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mickeycat

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about consilidation loans
I have over $26,000 in credit card debt.would it be smart to take out a consolidation loan? Or try to make a deal with the credit card companies?

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There really isn't anything wrong with a debt consolidation loan with a low rate if you are able to get one (it will count as a hard inquiry and a new personal loan; however, if you are true to the consolidation your credit cards will be paid off which will help cancel out most of that negative). The issue I ran into is that your debt-to-income ratio is not calculated in what you might consider a common sense fashion.  E.g. You have $26k in debt, you are seeking $26k consolidation loan to pay off that debt to be paid at a lower interest rate. Common sense says you debt-to-income would be $26k (the consolidated loan if approved since your current debt will be paid off). However, they actually included your current debt and your consolidated debt, so it begins calculation at $52k in debt. From there they lower the amount to take into consideration that it is a payoff; however, since credit cards are open lines, they will not cancel out the entire $26k of paid off debt and just assume you are going to charge them again, so really they will be considering you to have let's say $40-45k in debt when that isn't reality. That is what I experienced at Wells Fargo despite, a) having a previous auto loan paid off successfully with them, b) having a decent income, c) showed proof for the past 3 months I have paid about 3x more than my minimum payment, showing ability to pay, and d) a clean credit report.

To your second question, I am personally only aware of 2 methods of working with your credit card companies (there may be more, I am just speaking of my experiences).  The first and initial method you should try, is if you have a good on-time payment history, call them and request a lowered interest rate. I have done this and they did it with very little hassle.  Another option a friend did once he got a better job and after his wife had been out of work and wanted to just start over. He called the company and negotiated a significantly lower payoff amount and paid them off and closed the account. The problem with this method is he was first required to go 90 days past due before they would negotiate with them (which kills your credit), then he was required to payoff the negotiated amount in full immediately followed by closing the credit card accounts (which also will kill your credit, plus you have to have thousands ready to go). He just wanted a fresh start and is going to deal with it the credit problems later; however, this is definitely not a recommended route. I hope others share their experience of other ways to work with the companies, but these are the only 2 I have heard of.

Godd luck, and hoped I helped

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