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  1. #1
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    Default Finance Question- Helping Relatives


    My younger sister just asked me and my hubby to co-sign a loan so she can
    pay off credit card debt in the amount of $15,000.

    My initial response is NO.

    I am wondering about the various programs that are out there that help
    people get their credit card debt under control and paid off. Can anyone
    offer reputable companies? Are there any out there that actually help you
    and don't rip you off? I know some are non-profit -- does that make a
    difference? What kind of "red flags" do you keep an eye out for when
    investigating these kinds of companies?

    My sister was unemployed for almost a year due to a layoff and I suspect
    that is when she started accumulating the CC debt. She is NOT overdue on
    any card and continues to pay the monthly amounts but I suspect she is
    starting to drown and is obviously worried. The bank will not give her the
    loan and I suspect it has to do with her debt to income ratio.


    I'm interested in helping my sister find a way to cc freedom but I'm not
    sure I want to have a responsible part in the scenario! Anyway, any good or
    bad experiences with debt reduction companies (or whatever they are called)
    would be helpful. I appreciate your responses in advance!

    Michelle in DE

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    Dear Michelle:--I believe also there is help out there for your
    sister. I'm 53 and believe me, it is never wise to cosign or
    lend money to family or friends. Even the best intentions can
    end up with hurt feelings and the damage is done for life.
    You sound like you have a great head on your shoulders!
    Blessings, Pat

    From: "Pat Price Flatt"
    Date: Sat Feb 22, 2003 9:06 am
    Subject: Re: Budget101.com : Finance Question

  3. #3
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    Many non profit prgrams will help lower the monthly amount paid and help get
    your sister debt free. they will contact the CC companies and ask for no
    interest, lower payments, etc. -- whatever ther companies can do for your
    sister. the non profit organization should be able to tell you what to expect
    from each campany since they have dealt with them before. the non profit
    organization i went to a few years ago was in South Dakota and was associated
    with the Luthren Social Services and called CCCS(Credit Consolidation
    Counseling Services??) they were very helpful.
    maybe check with your local social services programs?? I feel better about
    talking to someone in person rather than online myself. Good luck, and i am
    glad to hear you want to help your sister.
    God Bless,
    Krystal in MN

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    Just remember that in most cases, these credit counseling firms are

    treated as bankruptcies on a credit report.

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    Michelle, I know you really want to help your sister, and it is so hard
    to know our family is suffering and want to help. BUT, I really would
    advise AGAINST co-signing on any loan for anyone! It can cause so many
    problems. No one knows what the future will bring and you could easily
    get stuck paying off the debt yourself. Co-signing on a loan also can
    hurt your credit rating and keep you from getting a loan that you may
    need in the future. Like a home or car.

    No matter what anyone tries to tell you, that debt is considered yours
    just as much as theirs if you co-sign. You will be listed as having a
    $15,000 debt in your name. If your sister can't straighten out her
    finances and has to file bankruptcy at a later date it will wreck your
    credit as well as hers! I know for a fact that this is true because I
    have family that has gone through this exact thing. My family member was
    told by a lawyer that her credit rating will show that she filed
    bankruptcy even though it was the person she co-signed for that did!

    Please protect yourself, don't co-sign. Tell your sister that you love
    her but you just can't co-sign, but you will help her try to make a
    budget and find a credit counselor.

    DON'T DO IT!!

    Nancy Ann

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    I agree 100% with this advice. On the other hand, if you know that your
    sister is going to sink without it, you might consider co-signing it as
    a *gift* to her. With no expectations that she will pay it off and with
    full expectations that *you* will pay it off, in fact, if you both share
    the load a bit, it might just get done sooner than you both think.

    If you give it to her as a gift, then there are no hard feelings, and
    you won't expect her to pay it back.

    Never loan money to friends or family, but give it to them (if there is
    any way that you can) with no strings attached, it is the only way.

    From: "Bill Marcy"
    Date: Sat Feb 22, 2003 1:36 pm
    Subject: RE: Budget101.com : Finance Question

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    Hi,
    I'm new here, but thought I'd give my input. I wouldn't co-sign a loan, but
    would maybe suggest to your sister or her husband if possible, to get a part
    time job and put all of the money from that towards paying off her debt. I
    know this probably isn't a popular idea, but if she did this for a while, she
    could really get somewhere. Also there is a program I have information on (I'll
    have to dig it out and could post it later) that tells you how to pay off bills
    in the most efficient way. If you've ever heard of Mary Hunt, she also has some
    good information on paying off debt.
    Kathy M

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    The best advice that I can give is to look for debt consolidation companies
    in the area and than check with the BBB to see if there have been any
    complaints about the company. I would definately look more towards the
    non-profit agencies because they won't be charging even more extra money on
    top of the payment. The only other thing that I could say is that if she had
    multiple cards that she is paying on how about doing either a balance
    transfer or paying one with a lower interest card. I realize that this doesn
    t solve the problem right away but it would save some money on the interest
    and would get her bills closer to just one.

    Susan

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    Actually they aren't really looked at that way. We have just gone through
    this and I had looked into it to know what we were getting ourselves into. I
    even asked one of the companies that we owed money to. Most companies prefer
    to see that you went through a debt consolidation company over bankruptcy
    because than it showes that even though it was "late" it was paid and not
    dismissed. We unfortunately ended up filing bankruptcy because we owed way
    too much and there was no way that we could do it.

    Susan

    From: "Susan Kunz"
    Date: Sun Feb 23, 2003 2:42 am
    Subject: RE: Budget101.com : Finance Question

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    Michelle:

    You, or your sister, could look over http://www.debtsteps.com
    which explains various ways to get out of debt, and the pros
    and cons of each, including debt consolidation companies
    and which are recommended.

    Wishing you the best,
    Deb Seeber

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    As long as you had it is writing Susan. Companies whom you owe are not
    obligated, nor do they profit by having a debt consolidation company
    renegotiate your debt, yes, they will happily take whatever they can get
    before you completely screw them by filing bankruptcy, but don't think
    for a minute that they will not report that on your credit record. In
    most cases it is treated *exactly* like you had filed bankruptcy (as you
    did not meet your contractual obligations, and there *was* a financial
    loose to the lender).

    I understand that you have your anecdotal evidence to support your side,
    but the lending industries position is well known on this matter.

    In the end, TANSTASFL (there ain't no such thing as a free lunch).

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    Michelle,

    Consumer Credit Counseling Service (CCCS) is a great organization. Non
    profit. They work with the credit companies to lower and sometimes
    completely suspend interest rates. Late fees stop....over the limit fees
    stop. Monthly payments are lowered, which isn't a big deal since all the
    fees and rates are lowered (or suspended) and your balance isn't growing by
    leaps and bounds. CCCS do NOT make any money directly off you...they do not
    charge you one penny. They are privately funded PLUS the credit card
    companies help subsidize them because CCCS helps them gather money that
    might not have been paid back by overwhelmed consumers. It's good business
    for the credit card companies to have CCCS around.

    The way it works is simple. You will gather all your credit information and
    take it to CCCS at your initial meeting. They'll give you an estimate of
    your monthly payment (based on what various creditors usually agree to) and
    then verify it with all the creditors. Then each month, you pay CCCS one
    large payment (the combined amount that the credit card companies agree to)
    and CCCS decides who gets how much money and then sends it to them. It's
    that easy. If you're paying 13 different bills each month (kinda
    confusing!), you'll now have one large payment to make and that's it!
    They'll also go over your budget with your and help identify ways to cut
    back and/or save money.

    All YOU have to do in return as the consumer is hand over all your credit
    cards (they snip them up right in front of you) and agree NOT to acquire or
    use any further credit or debt. If you need something like a car loan
    while you're on the CCCS program, then you have to get a letter from CCCS to
    your creditor saying they are aware of the loan and approve of it.

    As far as the "red flags" go, I'd say any companies who charge a fee,
    whether a monthly fee, flat rate, percentage on balances etc. would be a
    company to avoid. When you have a ton of debt, the last thing you need is
    another bill to pay. CCCS provides budgeting advice and financial
    counseling. I just can't say enough good things about them. It is a very
    professional organization. No, I don't work for them.

    And as for co-signing for your sister, I'd definitely steer clear of that if
    possible. What she really needs is help finding the most logical solution
    to her immediate problem (mounting debt) and whatever situation got her into
    debt (layoff or lifestyle or whatever). I agree with the person who said
    if you co-sign, you should just assume you'll be paying the debt off for
    her. If she is in debt, that means she didn't have the money to pay it off
    herself, so why would she be able to now? I don't mean to be rude, it's
    just logic. That being said, I don't think assuming her debt will be
    helpful to her at all in the long run. We all have to learn our lessons the
    hard way sometimes. And when you totally pay off your debt, CCCS will help
    you get a good credit card and teach you how to use it responsibly to
    re-establish your credit.

    If you have any more questions about CCCS, you can email me privately. Good
    luck to you and your sister!

    Karla

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    Default Re: Finance Question- Helping Relatives


    Running into credit card debts is not an uncommon occurrence. But, at times, the credit card debts run out of control and require thoroughly measured out steps to be taken. So, what does it take to eliminate credit card debts?

    A well-planned and executed strategy is required to phase out credit card debts. It may mean cutting down on certain expenses/luxuries, but itís a small price to pay for living a debt-free life.

    Credit Card Debt Elimination Ė How to Prepare an Effective Plan

    Running into credit card debts is not an uncommon occurrence. But, at times, the credit card debts run out of control and require thoroughly measured out steps to be taken. So, what does it take to eliminate credit card debts?

    A well-planned and executed strategy is required to phase out credit card debts. It may mean cutting down on certain expenses/luxuries, but itís a small price to pay for living a debt-free life. So, here is how to go about credit card debt elimination.

    1. Analyze your credit card debts and financial condition: Credit card debt elimination essentially takes up one of the following forms: self-help credit card debt elimination, credit card debt counseling and settlement, and as a last resort, bankruptcy. The first step is to analyze the nature and amount of credit card debts, your liabilities and expenditures, gross monthly income from all possible sources and then zero-in on the option that suits you best.

    2. Get your act together: Create a reliable budget for yourself. Stretch your budget to minimize unnecessary expenditures and maximum payments towards your credit card debts. You might consider paying off credit card debts in such a chronicle that debts that attract highest interest rates are catered prior to other debts. Try making at least minimum required payments towards other debts. Another idea is to wrap up the smaller debts first.

    3. Shift your credit card debts on to a single low-rate credit card: It makes much sense to organize your credit card debts under a single credit card. Do your research on a compatible offer by a credit card company and transfer outstanding debts on to a single credit card. Steer away from paying out interest on multiple credit cards and breathe easy to find all your debts accumulated under a single credit card. No hassles of paying for each credit card, as a single payment is all that is required.

    4. Stick to a payment schedule: There is no point shifting credit card debts on to any single credit card if you default with your payments. On the contrary, make efforts to pay more than the minimum required on your monthly balance. The more you pay, the lesser the amount on which interest is charged. So, pay the maximum you can and get out off credit card debts quickly without paying huge on interests.

    5. Be street-smart, monitor your credit card usage: Although itís best to do away with your credit card for a while, at times it is handy to have one credit card (especially for emergency situations). You can lower the credit limit on your card and use it very selectively. Preventing credit card debts from piling up is a pre-requisite to eliminating credit card debts.

    6. Credit counseling: In case you find it difficult to solve your credit card debt problems, make use of credit counseling services. There are a number of non-profit credit counseling agencies that offer professional counseling and advice to people who are deep into debts. These agencies help you chalk out sustainable repayment plans for thinning down your credit card debts. Run an in-depth check into the agencyís terms and conditions before signing up with them.

    7. Credit card debt settlement and elimination: It involves talking terms with creditors and settling down on a mutually agreed contract. You may do the negotiations yourself or make use of professional advice by hiring a debt settlement company. These companies do an in-depth study of your financial conditions and sketch out negotiation plans with the creditors on your behalf.

    Once the negotiations settle down to the satisfaction of the creditors, you start paying a fixed amount to the debt settlement company. Your payments are furthered to the creditors in agreed upon ratios by the settlement agency. So, you have to direct just one consolidated payment to the settlement agency, which in turn route the payment appropriately. The flip side to such a settlement is that it is liable to hurt your credit scores. You will also have to do a stringent background check on the company to keep counterfeits at bay.

    8. Bankruptcy: This is the last resort to eliminate credit card debts. Pursue bankruptcy only when you have exhausted all your resources and chances to eliminate credit card debts. Bankruptcy causes long lasting and severe damage to your credit history. Opting for bankruptcy will make getting loans, credits, and even credit cards just next to impossible. Bankruptcy signifies your financial breakdown and repercussions are experienced for a long time.

    Eliminating credit card debts isnít as tough as it sounds. Just get your basics right and stay put. It may be time-consuming but surely there is a way out.

    Regards,

    Susan

 

 

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