Routine Order

For those with terrible credit having trouble paying off their debts, there are a variety of credit management programs to choose from. I decided to try out how these programs work, and wanted to put some real numbers to the test. So I was looking for a site that does not require too much personal information to play around with. This debt management program that allows users to evaluate their options seemed perfect, so I took the dive. The Consumer Alliance Processing Corporation Debt Management program seems to be good - it has a BBB affiliation, and seems to be honest.

They have a free debt management quote tool, which is we are most interested in. I filled out the form and the end results looks like the following:


I had plugged in some numbers that I thought to be typical for someone with 30% APR credit cards, choosing a sum below $10,000 for the total debt. I entered a total of 4 cards, with APRs from 20% to 30%, with the outstanding balance on the higher APR cards being about 75% of the total outstanding debt. The free quote tools gives estimates for how much money can be saved. It shows a monthly fee of $35 for the debt management program, but even after this, the total monthly payments are reduced by almost a hundred dollars. The tool also shows that the person can save a total of $18,476 (!!!) by enrolling in the debt management program. I expect this figure is calculated by comparing the total payments made over the lifetime of the debt if one were to pay only the minimum outstanding, to the amounts paid using the debt management program. What’s also interesting is that the monthly APRs are almost halved. If one were to continue making the same payments as before starting on the debt management program, then I suspect the debts will be paid off much sooner.

Debt management programs are not for everyone - of course, if you earn $1000 a month and your financial expenditure is $1200, you won’t find someone to manage your debt. These programs are not for those with less than $3000 in debt, neither are they for those with low APRs on their cards. One of the conditions of the program is that the credit accounts will be cancelled as they are paid off. Once you pay off all the debt, I bet your credit score will improve drastically - enough to get you another card, if you want to play the game all over again!

File this under “Weird, but True”. According to an article on the UK Personal Loan Store, more than 50% of the people who use a debt consolidation loan actually end up with more debt than they started with. Not that I am thinking of getting a debt consolidation loan - but the recent trends in borrowing in the UK show an alarming rise, and things are about even with the USA, for long the consumer debt champion of the world.

…a number of people use consolidation loans to pay off credit cards, but once the balance on the credit card is cleared it is all too tempting to rack up debt on it again, which is what many people tend to do. The average consolidation loan in the UK is for £16,459 but the survey revealed that even when given the opportunity to do so most people will not pay off the loan early.

The article on loan consolidation quotes a survey by fool.co.uk as the source for the data. If you are in the market for a debt consolidation loan, make sure you read the best practices for debt consolidation, which basically says it would be wise to use a lending broker in your search for a consolidation loan since they would have access to the widest range of loan providers. Also remember that the poorer your credit is, the more likely you might end up with a secured loan, as opposed to an unsecured loan. Defaulting on your payments will then cause the property which was the collateral to be seized by the lender. As a final tip, read the responses to this ask.metafilter.com question - some very nice tips there - between the tips they have all aspects of debt management covered.