Hey everyone, I’m at work so I don’t have all my exact numbers with me, but I’ll update later when I get home. Right now, I have about $63k in credit card debt spread across 10 cards. I’ve been looking into debt consulting, but there’s so much mixed info out there.
I heard debt consolidation is basically a scam, but debt consulting is different? Someone mentioned “Debt Fellowship” and said they’re good. I just want to get this debt paid down and move on. Lesson learned.
Anyone got advice or experience with this? Appreciate any help!
I’ve explained this so many times, so here’s the short version:
True debt consolidation means taking out a single loan to pay off your other debts. Banks and credit unions do this.
Most companies advertising ‘debt consolidation’ are actually doing debt settlement, which is NOT the same thing. They tell you to stop paying, your accounts go delinquent, and eventually, they try to negotiate for a lower payoff. But this tanks your credit for years and can even get you sued.
The IRS may count the forgiven debt as income, so you could owe taxes on it.
Bankruptcy is usually a better option than debt settlement. It’s a legal process and gets handled properly.
The best option for most people is a Debt Management Plan (DMP) through a legit non-profit credit counseling agency. They negotiate lower interest rates, you pay off your debt in full, and your credit takes way less of a hit.
If you’re considering a DMP, check out NFCC (https://www.nfcc.org/) to find a real non-profit credit counseling agency.
We signed up with Family Credit Management, and it’s been a lifesaver. They cut our interest rates (some to 0%) and lowered our payments by half. They’re a non-profit, and they’ve been great to work with. Only thing is, you have to close all your credit cards, but for us, that was a good thing.
Avoid debt settlement companies. They take 20-30% in fees and give you no real guarantees. A lot of their ads make it seem easy, but they don’t tell you the downsides—like the fact that you could get sued, your credit will get destroyed, and interest keeps piling up while they ‘negotiate.’
If you’re looking for actual help, go with a non-profit credit counseling service. NFCC (https://www.nfcc.org/) is a good place to start. If you’re in deep, bankruptcy might be the better move. It’s faster and safer than debt settlement, and the damage to your credit is about the same.
@Leith
Debt settlement does have a place for some people. It won’t show as a bankruptcy on your record, and your credit can recover faster in some cases.
Honestly? I don’t trust any of these companies. Best thing you can do is learn about personal finance yourself or find someone who’s actually good with money and get advice from them.
@Aeron
I called Citi and told them I was struggling. They gave me 0% for 5 years and let me break it up into small payments. Amex lowered my interest to 10% and stretched out my payments, and I could do that online. Worth calling them before trying anything else.
I went with GreenPath a few years ago and paid off $50k. They kept me in the loop the whole time, and I always felt like they actually cared. Paying it down was still tough, but they made it manageable.
I just started with Family Credit Management in February. They negotiated lower interest rates (dropped mine by 20-25% on all cards), and my minimum payment went from $1,300 to $533 plus a $49 management fee.
It’s still early, but just seeing the lower rates and knowing I have a plan is a huge relief.