debt consolidation, good move at the expense of my credit?
June 22, 2014 8:32 AM Subscribe
briefly, over the last 3 years i experienced various times of unemployment. I've unfortunately accumulated about $45k in credit card debt. Does it make sense for me to have a debt consolidation service negotiate my balance down at the expense of my credit?
posted by foodybat to Work & Money (20 answers total) 3 users marked this as a favorite
My credit is just okay ... i think my score is around 650, this is mostly due to my income to debt ratio, as i'm maxed out on my 2 cards, and i have a revolving personal line of credit that's almost maxed out.
I've been working for a new company for the past 3 months & it seems like it will work out for me... but i have all this debt to deal with. I'm paying my minimums (I know that's a bad thing) at about $770/month...
I'm on time with everything... not late on anything... but struggling month to month to get by. 2 credit cards are at 6.24% & 10.24%... & the personal line is at 7.75%.
I debt consolidation service contacted me... & pitched me the same offer that i've heard often in the past;... they'll take the $45k... & negotiate it down to around $18k. they take 18% on the total amount ($8k)... there's another $10/month or so in 'maintenance fee' (which is the cost of opening up a 'escrow' type account.
Essentially saving me about $18k total, & having it all paid off in 3 years max (no prepayment penalty). The catch? I stop paying these creditors & only pay this debt collection company... they issue the payments, deal with the creditors when the call, etc.
Now, i own one of my cars, and my wife's car we're about $10k left on or so... I'm a number guy... & I get it.... but after going to fico's website & seeing how the credit score is determined & I realize it will have a negative impact on my already just so-so credit.... is this the right move for me?
They all offer similar programs at similar costs... but should i do this? I'm in my house now about 9-10 years... i don't think we're moving anytime soon.... (we're sideways on our house...) I don't think i'm looking to buy a car or anything.... So, does it matter that my credit gets hurt? I know after a period of time it gets rebuilt....
I love the fact that in 3 years (max) this giant elephant of debt i've been living with will be gone... but should i care so much about the detrimental affect it will have on my credit?
I'm happy to elaborate further if more explanation is needed....