I initially had $19,000 in debt spread across three credit cards. When I signed up for a debt consolidation plan, I was told that by making the monthly payment of $458, I would end up paying a total of $3,000 in interest, as long as I stuck to the minimum payments. If I paid faster, I was told I’d pay less interest.
After 14 months of payments, I just realized that my debt has actually increased by $700. I called to find out what was going on, and it turns out I’m still being charged 10% interest on each card. I’ve already paid almost $3,000 in interest alone. On one card, I’ve been paying $290 a month for 14 months, which I thought would reduce the balance by $4,000, but it’s barely gone down by $1,500.
I’m devastated because this wasn’t what I expected. I can’t apply for a business credit card or improve my credit until this debt is paid off. They initially told me it would take 4 years to pay off, but now I’ve learned that was just an estimate based on principal and interest (PI). I can’t keep making payments on these same cards for over five years. Does anyone have any advice on other options I can explore?
Unfortunately, there’s not much you can do. Your experience with these organizations is quite common. Many of them are predatory and make exaggerated promises to those in vulnerable situations. As you can tell, I’m not a fan. Their ability to negotiate often depends on their relationship with the debt holders, and without that, they don’t do much more than what you could handle on your own.
Your best bet might be to exit the plan with as little financial loss as possible—if that’s an option. Keep in mind that these companies tend to have contracts that favor them heavily, especially when it comes to termination penalties. A lawyer might be able to help, but that will come at a cost. If you still have the contract, go through it carefully to ensure they’re fulfilling their obligations. You might have some leverage there. Unfortunately, verbal promises from the salespeople often don’t hold any weight. Best of luck.
I went through a nonprofit, so does that mean the agreement isn’t legally binding? At this point, I’ve paid more than three times what I originally owed on one of my credit cards, just in interest (over $30,000), and I’ve never missed a payment. I’m seriously considering just stopping payments and letting it go to collections. From there, I’d figure out what to do next. People keep telling me this is a bad idea because it will ruin my credit, but I already accepted the risk of damaging my credit when I signed up for this plan.
I’m struggling to find information on what happens if I go down this path. I just can’t keep paying thousands upon thousands on the same credit card for the next ten years. Does anyone know where I can get more information about this process? I just want to settle at this point because I can’t keep doing this. The debt is about 10 years old now.
How much total debt do you have, and what’s your income? I think you should drop the debt consolidation plan (if you can get out of it, though I’m not sure) and focus on aggressively paying down these debts. Take on a second job, create a strict budget, and cut out all unnecessary spending for a year (no trips, dining out, or extra activities). You could likely pay off this debt in less than a year!
Pay the minimum on all your cards, but throw every extra dollar at one card until it’s paid off, then move on to the next. If you have $20k in debt and can earn an extra $2k per month, you could be debt-free in less than a year! Consider working as a waitress, pulling night shifts, and doubling up on weekends. Your life will be tough for a year, but you need to get control of your spending!
Thank you so much. Unfortunately, I have a disability that limits how much I can work. I used to work 60-hour weeks, but it led to hospitalization :/.
Right now, I make $1,900 a month, and my monthly expenses, including the debt consolidation, are about $1,750 (not including groceries or anything beyond bills). I’ve done everything possible to avoid spending money. I haven’t taken a trip in years, I cut my own hair, never eat out, don’t spend on entertainment, and wear hand-me-downs. I quit smoking and drinking, and I even walk to work. The only things I spend money on are necessities for me, my pets, and my debt.
There’s really nothing left to cut, unfortunately.
It’s a tough situation :/. I tried following your advice, but the interest rates are so high that I haven’t been able to make a dent for years.
Put an immediate stop to the program. Saying you are unable to make the payments and requesting a hardship program, give each card a call. To make things more bearable, they will reduce the interest and payments.Better still, give a non-profit organization like Money Management International a call so they can handle the labor-intensive work for you. What matters is that your cards will close. Pay them off and close them.
Such initiatives are frauds. If every card is still open and in good standing, you’d be lucky.
I had once discussed this with a business. They intend to seize and retain my money. not send in any money. Allow all of the cards to close and be collected, and then give yourself permission to call and settle for less.
Total fraud. can destroy your credit.
This is an annoyingly prevalent problem. I have over 25 years of experience as a professional debt collector, and one of the larger ones even tricked my brother by running advertisements on the radio every 20 minutes.
Despite my pleas for him to reconsider, he persisted in his sales pitch.
Ideally, you can resolve this without them suing you for whatever money they believe you still owe.
I’m not entirely sure what you signed up for, but based on the numbers you shared, it sounds like you might have enrolled in a Debt Management Plan (DMP) that isn’t helping reduce your debt because you’re not able to pay enough, even with reduced rates, to make progress.
From what you’ve mentioned, you make $1,900 a month or $22,800 a year, and your debt was $19,000, which is almost your entire annual income.
If your debt is still around the same level, bankruptcy might be your best option. With your low income, you could potentially qualify for Chapter 7, which would wipe out your debt completely. The downside is that bankruptcy stays on your credit report for 10 years.
I recommend consulting a local bankruptcy attorney. Their initial consultations are usually free.
Avoid declaring bankruptcy since it will cause more harm than good. Create your own strategy. Over time, they will come to accept 20–40 percent.
Your debt load will decrease and your credit score will rise faster than you anticipate.