Using a debt management program after previous consolidation attempts.
I took out 2 consolidation loans, and I have several credit cards that are high. Can all of them be considered?
Heather in Venice, FL
Rules for including debt consolidation loans in your debt management
This is an interesting question and a situation that people often get into when they’re trying to find debt relief. The short answer is that it really depends on the lender(s) whether those two loans can be included in a debt management program.
When you enroll in a debt management program, your credit counselor reviews the debts that you want to consolidate and helps you find a payment that works for your budget. The next step, however, is to contact the issuer of each debt you want to include to negotiate and get their signoff on the program. In other words, debts can only be consolidated on a debt management program if the lender agrees for them to be included. For credit cards, most credit counseling agencies have existing relationships with credit issuers and a history of helping clients eliminate those debts effectively. So the lender gets back what was borrowed. As a result, they’re usually willing to sign off on a person’s enrollment in a debt management program.
On the other hand, the loans you took out may be with a bank or financial institution that may or may not be accustomed to customers consolidating debt through a credit counseling agency. As a result, it’s not as certain that they’ll agree to the consolidation. They may do it, but it’s impossible to know for certain until they’re called during the negotiation part of the credit counseling process.
The Hidden Risk of Consolidating Debt with a Loan
In this video Gary Herman explains the risks of using debt consolidation loans and help you decide if using a loan is a good idea for your finances. If you’re thinking of consolidating debt with a personal loan because you’re overextended, just be aware that it can limit your other options for relief.
[On-screen text] Ask the Expert: Pros and Cons of Consolidating Debt with a Personal Loan
Gary Herman, President of Consolidated Credit: Consolidating credit card debt into another loan is risky. If you can get a better interest rate, and I mean a lot lower interest rate, sometimes it is worth borrowing money to pay off your credit cards.
However, most loan companies or finance companies inclined to give what they call debt consolidation loans, don’t participate in debt management programs, which means you’ve got to make this loan work or you may not be able to get the relief of a credit counseling program.
You should compare the benefits of participating in debt management with the benefits of borrowing money to pay off other debts before doing it.
[On-screen text] Subscribe to our YouTube Channel for Updates and News. 1-800-995-0737
With that in mind, it’s worth trying because the loan holder(s) may agree to allow the loans to be included. What’s more, whether the loans can be consolidated or not, you may still be able to get relief simply by consolidating your high-interest credit card balances. Combining those debts into one low payment may reduce your credit card payments so you can afford the loan payments individually.
So we’d recommend calling for a confidential debt evaluation with a certified credit counselor. You won’t be charged for it or for us contacting your creditors to see if they’ll agree to allow your debts to be included in the program. If it works then you’ve found the solution you need, and if it doesn’t then you’re at least not out anything for checking.
If you need relief from debt even after you consolidated, we can help. Talk to a certified credit counselor for a free evaluation.
