to pull the credit cards out and buy gifts -for others and for Scott was too strong. What slipped through the radar was that all those zero interest balance transfers carried transfer fees that actually increased the total amount owed. When the January statements came in, the numbers were shocking.

Sitting down and taking inventory of all the debt, it was obvious that even with prioritizing the amounts and developing a schedule of payments, it would take years to resolve the balances. In the meantime, temptation would surely come calling again-the cards would come out of the wallet. No matter how many promises he made himself to pay with cash only, interest would keep adding up in the interim, and those monthly credit card payments were killing his household budget.

His debt situation had reached the point where life decisions were being deferred. Moving to a new home was unthinkable even in the presence of low interest rates and equally low real estate prices. His credit rating was getting shaky enough; in fact, that he thought a new car loan might be out as well. Debt consolidation programs were always seen as suspicious of a “scam,” but the time had come to evaluate such programs with a truly critical eye. Were the offers valid and if so, could they help?

Education was the first order of business. Finding companies offering debt consolidation programs was no harder than running an Internet search. The idea was to find a company that seemed open and transparent with the plan details. He cross-referenced against complaints at the Better Business Bureau’s website, and the list began to narrow down quickly. Next the phone calls began. Any company that seemed reluctant to answer detailed questions was eliminated as a potential.

Essentially all the companies were offering the same thing: to negotiate with his creditors to lower existing balances and to extend the life of the loans with lower interest rates. The final amount would be consolidated into one balance, with one monthly payment to be distributed among my creditors. The company with a clear BBB record that offered everything in writing with a clear schedule of payments, and that answered all his questions in detail, “won” in the end.

So, a year later, what’s his status on the debt? It’s been reduced by more than a third, right on schedule with the realistic 2-3 year debt resolution plan outlined in his company’s literature. The monthly budget is starting to loosen up. Yes, he has made sacrifices to make that single monthly payment, but the amount doesn’t change, and because of that, it can be treated as a fact of life. Seeing the total debt amount shrink monthly made it easier for him to keep the credit card in the wallet, so overall spending habits have also improved.

The debt consolidation company also offered free financial counseling and literature that have been useful for him. Taken altogether? This has been a positive experience for Scott. Without careful planning and evaluating multiple companies, that might not have been the case.

Susan Smith’s Tale of Debt Consolidation

Susan Smith was feeling overwhelmed by her debts. Because she was recently laid off, she could no longer make the minimum payments on her credit card bills, car loans, mortgage, and student loans. Despite the fact that she was able to pay all of her bills while she had a job, she had already run through most of her savings, and was struggling to pay her bills.

She began to look into her options with debt consolidation programs. She soon discovered, unfortunately, that she wasn’t a good candidate for debt consolidation.

She found out that she would need a steady source of income to qualify for the loan. The payments she received from unemployment insurance did not qualify at some banks. Next, she discovered that not all of her loans would be eligible for consolidation. Her mortgage was not eligible for the loan because her house was underwater. Her car loan was also considered to be non-eligible for consolidation.

Because of all the roadblocks, she decided not to pursue debt consolidation. She’s looking into other options, and hoping she finds a job soon to pay off her bills.

Daniel Jones’s Tale of Debt Consolidation

Daniel Jones was also considering debt consolidation. While he was able to make his monthly minimum payments on his debt, he felt as if he was never getting ahead. His budget didn’t let him pay much extra towards his debts, and he thought that debt consolidation might be the answer.

He started his research by doing an internet search for debt consolidation loans. His search turned up thousands of results. As he began the long process of researching companies, however, he began to have some reservations. Several companies didn’t return his calls, many wanted him to pay application fees, and he found many problems with companies when checked on them through consumer watchdog groups.

At the end of his research, he believed that he just couldn’t find a company that he trusted enough to handle his debts. The market was too full of companies that were poorly managed or seemed to be scam operations. Ultimately, Mr. Jones also decided he would try to find another way to manage his debt.

About the Author

This is a guest post written by Suzan Bekiroglu. Ms. Bekiroglu is a published author, freelance writer, and editorial consultant for secureloanconsolidation.com. After receiving a Bachelor of Arts degree from the University of South Florida, she faced the mounting obstacle of paying over $24,000 back in student loan debt. Thus, she became determined to eliminate the debt and become very knowledgeable about money management.  She seeks to educate others with tips on managing student loans and other kinds of debt, as well as in general personal finance and money saving tips.

With the present slothful economic state in the US, just about everyone has a nodding acquaintance with the D-word debt, although a particular class of people in the US is intimately associated with it. Debt can creep into your personal thoughts and wreak havoc and even spoil relationships. Over the past few years, I’ve been in and around credit card debt and when I heard about this personal finance blogger who invited success stories of how people squelch their debt load, I couldn’t resist the temptation of sharing my experiences of drowning in a sea of high interest debt and how I settled my way out of it. Though there was an abundance of debt settlement options that flooded by mailbox, I decided to negotiate my debts on my own by taking resort to some DIY steps. Here’s how I managed to get out of the high interest debt trap.

How I brought myself into this hapless financial situation

Since I started sharing my personal experience with debt, let me tell how I landed up in this gross financial mess. My first job was that of a CCE or a customer care executive where I used to spend 9 hours answering queries of credit card holders. From there I changed to various sectors within the same company including the credit card fraud department. I used multiple cards and my habit of impulsive shopping made me whip my plastics for every purchase and this is how I ended up in a soup. Thankfully, my job helped me equip myself with enough experience and knowledge on getting out of debt on my own and deleting my financial worries. I owed a total amount of $60,000 on revolving credit card debt and these are the steps that I took to settle them.

Debt settlement steps that I took to eradicate my fiscal worries

A person who has amassed a huge amount of debt on multiple credit cards will think that defaulting on the payments would just subject him to penalties and late fees amounting to 25-30%. I too foolishly thought that repaying the balance with the additional fees would change my life but unfortunately it didn’t. It rather set the stage for my vengeance against the soaring credit card debt level. Read on to know how I succeeded with DIY debt settlement.

• I made a list of the debts: Though some people may find it foolish to sit with a pen and paper to calculate their debts, but I did it! I sat with a pen and paper and jotted down the total debt amount, the principal balance, the interest rates and the due dates on each account.
• I set goals and started saving money: Before opting for DIY debt settlement, I knew that I had to grow a fund by saving at least 10% of what I made in a month so that I would be able to repay the remaining amount on time. Therefore, I pinched my pennies for a long time and started saving money like never before.
• I negotiated with my creditors: Though I used to feel shy meeting with my creditors and telling them about my financial hardship, yet I took this step as they’re the best people to help me out. I told them about the fiscal hardships that I’m going through and convinced them that I will pay back on time once they waive off a certain portion from my debt amount.
• I prepared a post-settlement budget: Yes, this is a very important step that supported my request and helped me in convincing my creditors. The well-planned budget made the creditors understand my urge to repay the debt if they settle for a lesser amount.
• I came up with a settlement amount and made the payments: Last but not the least; I came up with a settled amount that benefitted both me and my creditors. As they agreed after a small discussion, I started making the payments of the remaining amount and within 24 months, I became debt free.

Author:

Jenney Roberts is a  writer for various finance related Communities including Debt Consolidation Care. She is a financial writer by profession and has specialization in dealing with financial problems and its solutions.  She is well equipped to write articles on debt consolidation, savings, planning, frugality, debt settlement etc.

Mistake #1: Not knowing the difference between subsidized vs. unsubsidized loans

As a naïve, uninterested, invincible 17 year old, I didn’t pay any attention to what my mom was signing me up for.  Unfortunately for me, I don’t think she really knew what she signed me up for either.  Although both of these loans are backed by the government, there is one major difference between the two. One type of student loan is a subsidized student loan. The other is an unsubsidized student loan.

A subsidized student loan is based on financial need and there is a specific amount of money that you can borrow each year. This is an interest bearing loan, however while you are enrolled in school the government pays the interest for you. This loan does not require any payments from you until six months after you have graduated from college. A subsidized loan is great for someone who is attending a community college where the overall cost is much less than a university.

An unsubsidized student loan is also based on financial needs however the amount you can borrow is much higher compared to a subsidized loan. This loan is also interest bearing. The biggest difference between this loan and a subsidized loan is that the government does not pay the accruing interest while you are enrolled in school. You are responsible for paying it.  Luckily (or so I thought …) many student loan organizations will let you defer the interest payments until after graduation, and mine did which I thought was great as it allowed me to not have to work my first year in school.

Mistake #2: Not paying my interest while in school

Although my student loan company allowed me to defer interest payments on one of my unsubsidized student loans until after graduation, it was not a good idea to wait. Interest continued to accrue on my loan while I was in school, consequently increasing the overall amount I owed. If I had been smart and paid the interest payments while in school, which were inexpensive compared to a standard loan payment, I would’ve saved myself some good money, which I’m now repaying.

Mistake #3: Spending the ‘overpayment’ on beer

I didn’t know this but almost everyone receives an overpayment of student loan money after the school has been paid by the loan company. Most people will be like me and keep this overpayment and use it to pay for partying. While this is okay, it was a poor decision, one I’m still paying for now. I could’ve saved myself a lot of stress later by using the refund to pay a portion of your student loan back immediately. This would’ve helped reduce the amount of interest that I owed as well as the size of the loan.

Mistake #4: Not paying interest on my deferred loan

Like most students, I didn’t have the necessary means to pay my student loan payments after college. Therefore I deferred them as long as possible. While this alone wasn’t a terrible decision, not paying the interest while the actual loan payment is in deferment was stupid. For one, the interest that you pay on your student loans is tax deductible (which I didn’t know). Secondly, not paying the interest substantially increased the amount of my total student loan owed.

So for those of you that don’t like reading, below is a very brief summary of what I learned from this tale of student loan mismanagement:

1)    Know what you’re getting yourself into, and know whether your loans are subsidized or unsubsidized as this can make a big difference.

2)    Pay your interest while in school on your unsubsidized loans.  If not, it will come back to bite you.  Trust me.

3)    Don’t spend the overpayment.  It’s definitely not ‘free money’ like I thought.  Use it to start paying your loan right there.

4)    Pay your interest on your deferred loan.  See #2.

Follow those instructions and your student loan repayment experience will be a bit more pleasant than mine.

About the Author

Sammuel Mauzzie is a financial blogger who enjoys writing about macroeconomics, personal finance, and the potential landmines of student loans.  When not working with Wonga, Sammuel can be found hitting golf balls or hanging out with family.

I suffered the misfortune of credit card fraud at a terribly inconvenient time, not that there is ever a good time for it to happen. I had stretched my credit card near my borrowing limit for the sake of purchasing items to furnish a recently rented apartment, so funds were tight. I had been keeping a watchful eye on my credit card statements online, and I had a smartphone app to track the expenses on all my money accounts. But once I had nearly maxed out my card I stopped using it, resolving to pay off the balance before using it again.

Of course the fraudulent charges hit me during the time when I wasn’t checking my credit card balance regularly, so I wasn’t able to pinpoint the first charges in time before things came to a head. I actually didn’t notice that I had been subject to credit card fraud until I absentmindedly used it for a food purchase, only to find it declined. While I knew that my credit card was approaching the maximum, I knew there was no way that a meal at lunch would push me over the edge. See A Taco Tale. I immediately went online and discovered that someone had been making a series of small purchases on my card, I assume so that I would be slow to catch them. Feeling defeated by hopeful that I had caught the problem earlier enough, I contacted my credit card company.

Normally the bank and/or credit card company can easily deal with an incident like this because the perpetrator will spend an exuberant amount of money on your card, making the fraudulent charges easily identifiable. Furthermore, the theft usually occurs in another city or even state where you wouldn’t normally shop, much less travel to. Unfortunately this was not the case when I was struck with fraudulent charges. Whoever used my information did so in the city where I lived, making it harder to prove to the credit card company that the fees were not mine. It took a few heated conversations with various “managers” and “officials” before I could convince them that the charges were indeed some else’s, and that I needed them to be undone for the sake of my credit rating.

Even after speaking to the credit card reps, it took about a week for the charges to be removed from the account. Of course they cancelled my card and I had to set up a new credit card to prevent further fraudulent charges, which took even more time. The problem itself had been resolved, but it had left me with a whole new host of problems, not least of which was a mounting debt that was unaddressed during this whole drama.

But the experience taught me the value of monitoring my balances on all my monetary accounts, especially if they’re not active. Just because you’re not using your credit card, it doesn’t mean that someone else might be. In this day and age where identity theft is rampant among even the most cautious consumers, it’s never a mistake to be extra vigilant.

How do you protect yourself from credit card fraud and identity theft?

By-line:

This guest post is contributed by Angelita Williams, who writes on the topics of online courses.  She welcomes your comments at her email Id: angelita.williams7 @gmail.com.

An AARP Tale

for all those who may be interested in purchasing an immediate annuity from AARP and New York Life, please read this tale.  I apologize to my younger audience but remember one day, this may apply to you and you must know the difference between the payout rate and the rate of return.