Do It Yourself Debt Consolidation

Hello, I am Betsy from PA. I am a single mother and wanted to knw how do it yourself debt consolidation can help me. What are its benefits and disadvantages?

I think one advantage for DIY debt consolidation is being able to talk straight up with your creditors on your current situation. It's an advantage coz you'll be able to explain your situation with them thoroughly and you can ask them specific terms on your debt. If you're lucky you just might be able to lower down your interest rate wtih them so you can pay less.

Well, consider yourself lucky if you're able to find a creditor who can actually lower your interest rate and cut back some fees for you....

It helps by first making a list of all your payables--sort them by debt type, i.e. secured loans and unsecured loans. Secured loans are simply those loans that have collateral--mortgage, auto loan, etc. Unsecured loans are debts that don't have security attached to them.

After you've done this accordingly you need to arrange each debt on your list according to their interest rate. Put the ones with the higher interest rate on top of the list. You'll want to get rid of the debts ASAP so that you won't be able to spend so much on interest payments.

And yes, what you need to do next is give your creditors a call. Ask for a lower interest rate or different payment terms. They may say yes, or they may say no. What matters here, at least for me, is that at least you tried your best and told them abt what you can offer to them at this point in time.

What happens if they say no? What are my alternatives?

Well if you still really wanna go for the DIY option I think the the best thing to do is to go for a balance transfer. It works by getting a credit card that has a really low interest rate or a zero percent interest rate, even. And then you use that credit card to pay off all your debts. At least by having a low interest rate you'll not really be worrying about so much interest that needs to be paid in return.

Debt consolidation really isn't a very good option, to begin with. Getting a loan to pay off another loan--robbing Peter to pay Paul--doesn't really address the root of the problem. Studies have shown that consumers who opt for this debt relief option never really do get out of debt later.

Think about it--you're making a loan to to pay off another loan. That adds another weight on your shoulders to the already heavy weight that you're carrying. It's very likely that the interest on this new loan will be sky-high, given that your credit isn't really in good shape to begin with.

Debt consolidation will really not help you in the long run. Have you considered other options, like credit counseling, or debt settlement?

Can't I just file for bankruptcy to get it over with? I don't see the point of going thru repayment. That would be a waste of $$$ on my part! Serves my creditors right for hiking up all those interest rates and late fees

Yes, you could file for bankruptcy. But don't think that filing bankruptcy means you don't have to pay anything back. In fact, if you don't qualify for Chapter 7 and are forced to file Chapter 13, it is likely you will pay the full debt amount back.

Also, keep in mind that bankruptcy stays on your credit report for a long time (7 years for Chapter 13, 10 years for Chapter 7) and also stays on your public records for 20 years. If you have the financial resources to avoid it you should.

Thank You everyone. PurpleCow I am interested in the other options that you have presented-- debt settlement and credit counseling. Can you explain each of these, please? Thank you.