My boyfriend lost his job recently and im falling behind on my credit cards, there is no way that i can pay rent, utilities and all of my credit cards, im already falling behind, can someone expalin how does debt consolidation works, Pros and Cons? what if i dont own a home, can i still qualify for debt solution? Any suggestions, im stressing, im already getting collection calls
First you need to get your priotities straight. Worry about your “four walls” first….. food, shelter, clothing and transportation. Pay those first then worry and pay the credit cards. If you are worried that a creditor will garnish wages, they can’t without proper and lengthy court action.
This is an excert from Dave Ramsey’s book “Financial Peace” (great book)
“Debt Consolidation
These companies [finance companies] also do a lot of debt consolidation or bill consolidation loans. Let’s look at a bill consolidation loan foe the average couple. Joe and Sue have the following debt they wish to consolidate:
Item……………….Balance……..PAyment……..Interest rate
Visa …………….1200………….200………………18
Mastercard……..1700…………250……………….18
Doctor …………….40………….100………………18
Gas card ………..600………….80……………….18
Car………………6500…………270………………12
furniture………..3500…………175……………..15
TOTAL…………13,900……….1,075
These bills are causing “great strain” for Joe and Sue. If only they could get some relief! So they go the freindly finance company that will lend tem not only enough for the bills, but even a little extra so they will have some extra cash. But let’s say they borrow just the $13,900 and they want to cut thier payments in half so they’ll have a payment of $550 per month. They will pay that for thirtysix monthes, gor a total of $19,800.
This is an extremly poor program because if they could have just worked extra or figured out a way to hold out, in just nine monthes they could have paid off everything- using the snowball method- excapt the car and the furniture. THe total payments would then be only $445 per month and the two outstanding items will be paid off in two years instead of three years, and at a lower interest rate. Beware of bill consolidation. Few cases justify using this strategy.”
The debt snowball is where you put your debts in order from smallest to largest regardless of interest rate or payment. You pay on these in that order. It works because you get to see success quickly. As an example …….
item……..balance……payment
gas card …….400……..60
mastercard ….700…….70
visa……………1200……..200
So first you pay off the gas card. Once you have that paid off you take that $60 that you would have paid to the gas card for the mastercard. You would pay on the mastercard $130 instead of $70. The money keeps rolling down to the bigger bills untill you have everything paid off.
If you can’t make minimum payments use a “pro rata” plan. Here is a site that explains it.
Myth: Debt consolidation saves interest and you have one smaller payment.
Truth: Debt consolidation is nothing more than a “con” because you think you’ve done something about the debt problem.
For more information on the truth about debt CONsolidation, visit
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The only surefire road to financial freedom isn’t an easy one, but with the right discipline, it is very effective.
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