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Nahualli
RealPoor Master of Posts
Joined: 11 Oct 2002
Posts: 8461
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 Posted: 04/03/03 - 13:06 Post subject: Debt Consolidation Question
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What are the drawbacks to debt consolidation services?
I was told at one point it looks REALLY bad on your credit report.. this doesn't bother me in the least.
What I am more concerned about are hidden costs and catches...
Basically what I was wondering is... is there a limit to the TYPES of debt these services can address?
I don't have credit card debts, I only have student loan and income tax debt that Im looking at paying off for years to come.. looking for a way to make it easier.. can these agencies deal with federal money or is it not worth the time to even bother trying?
Just wondering if anyone has had experiences with any of these services.
-Nah-
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Rennol
RealPoor Guru
Joined: 11 Oct 2002
Posts: 3741
Location: Charleston, IL
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Posted: 04/03/03 - 15:40 Post subject:
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If you f**k your credit up, you can kiss your chances of buying a house or getting a car at a decent interest rate good bye. House not as much really but only as far as the 1st Mortgage goes, Home Equities and shit you'd be screwed on.
Don't s***w your credit up, it will make the next 7 years of your life really bad if you need a loan at all.
I worked at a bank for 2+ years so I know a little about that.
If you own a house and you are looking to consolidate your debt, I would advise getting a home equity loan as long as you are responsible about not getting more debts. If you do not own a home I would advise just sticking it out, income tax debt is your own fault and student loans usually have flexible repayment plans, as long as it isn't at an astronomical interest rate you should just pay it on your own, think of it as an investment in your credit future.
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lotek
RealPoor Sensei
Joined: 12 Oct 2002
Posts: 1598
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Posted: 04/03/03 - 15:43 Post subject:
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look real REAL carfull at debt consolidation firms. I've known people who have signed up with some who are nothing more than no interest banks. They dont negotiate any settlement with your creditors, they dont stop the nagging phone calls. All they do is skim a bit off the top. A lot of them are real scams..
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compusmack
RealPoor Master of Posts
Joined: 15 Oct 2002
Posts: 6354
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Posted: 04/03/03 - 15:45 Post subject:
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Speaking of houses, anyone have advice on buying them?
I've heard quite a bit about things like PMI, minimum down payments, % of gross income you should spend, when to buy, etc... but im not really sure wtf im doing.
I want to get a house next year sometime.
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Tlaloc
Luke Warm
Joined: 14 Oct 2002
Posts: 123
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Posted: 04/03/03 - 15:49 Post subject:
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you need to put down a 20% down payment in order not to have PMI insurance. PMI sucks, but for most folks they can't shell out 20% of the price of the loan to not have it......
Now is a great time to buy with super low % rates. I bought my house like 4 years ago and got 6.85% and I thought that was great, now the interest rates are in the low 5%'s.
For Nah's question, I dont know about the companies, I went through my bank and consolidated all my credit cards with an equity live of credit once, cause the interest rate was lower. I have it paid off and now I'm credit card free. 
f credit cards!
Last edited by Tlaloc on 04/03/03 - 15:55; edited 1 time in total
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compusmack
RealPoor Master of Posts
Joined: 15 Oct 2002
Posts: 6354
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Posted: 04/03/03 - 15:51 Post subject:
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I heard something about some kind of double loan system to avoid the pmi...
something like 80-15-5
where you get 2 loans, one for 80% the other for 15% and 5% down.
This allows you to not pay a pmi supposedly.
Thoughts?
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Rennol
RealPoor Guru
Joined: 11 Oct 2002
Posts: 3741
Location: Charleston, IL
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Posted: 04/03/03 - 16:07 Post subject:
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Yah Compus I heard about that, its like a program for first-time homebuyers that essentially allows you to finance 100% of your house without having to get PMI because you get a piggy back loan for the down payment. Not sure if you have to get a FHA loan for that or a conventional loan but you can talk to a mortgage lender and find out about that. I believe that is a federal program.
As for rates, if you are paying 6.85% fixed I'd consider refinancing if thats like a 30 year rate anyways hehe.
Be careful on closing costs and stuff and points and all that shit too.
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Fluxus the Rogue
Luke Warm
Joined: 11 Nov 2002
Posts: 385
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Posted: 04/03/03 - 19:09 Post subject:
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Holy shit! A thread with meaning.
Nah: It doesn't sound like you need a debt consolidation loan. The federal tax you owe is already very low interest. You have 4 years (I think) to pay that debt to the IRS. I was in the same boat. I made $100/month payments and paid in chunks ($500 or more) when I could. It's a pretty fair deal and much lower interest than you'll get with a bank loan. If I remember correctly, the IRS person I was dealing with basically asked me what I wanted my monthly payment to be. Next year when you file your taxes, you just submit it and if you have a refund for that year, they will automatically apply that amount to your debt. Student loans and IRS debt shouldn't be considered for consolidation loans because they are already low interest.
Now, if you had $20K in credit card debt at 19%, then you should look to consolidating at a lower rate.
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lotek
RealPoor Sensei
Joined: 12 Oct 2002
Posts: 1598
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Posted: 04/03/03 - 21:39 Post subject:
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the best time to buy a house (if your renting) is asap. Its a good investment, period.
I did an 80-15-5 for mine, so I didnt have to pay the pmi, and got a conventional loan. The interest rate for the 15% is higher than the 80%.
after a year, the value of the property had increased such that I was able to refinance (with a lower interest rate) and get rid of the high interest 15% loan.
do NOT buy the most expensive house you can afford. I know many people who have made themselves house poor.
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kireol
Guest
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Posted: 04/03/03 - 21:51 Post subject:
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Nah
I'm a loan officer for mortgages. any conforming "good credit" loan over 80% even split loans, MUST have PMI. It's the law. even 80-15-5. That being said, you can go non conforming, but then you'll have a higher interest rate but wont have to pay PMI. This is assuming you have or are buying a house which i didnt get from your post.
that being said, I would highly suggest keeping your student loan the way it is. You really wont find a better interest rate, longer term, or lower payment than that loan. as far as your income tax goes, you have to pay it. no way around it.
in short, just keep paying what you can when you can. doing a debt consolidation can hurt your credit if they try to get the payoff lower, and you'll just end up paying more in the end anyway.
probably not what you wanted to hear, but hey =/
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Paco
RealPoor Jedi
Joined: 13 Oct 2002
Posts: 12939
Location: Jacksonville, FL
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Posted: 04/03/03 - 23:10 Post subject:
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heh, i just got approved for a loan and the loan officer said "whoa" like keanu reeves when he saw my credit report, lol. I have nearly perfect credit he said..
dunno how that's rated, but by his reaction i guess he doesn't see that very often
i feel all warm and fuzzy now, can't wait to buy a house
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rollin
Rookie
Joined: 15 Oct 2002
Posts: 88
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Posted: 04/03/03 - 23:29 Post subject:
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compusmack
RealPoor Master of Posts
Joined: 15 Oct 2002
Posts: 6354
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Posted: 04/03/03 - 23:45 Post subject:
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| rollin wrote: | |
again?
your avatar is good. I like this one too:
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lotek
RealPoor Sensei
Joined: 12 Oct 2002
Posts: 1598
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Posted: 04/04/03 - 00:17 Post subject:
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agrees with kireol.
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Ashenor
RealPoor Sensei
Joined: 14 Oct 2002
Posts: 1539
Location: Metro Detroit
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Posted: 04/05/03 - 12:46 Post subject:
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Don't look to much at the fee's, there are reasons why i make 100k+ a year doing what i do =).
There are always fee's. Hard costs, fee's, and Yeild spread (amount you get paid on a loan for giving someone a rate over par).
Very few people will ever see a par rate through a bank or anyone. Par on a 30 year is around 5.375 right now, but most people are getting 5.875 best case scenario.
Always check on the Good Faith Estimate what the estimated closing costs will be, then check again when you close. I am glad most of my customers don't do that =).
There are lots of programs out there to buy houses, don't be so worried about PMI on your first house. If you are trying to put 20% down on a $150k house, not everyone has 30k to toss down. Check out some FHA loans and stuff where you get get 3% down. There are also things you can do like Seller Consessions and other things to make it look like you are putting more down or paying money out of pocket that you are not.
Even a house payment with PMI is better then renting by far.
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Nobunaga
Toomuchtimeonhands
Joined: 11 Oct 2002
Posts: 932
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Posted: 04/05/03 - 18:11 Post subject:
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Nah, I don't think anyone here answered your questions and went off on tangents but debt consolidation services don't really help too much and charge a a premium in addition to costly flat fees for consolidating your unsecured debt by either helping you get a lower interest loan attached to any property you may own or giving you an unsecured loan based upon your yearly income (usually to address high credit card bills).
Since most of your debt is based upon student loans and outstanding taxes, you should just try to work out directly with the IRS and the loan/collections officer at your school. The IRS and your institution will more than likely work out a feasible payment arrangement with you but make sure you request that they abate any late fee penalties. You will obviously have to interest but at least you can try to get rid of some of the penalties. Also, If you're a graduate, remember you can take a class as a part time student to delay having to pay most federal loans such as the Stafford.
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