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Old 06.06.2011, 11:22
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debt consolidation is it all a scam or are there good ones?

Hi
I have a lot of debt :-( Some 'poursuites' and some 'acte default de biens'
I have been looking into debt consolidation. I live near Lausanne and have found a company who does debt consolidation for individuals. They are in Vevey and are called 'MGA gestion' I have a meeting with them next week.

Is all debt consolidation considered a bad idea? I am from London and my friend has used a company there that she says was really good. When I googled for UK debt consolidation there does seem to be a couple of interesting trustworthy companies. (and a lot of high interest awful ones too)

Anyone have experience with debt consolidation in Switzerland? Any advice? I tried to get a low interest loan from a bank as that would be safer but all the banks will only lend to those without debts. I cant find a bank that does a debt consolidation loan.

Any input will help - thanks a lot.
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Old 06.06.2011, 13:31
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Re: debt consolidation is it all a scam or are there good ones?

Debt consolidation can be a good idea if the overall cost is less than what you're paying now, there is a definite plan to clear the total debt, and you keep to the repayment schedule.

It's a bad idea if it used to give breathing space and accumulate more debt. If you have a credit habit, it can lead you into deeper water. The focus must be on reducing debt, and, eventually, becoming free of it. Learn to budget, learn to do without. You might find debt counselling more beneficial - a good counsellor should help you to change the way you manage your money and your debts.
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Old 06.06.2011, 13:32
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Re: debt consolidation is it all a scam or are there good ones?

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Debt consolidation can be a good idea if the overall cost is less than what you're paying now, there is a definite plan to clear the total debt, and you keep to the repayment schedule.

It's a bad idea if it used to give breathing space and accumulate more debt. If you have a credit habit, it can lead you into deeper water. The focus must be on reducing debt, and, eventually, becoming free of it. Learn to budget, learn to do without. You might find debt counselling more beneficial - a good counsellor should help you to change the way you manage your money and your debts.
+1

Have you spoken to your bank or someone who can actually provide you references for this (or any other similar) company?
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Old 06.06.2011, 13:34
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Re: debt consolidation is it all a scam or are there good ones?

Hi AnnaStorm, basically debt consolidation is borrowing more money off one company to pay back all your existing creditors.¨
Then you start paying the new loan to one company, rather than the many repayments to the many companies.
So, it's more simple for you having one payment a month, and hopefully you'd be able to save money.

That said, these companies exist and make good money from you, so you have to do the maths and decide what premium you are willing to pay to have this convenience. Usually the interest rate will be high, but not as high as say a credit card. If you're a defaulter/bad risk they'll charge accordingly.

Once you agree and borrow the money, you are committed, you will pay back the consolidated debt arrangement and there will be no reduction for early payment.

Unless you can not service your debt and are slipping further into the mire every month, you would be better off (usually) to get organised and carry on paying your individual debts and just make a more concerted effort to clear them. Pay the expensive ones first and the ones where you can get a discount etc. Call your creditors and see what they can do, you may be surprised.

Borrowing Peter to pay Paul is rarely a successful policy to follow. Good luck !
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Old 06.06.2011, 14:51
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Re: debt consolidation is it all a scam or are there good ones?

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Borrowing Peter to pay Paul is rarely a successful policy to follow. Good luck !
Yes I completely agree. The debt consolidation companies are not "helping" you free of charge! You will end up paying more money back.

You need to open an extra savings account and transfer regular amounts into it. You really must find the discipline to do this.

Have you talked to the Office de Poursuites? They can probably recommend a councillor.

Please cancel your appointment with 'MGA gestion' In my opinion it won't do you any good long term.
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Old 06.06.2011, 15:31
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Re: debt consolidation is it all a scam or are there good ones?

Hi,

No experience with debts... but every month I go to the Centre Social Régional (in my case in Morges) and there are all these flyers and posters with yellow smiley faces and the heading 'moins de dettes, plus de vie' (less debts, more life). So maybe if you go into your local CSR they might be able to help you with advice?

(I did google that phrase but can't find anything specific online. Of course I might be remembering it wrong... I'll have a look next time I go in.)

You might also be able to get a Caritas Card, which enables you to do your food shopping at Caritas shops, where the prices are lower, as their website lists people dealing with debts as one of the intended customers. http://www.caritas-vaud.ch/epiceries_caritas.php

Hope that helps, and all the best.

Last edited by Vlh22; 06.06.2011 at 15:32. Reason: Missed out a word...
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Old 06.06.2011, 15:47
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Re: debt consolidation is it all a scam or are there good ones?

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Yes I completely agree. The debt consolidation companies are not "helping" you free of charge! You will end up paying more money back.
Maybe, maybe not.

Years ago (before moving here) I did it, and ended up paying less as I got a better interest rate than on my outstanding debts. I also was able to pay it off earlier, with no penalties.

However, I did it via a bank.

Tom
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Old 06.06.2011, 16:01
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Re: debt consolidation is it all a scam or are there good ones?

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You will end up paying more money back.
Less money back, almost always. A credit card or other sorts of high interest borrowing don't usually assess risk in the same way as a bank - they charge interest at a flat, high rate that they assume (correctly) will deliver them a fat premium over risk for whoever they lend to. A good debt consolidator should arrange a loan that is high enough to compensate them for the risk of lending to a high risk borrower as well as a nice profit for themselves, but that is still a lower rate of interest than American Express Credit Cards (50.9%) or similar.

Not only should the total amount repaid be lower, but the term may be longer. In spite of conventional wisdom, it doesn't matter to most people the total amount they have to pay back or the total amount of wealth they have or will have. And rightly so. What's important is cash flow and monthly book keeping. If you have a 2000chf per month wage and your outgoings are 1950, you're rich - if they're 2050, you're on the streets. So if a debt consolidation company can arrange a 6 year loan instead of your 4 year average loan, even at a marginally higher rate, you're winning.
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Old 06.06.2011, 16:02
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Re: debt consolidation is it all a scam or are there good ones?

As others have said, you may get a better deal talking to your creditors yourself and moving your payment dates such that you know you'll be able to pay them (such as the day after payday).

I wouldn't trust any of the debt consolidation companies, you'll certainly pay more back than you would have to, and no doubt they'll have their own little tricks to keep you paying back more. I've never heard a good thing about them, but I guess they're never going to be dealing with happy customers.

Perhaps your existing bank would be a better place to start. I'm pretty sure they'll be free services available.

I always remember the ad for one of these companies back in the UK, consolidate all your loans into one easy package type of thing. At the end of the advert, they demonstrated precisely how their customers got into debt in the first place, showing the happy husband of the couple driving around on a brand new sit down mower for a tiny, tiny, garden, bought with the money they'd saved on debt repayments.
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Old 06.06.2011, 16:42
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Re: debt consolidation is it all a scam or are there good ones?

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Hi
I have a lot of debt :-( Some 'poursuites' and some 'acte default de biens'
I have been looking into debt consolidation. I live near Lausanne and have found a company who does debt consolidation for individuals. They are in Vevey and are called 'MGA gestion' I have a meeting with them next week.

Is all debt consolidation considered a bad idea? I am from London and my friend has used a company there that she says was really good. When I googled for UK debt consolidation there does seem to be a couple of interesting trustworthy companies. (and a lot of high interest awful ones too)

Anyone have experience with debt consolidation in Switzerland? Any advice? I tried to get a low interest loan from a bank as that would be safer but all the banks will only lend to those without debts. I cant find a bank that does a debt consolidation loan.

Any input will help - thanks a lot.
I used to do Debt Management many years ago during my University years. In essence debt management / consolidation / help or whatever what you choose to call it will just mean first and foremost assessing your financial situation and understanding where you are going wrong. This is achieved by compiling a budget report or an Income & Expenditure Report, the more details the better. Once you've worked out your total income minus your fixed outgoings excluding insecured debt you have your "Disposable Income" that could be used to pay off the debt. Now a debt management company will take a big slice of that cake! (Disposable Income that is) in the name of "Debt Management Fee" and they would contact all of your creditors to ask for a freezing of interest or a potential final payoff amount which could be in the region of 80% or so and creditors are not obliged by any means to do any of this however they tend to be quite compliant in cases where the lender actually contacts them as otherwise they would have to sell the debt for peanuts and you will be chased by collectors who won't settle for less than 100% of the debt!
So helps and tips:
1) compile your budget report.
2) contact your creditors personally with a full budget report and a pro rata offer of payment based on the total amount owed and the disposable income, if this is reasonable (i.e. above 1% of total debt owed per month) they are very likely to accept the arrangement for temporary periods of 12 months or so, if you keep up to the payments they will be more likely to help you further. Of course if you're only going to be paying 1% of debt it would make sense to freeze the interest at 0% or a reasonable low interest as it would be silly otherwise.
3) if you do have to go through a debt management company look out for ones that provide the help for free. If you do have to go through one of those that charge make sure you know if there are any upfront fees and how much slice of the cake they would take per month as this would just sink you into a deeper hole as these guys don't give two **** to be honest as once the arrangement is set up it's free money for them they just sit there collect your money and payout 50% of the money or so to your creditors.

Anyway pm me if you need more info.

PS: Just want to add that consolidation of the actual debt is hardly ever offered at the late stages (i.e. when you are already in arrears) because no bank in it's right mind will touch anyone with arrears. The only consolidation usually offered is to people with a very good disposable income who would yield a very good return on the consolidated amount usually upwards of 10% and even then there is a limit of how much they would want to consolidate. These companies are no longer around well at least I haven't seen them advertising as they used to. Some of the ones in the UK included Ocean Finance etc.

Last edited by The_Love_Doctor; 06.06.2011 at 17:05.
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Old 06.06.2011, 17:02
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Re: debt consolidation is it all a scam or are there good ones?

Some of you are forgetting that she cannot get normal loans as she has debts at the Betreibungsamt / Office des Poursuites.

But some good advice also from EF members: contact your creditors and offer them a longer repayment plan. Pay off the high interst loans first.
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Old 06.06.2011, 17:11
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Re: debt consolidation is it all a scam or are there good ones?

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Pay off the high interst loans first.
Technically this is true, as it make sense to reduce the high interest generating loans. However as I previously said the OP needs to agree 0% interest or a fixed interest with all creditors or simply they would all get nothing. Many times in my experience the offers get rejected because simply the client is paying more to one creditor than another. The payment amount should not be based on interest but rather a pro rata payment based on the total amount of debt owed.

Payment Amount to Creditor (X) = Disposable Income x Amount owed to (X) / Total Credit

You would then ask the creditor to adjust the interest they charge accordingly so that your debt doesn't actually grow and ideally it would reduce even if you do have to pay some interest.
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Old 06.06.2011, 21:34
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Re: debt consolidation is it all a scam or are there good ones?

Let's not forget that organizing a debt consolidations load will get her poursuites cleared which in most cases is a good thing. If she hasn't addressed the underlying problem, it could make things worse.

Ultimately really she needs to talk to a not for profit counselor first. IIRC, there is this option in VD/GE. A quick search hasn't turned up what I was looking for. But I'll take another look.
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