Loan consolidation

Submitted by erb1953 on Sun, 01/06/2008 - 01:44

My daughter is about to consolidate all her debt, it is a pretty large sum, they just moved their double wide to a new piece of property and they can now take out one loan to have the land, house and other long term items on one payment and lower their intrest rate. The lady at the bank told her that if she could make one extra payment a year that it would shave off so many years of the loan, saving the a pretty good sum of money, I told her that this would be the best thing to try and do, but not to get all stressed out for something that will take a long time to pay off, she is a worry wart and is already thinking about 15 years down the road, she has not even signed the paperwork yet. I think she will do what she says she will do, she is a penny pincher in the worst way, her situation has forced her into this way of thinking. What are you guys thoughts on loan consolidation?

consolidation can be a good thing, and if it is her intention to make the extra payments she can do it if she sets her mind to it. You just put back a little extra each month by taking the monthly payment amount, divide it by 12 and then she will know how much she has to put away to make this possible.

what she needs to remember that this is an extra payment, not something that she is committed to do, so she should not be getting all worked up about it. If she can do it fine, if not, maybe make one extra every year and a half, either way it will cut the life of the loan. Banks always put out this type of information to make the persons borrowing the money feel better about taking out a long term loan. She will be fine, she should not worry about something like this, this early anyway.

Sun, 01/06/2008 - 02:01 Permalink

Thank you for the reply lunchtime, you said pretty much what I told her that it is not a commitment, if it was it would be in the payment book, she should not get all stressed out about it. One think you did say, about the one every year and half might ease her mind, of course she will be figuring where that will put her and how long it will take her to pay it off if she does that. Like I said, she is a worry wart.

Sun, 01/06/2008 - 12:47 Permalink

sometimes you dig a bigger hole if your not careful. make sure you check the rates and fine print get rid of all the cards you pay off and dont get new ones.

Mon, 01/07/2008 - 15:42 Permalink

True, it is silly to open new cards to pay off old ones, but in the case of a bank loan, it is wise to get rid of all your never ending credit card debt, the key is too NOT get anymore once these ones are gone. So many people do this, pay them off, owe on the loan that they paid them off with and then go get new ones. Right back into the same old hole, with more bills than you can handle. Becareful.

Tue, 01/08/2008 - 01:23 Permalink

I used new credit cards to help eliminate my debt--I took advantage of one year, no interest deals...took a $75 hit (balance transfer fee), but saved hundreds on interest payments. The real key is to not add more debt to an already high balance due.

Wed, 01/09/2008 - 06:38 Permalink

True, morningstar, I think this is where people make the biggest mistake, they do a consolidation and then figure that they have all this money left over each month and bam, the cycle starts all over again.

erb, what your daughter can do after she consolidates is put money aside and act as if it is a bill, then she won't be so tempted to fall into this trap.

Thu, 01/10/2008 - 12:13 Permalink

That's another good way, Morningstar!! Unfortunatley, many people aren't as determined and responsible as you have shown. But it is still a good approach, and doable, if one knows what they are doing...

Sat, 01/12/2008 - 06:42 Permalink

consolidateing is great if you dont plan on getting any more credit cards or debt, but face it not many people can afford not haveing some credit cards best thing to do is pay them off one at a time. i paid minimum payments on them all but one then when i got it paid i started on the next and so on. i tried the consolidation deal you just dig deeper if you dont have some stash.

Sat, 01/12/2008 - 17:22 Permalink

paying one card at a time is the "snow-ball" approach... This is one approach I think is easier to do...

Sat, 01/12/2008 - 17:26 Permalink

I think it all depends on how big of an amount we are talking about.

Tue, 01/29/2008 - 18:53 Permalink

Pay as much as you can towards your bills and get rid of them as soon as possible. The more you pay now, the less you pay later.

Wed, 01/30/2008 - 00:19 Permalink
Anonymous (not verified)

It is always good to pay as much as possible and get rid of bills as quickly as you can, but keep in mind that you can't build a good credit history if you don't pay on them for a period of time.

Fri, 02/08/2008 - 03:03 Permalink

That is true guest, in order to establish a good credit history you need to establish a good credit history. Making at least 6 months of payments on time will be ok and then you can pay it off with out affecting anything.

Fri, 02/08/2008 - 03:05 Permalink

A neat trick is to pay the 'late fee' as an additional principal payment each month -- the figure is right there on the payment coupon, just specify that it's for 'principal'.

Sat, 03/15/2008 - 05:43 Permalink

On my credit card ( it's a $300.00 limit), I usually send a $40.00 payment, per month. However..the 'minimum' payment is $20.00. Can I ACTALLY specify if i want to use the 'extra' payment TOWARD a payment, OR the 'principle'? I din't know I could do this.

Tue, 03/18/2008 - 01:39 Permalink

I know that you can do this with a collection agency, when one is collecting on multiple accounts from a single debtor, but I am not familiar with this practice in relation to original creditors and a single account.

Tue, 03/18/2008 - 04:26 Permalink

I've never seen a spot on the return payment coupon where you can SPECIFY where the difference is to be applied -- I always assume it will applied against the balance due -- not the principal, since the accummulated principal and interest accrued becomes the balance due.

Tue, 03/18/2008 - 17:02 Permalink

So how do we now understand how much principle or interest is left towards payment?

Wed, 03/19/2008 - 10:48 Permalink

We don't! Credit cards are worst boon-doggle ever invented, for the consumer. We used to bo the bank to get a small loan -- now, we are "granted" the priviledge of borrowing untold amounts of money for whatever the market will bear -- i.e. - they charge whatever they can get.

Our minimum payments are only 5% of the balance due, if that. You'll notice that the bulk of any payment is the accrued interest -- the difference is being applied to the balance, but that includes the accumulated interest.

This arrangement is the chief reason people have refinanced their credit card debts into their tax-deductible mortgage interest home loans.

Credit card debt is free to get, but it is not cheap to own.

Wed, 03/19/2008 - 18:12 Permalink

Credit card debt is free to get, but it is not cheap to own.

Ain't that the truth!

Wed, 03/19/2008 - 20:22 Permalink

I've been looking at different companies that can 'consolidate' credit card debt. don't 'qualify' if you don't have credit card debt that is underso-much of an amount (ie..if you have LESS than $5000.00 in Credit Card debt). OR..if you don't have a ZILLION dollars of overdue bills, you don't 'qualify' with some companies. Boy....that's frustrating, when you are trying to help yourself.

Mon, 03/24/2008 - 10:19 Permalink

I agree sdchargers, if we had perfect credit would we be going to these clowns in the first place? Sounds goofy, huh. Hopefully you will find one that is not too crazy on intrest, that seems to be the problem when we get ourselves into this pickle. goodluck.

Mon, 03/24/2008 - 10:52 Permalink

I think very few have excellent credit. Nobody sails through life without hitting a rough spell. I'm sure their are actually few out there. I wish they would offer help to the ones whom don't have "considerable" debt. $500 may be alot to some one making $50,000 but to someone who only makes $20,000 considerable debt would be $2500. When you relize you need help it would be nice if it was there.

Mon, 03/24/2008 - 17:43 Permalink

Gotcha, unforturnately it does not work like that, the rich get richer and the poor, well they stay poor and the rest of us go to work every day.

Tue, 03/25/2008 - 02:11 Permalink

Companies ARE there..........however, I'm not giving half my income, to them. As I do more and more 'research', on Consoladation/Settlement Companies, I'm convinced they are there to help ONLY the 'high income'. I agree with ya'll above. It would be more accurate ( I think, anyway..) to take care of debts ourselves.'s free if we do it ourselves. I understand alot of people want a 'quick fix', but, it doesn't happen that way. 'Time' will help.

Thu, 03/27/2008 - 05:09 Permalink

Yeah, and sites like this where you can get all the advice you need. How are you doing with everything??

Sun, 09/21/2008 - 04:23 Permalink

Well, tell you the truth, everything seems so 'disorganized' ( lack of a better word). I seem to get my 'ducks in a row' and something happens. THIS brakes down or THAT comes up. The one and only credit card I had I cancelled. Just seemed like I would never 'get ahead' on it. The payments went up and the fees and % were just soaring! A few times, I made late payments and only had the money for the monthly payment...NOT the late fee, so it seemed like I din't make a payment at all. Make sense? With everything else......I'm just taking day by day. .....looking at some 'small' debts and seeing what I can do with them. All of this can get overwhelming.

Sun, 09/21/2008 - 12:12 Permalink

I wanna add, too that I'm SOOOOOO glad that in the state of PA CA's can't take Wage Garnishments ( except Federal stuff like Child Support, Student Loans, etc.). Boy.if that COULD happen, I wouldn't have a paycheck left.......LOL I guess sometimes you HAVE to laugh about 'your' situation...ya know?

Sun, 09/21/2008 - 12:15 Permalink

In Pennsylvania, wage cannot be garnished for recovering of credit card debt or any other debt obligations. Only for recovering of outstanding Federal taxes, child support and matrimony obligations, wage can be garnished. The Revenue Dept of Pennsylvania, can even garnish your wages without obtaining judgment against you from the court. All that they will do is to notify the taxpayer that they are going to contact the employers to begin garnishing their wages.

Wed, 09/24/2008 - 12:03 Permalink

It is strange how all these laws vary from state to state. I can see why they would garnish for the few things PA allows for. Especially the child support. There are a lot of single parents out there struggling finacially to just make it day to day.

Wed, 09/24/2008 - 16:55 Permalink

Some people think that they can just make babies and then just walk away and leave the responsibility to the state, these kids become a burden of the tax payers. I don't think this is fair to the rest of us. I am glad that they can take this out of the paychecks. Thing is, some of them will not work or simply work under the table.

Thu, 09/25/2008 - 03:07 Permalink

Hi Fireyone
Mostly all the states in US allow for wage garnishment for credit card and other debts. The only states that do not allow wage garnishment include South Carolina, North Carolina, Pennsylvania, and Texas. These four states neither allow wage garnishments nor do they allow garnishment of social security benefits. However, Wage and Social security benefits can be garnished even in these four states if it is Federal Tax debt or for child support and alimony obligations.

Fri, 09/26/2008 - 10:45 Permalink

I think that all states should have some limitation on what can be garnished and what can not, I would not want the collection agencies just being able to get into my paycheck the way the get into some bank accounts. I am happy to be from a state that does not allow wage garnishment, go Pennsylvania.

Mon, 09/29/2008 - 14:29 Permalink

I agree Gn and I am glad we are in one of those states. It gives creditors free access to your account in the other states. If I was in one of those other ones I imagine the harassment would be so much worse.

Mon, 09/29/2008 - 23:05 Permalink

Loan Consolidation can be a good option for some people but not in all cases. The most important thing I guess is to make sure that it will definitely reduce the overall interest rate. It is good in cutting out many different credit card etc manangement fees and also in giving a clearer vision of your finances.

Wed, 11/19/2008 - 09:35 Permalink

Yes it is wise to compare the interest rates. Some people may go to a lender other than a bank hoping to get their loans consolidated into one payment. Some of these places like American General and other lenders may charge an even higher interest rate than some of the actual credit cards. If you have many debts wiht different rates it may be best to go inquire about a loan and then sit down and figure out which route is the one tha pays it off quicker and for less money.

Fri, 12/05/2008 - 17:15 Permalink

And once you get the consolidation, get rid of the bills, Don't charge them up again. Makes no sense at all cause then you have the bills all over again along with a loan payment to pay off your first round with the same bills.

Sat, 12/06/2008 - 05:00 Permalink

I have seen people do this type of thing. I know its easy to do but it is the absolute worst. By doing this your doubling your problems and your debt. Then you can add the interest rates up and see what kind of money you are throwing away.

Sat, 12/06/2008 - 15:24 Permalink

I don't think that people look at any of this really, when you are in a desperate situation you make choices that are not so wise. On the other hand, you may think that you have some breathing room so you shop with the intention of paying it off quickly and then it gets out of hand.

Sun, 12/07/2008 - 05:07 Permalink

Thats true..leave it to you to put sense into something. I bet with the gas prices being at a 5 year low the credit cards will come out a lot less when filling up. I also here grocery prices will fall in Januaryt due to last quarters lower gas surcharges. This should help out a lot of peoples wallets. It is also an excellent opportunity to maybe pay a few extra dollars on the credit card debt already made.

Mon, 12/08/2008 - 23:04 Permalink 'hard times' you do what you have to do. EVEN if it's getting PDL's to 'survive'. Or...having to have a higher % rate, just to get something paid.

Thu, 12/11/2008 - 02:52 Permalink

I would like to see a better program implemented for those with bad credit looking to rebuild. It would be an idea for the orgram to take on some people who are looking to rebuild woht an honest effort. They could screen the applicants ans weed out the ones whom seem like the biggest risk. It could even start out at a lower amount and an at least half decent interest rate. As the person pays and shows they are responsible they could slowly lower the interest rate and up the credit limit. Nor like it will happen but it sure would help out the honest people who just fell behind and get the credit world back on the right track. What do you think?

Thu, 12/11/2008 - 13:53 Permalink

Secured cards are a faaaar superior way to establish credit, and they force a certain responsibility on you, thus making the likelihood of a revisiting of credeit issues less likely... They do have better interest ratesand fees, but they do also require a "minimum deposit" to secure a credit line equal to that deposit... in time, you can increase your line by increasing your deposit, and through a good payment history.

We recommend them to any of our clients who lack any positive revolving (credit card) accounts.

Try this link...

This is my site, and YES, I do make money off of it, but the companies listed are all reputable, and I offer this site up only because there seems to be quite a significant interest in these types of things... There's also tons of other products, including credit reports and monitoring services, and several types of loans...

Thu, 12/11/2008 - 15:58 Permalink

I do not know a whole lot about secured cards but I do know that they are out there. I relize there is a fee but feel the same as you. If the credit card holder has an interest in the card and secures it they are really less likely to default on the payments. I visited your link and see that you have some really good looking offers from credit card places. What really looked good was the interest rates. I would like to advise anyone looking into this to click on that link. You may find what you are looking for.

Thu, 12/11/2008 - 21:06 Permalink

I too visited the site a little while ago, great job.

I do agree that the secure cards are the way to go to rebuild your credit, but one thing that I do not know is, how long do you keep the card and do they eventually lead into an unsecured card?

Fri, 12/12/2008 - 00:57 Permalink

Thats a great question and one I never thought to ask about. I would imagine that you would need to hold pone up until your credit improves but lets see what the Doc says. I also am very interestred in this reponse.

Fri, 12/12/2008 - 03:09 Permalink

Secured can ONLY use what you have on your cards..true. I haven't looked on the Link yet.but, I'm looking forward to it. I DO have to say, DOC was pretty honest about saying he DOES make money off the site, when it's advertised here.

Fri, 12/12/2008 - 05:49 Permalink