Can I consolidate unsecured debt into one payment without settling down the balances and ruining my credit?

Asked by Joshua A. Tremmel, New Sharon, IA Tue Jan 6, 2009

I looked into debt consolidation today. They advised me to stop making payments, so they could negotiate with my creditors to settle for a percentage of my balance. Not what I thought debt consolidation was. Is there a debt consolidation loan where they pay off all your balances and put them into one payment? If so, what is it called?

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Dane Hahn, , 34223
Wed Jan 7, 2009
Hi Joshua,
Debt Consolidation firms are in business to bail you out of a bad situation, but first they have to put you into a worse situation to get the attention of your creditors. Steer clear of them if at all possible.

I would try the following: Call Capitol One or American Express or Bank of America. Suggest that you would like to consolidate all your unsecured credit into one of their cards. See if they will transfer all the debt you have into one account and get the best starter rate you can negotiate. I throw away these kinds of offers almost daily, so I would imagine they are available to you. I had an agent who bought a school bus on his American Express card and only paid the interest for years. These opportunities are out there.

But promise me you will cancel the cards once they are paid off.

Then, after you have bought that house we discussed, consider applying for a home equity loan, which will come in at about 6%, maybe less--and use that to pay off the monster credit card. This is a 2 step concept, and the steps may be 6 to 10 months apart, so don't try to rush into a solution overnight--you didn't get into this mess overnight, it might take some time to clear it out.

Good luck,

Dane Hahn
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Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Thu Jan 8, 2009
Advice below is good except for one point: Cancelling credit cards.

I understand the poster's view: cancelling a credit card prevents the cardholder from running up a balance again. This is good.

However, a significant portion (15% ) of one's credit score depends upon the length of time credit lines have been open. Cancelling cards removes those accounts from score calculation. If you have have the card for 3 years or more, cancelling that card will reduce your credit score.

Instead of canceeling the account, put the card in a secure place (mine are in my safe deposit box) and make sure the account information is not stored with an online merchant. For most folkd with reasonable discipline, make the card physically inaccessible will do the trick. Bear in mind, though, that the card issuer will expect some level of activity on the card to avoid cancelling. I use my two cards to automatically pay small bills - broadband account and cell phone account - and then have the card issuer automatically debit payment from my BoA checking account. Not only are my bills paid automatically, but I get the benefit of monthly on time payments with no balance reported on each card.

More info on credit scoring from the company the provides the software to the credit bureaus:

Again, excellent advice below.
1 vote
Robbie Hardy, Home Buyer, New York, NY
Thu Mar 19, 2015
This is a great question. I also suggest you contact banks and see if they have programs for this type of action. I have heard of it before, but don't know what it is called. Just this week I learned about a few other things/accounts banks are willing to open with their customers. From what I understand they like to try and diversify their portfolios.
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, ,
Sun Jul 25, 2010
Of course it's possible. One of my clients found help through

Here is the link below, maybe it will help you.

good luck
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Scott Godzyk, Agent, Manchester, NH
Thu Jan 8, 2009
Joshua the debt consolidation companies will make things worse before they get better. Try citifinacial, there are local offices here in NH you can go to. I think one of you best options is calling each card. Asking them to reduce your interest rate which will lower yoru payments, it wont consolidate but could help you lower your overall payment. If you do close all teh accounts you will take a big hit in credit score. First make those calls. Second get a quote from your citifinacial or even capital one, then get a quote on including it in your refinance. Compare the costs of all of the above and look at what the payment will be so you know your best option.good luck
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Beverly Dunc…, , Fresno, CA
Wed Jan 7, 2009
I agree with the previous post. If you use a debt consolidation company you will have a very hard time getting a loan to buy a home. It looks as if you can't handle your finances. Negotiating the balances yourself will put you in a stronger position.

Dominique Ressurreicao
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Dallas Texas, Agent, Dallas, TN
Tue Jan 6, 2009
Why dont you make the contact yourself speak with creditors work on % reduction. Determine which balance has highest interest rate pay those or reduce balance 1st then work on cards which have lower interest rates%. However dont close any of these cards it will "tank your credit scores"

Debt consolidation can appear on your credit report which in some instances can have a negative impact.

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