I have $7000 in credit card debt, should I go to a debt consolidator?

Question

I'm trying to work at paying off my debt and get my credit score up. I have close to $7000 in credit card debt (I have 7 credit cards). Some of the credit cards have high APRs between 16% and 24%. I've been paying all my monthly payments on time and have been paying more than the minimum payment. Do you think going to a debt consolidator would be better or even helpful? If so, what are good companies to go to?

I don't have a home. I'm 21 yrs old and got a little credit crazy when I got my first credit card out of high school. I would eventually like to buy a home but I'm working on getting rid of the debt first.

Answer 1

I woudn't recommend it. I work in Collections at a mortgage company. Paying more than the minimum monthly payment on time every month looks MUCH BETTER on your credit then consolidation. You should be very proud of yourself for that. You might try calling the cards with the low APR to see if you can transfer some or all of you balance(s) from the high APR cards. Even if it goes over your limit, they might allow you to. Consolidation will also terminate many opportunities for credit increases, new credit card offers, and many lenders will not extend credit to you until the program is complete. Lastly, $7000 of credit card debt really isn't too bad. Yes it's kinda high, but it's not out of control (and these are the people who need consolidation services), especially since you are able to pay more than the minimum every month.

Answer 2

Here's the plan (and you won't need any debt consolidation help for this):
1). List your debts, from the smallest balance to the largest, along with minimum payment.

2). Pay the minimum on everything except the smallest debt and pay as much as you can on this until it's paid off.

3). When debt #1 is paid off, take the amount you WERE paying them and ADD it to debt #2, so that your total debt reduction payment stays the same.

4). Keep going until they're all paid off, then take that same amount and put it in savings every month for your down payment.

The difference in interest between paying the smallest debt first and paying the highest interest rate first is so small, it won't matter in the end.

Answer 3

I have tried Debt consolidation which closed all my accounts leaving the balance which really hurt my credit score. Cut up all of your credit cards so that you do not charge any more. If you can afford than minimum pay it. Try to pay off smallest card first and then use that money toward your larger cards as the balances are paid off. With Debt consolidating you have to make way more than the minimum payment but it does reduce your interest. If you can try to transfer balances to lower interest cards.

Answer 4

Base on your situation, consolidating your debt may not be a good choice. If you have over $10,000 in debt, then you should consolidate. If you are going to consolidate, I would use the saved money and apply most of it back to the principal and invest the rest. Primerica Financial Services is a good company that helps clients get out of debt and they do what I just explained to you. If you go to them, ask about the "SMART" loan, which the lender is Citicorp Trust Bank. http://www.primerica.com

If you are not going to consolidate, I would pay the minimum on the low interest credit cards and move the "free-up" money toward your high interest credit cards (I call it the "Debt Stacking" solution).

Answer 5

You don't say if you have equity in a home to use for a loan. If so, you would be wise to use this way to consolidate. Otherwise, you may be able to contact each credit card and negotiate your interest rate. Try to get it lowered and then try to pay more than the minimum payment as you say you've been doing. Good luck.

Answer 6

Could you possibly take out a loan from a bank for $7,000, initially paying a large chunk of it (say 1 or 2k)? Making loan payments on time (along with the first large chunk payment) would help your credit quite a bit and your debt would also be consolidated with a decent interest rate.

I'm not sure doing that is even possible, but I know that making loan payments on time tremendously helped my credit.

Answer 7

Absolutely. I strongly, strongly recommend taking some time and going through the Motley Fools workshop on getting out of debt. It's free and it has very sound advice. Here's some text I copied from it:

"....

Be especially wary of double-digit debt -- credit cards and loans that charge 10% or more in annual interest. At this level, balances snowball quickly, and it's tough to get a return on the borrowed money that beats this cost.


# Reduce the interest rate. Most credit cards charge anywhere from 16% to 20%, which is huge! But you can negotiate with your credit card company for a lower rate. Particularly if you've had any of your cards for a while, take advantage of being a faithful customer, and call them up to demand a lower rate. Shoot for 11% or 12%. You'd be surprised at how easy it is.

# Consolidate your debts. OK, so you know what the interest rates and outstanding balances are for each of your cards, and you've reduced the rate on at least some of them. Next, consider combining your debts onto one or two of your lowest rate cards, if you've got some credit room on them. (If you're maxed out on those cards, then forget it.) Simply call your lender and ask how to transfer funds.
..... "

Here's the link: http://www.fool.com/seminars/capitalone/index.htm?sid=0001&lid=000&

Good luck!!

Answer 8

I think it's a good idea. But also, it would depend on your income, too. If you have a history of paying bills on time, you might be able to transfer the balances of the cards with high APRs to a card with lower APRs.

Answer 9

shifting debt around is a undesirable concept. once you do stability transfers or money advances on credit playing cards,, there's a cost of three% to 5%, watching the cardboard words. pastime starts to accrue immediately on the a lot greater money improve fee. Your obtainable shrink for money improve/stability circulate is frequently a lot under the acquisition shrink -- 0.5 to 2-thirds. verify your assertion to verify in case you relatively have any obtainable money improve shrink. you probable have not got adequate obtainable shrink to circulate $4 hundred. Your debt to shrink ratio is in keeping with each and each card AND common -- common being the biggest ingredient. the two your bills are donning balances of extra effective than 30% of the shrink. shifting from one to the different won't help the two account. relatively won't strengthen your common. do no longer hardship approximately your score. hardship approximately looking suggestion on the thank you to pay off those bills. focus on the optimal pastime account -- the speedier you pay that off, the fewer pastime it is going to fee.

Answer 10

Yes you need to consolidate your debt and destroy those credit cards...arrange to see a consolidator soon if your concerned about your credit score.

good luck