GMR 105: Debt Free in 2020 - It's TIME!
Episode 105
Are you one of the millions of Americans who each new year commit to getting out of debt? If you're ready, 2020 can be the year you actually become debt-free. In this episode of Getting Money Right, we begin a series on eliminating debt the right way. This series is the most comprehensive process we've ever shared on getting out of debt. We'll provide each step of the journey to ensure you eliminate debt once and for all!
Show Notes
Debt in America
1.1 trillion in credit card debt - $6,762 per holder
65% don’t know when or if they will ever get out of debt
71% of households that make $30K to 50K owe credit card debt
Debt has become a way of life in the US.
Most people don’t believe it’s possible to live without debt.
False start to paying off debt
Looking at options to lower the interest or pay it down fast.
Start by asking: How did I get here? What caused me to get into this debt?
“If you don’t deal with the real reason you got into debt in the first place, and you somehow pay off your debt, you’re to repeat it. ”
Wrong ways to pay off debt
HELOC
Borrow from 401K
Borrow from mom and dad is a BIG no-no!
Con-solidation loan
Lower your credit card interest and combine the payment into one lower (due to lower interest) payment.
May not include all your debt.
Not recommended because it removes the pain quickly and frees up cash that you can easily recommit to new debt.
Debt Settlement
Debt-settlement often advertises that they can get you out of debt in 3 years while cutting your total by as much as half. It’s a great sales pitch. “I’ll cut your debt in half and help you get it paid in 3 years.”
However, this industry is filled with problems, loopholes, bad contracts, and high fees. You can actually do everything on your own without paying fees. If you tackle it yourself, it’s likely you’ll pay less overall, get out of debt quicker, and have a higher level of integrity in the process.
There are no guaranteed results with debt-settlement. You might end up being forced into bankruptcy or having your wages garnished. But it’s still typically better to tackle the process yourself instead of hiring a company to do it for you. Because working with a company, you’ll typically pay them 25% of the total debt and their fee is usually upfront. Meaning all your initial payments go to the company, while nothing is set aside to pay the creditors.
You’ll also have fees to set up the account with the company and likely have monthly fees for account maintenance.
Debt settlement companies also can have inconsistent success rates. The Consumer Financial Protection Bureau has logged more than 330 complaints against debt settlement companies since 2014. Among the most common issues were fraud and excessive fees. In 2013, the CFPB took legal action against one company, American Debt Settlement Solutions, saying it failed to settle any debt for 89% of its clients. The Florida-based company agreed to effectively shut down its operations, according to a court order.
While there are no guaranteed results with debt settlement — through a company or on your own — you’ll at least save yourself time and fees if you go it on your own.
Resources
Budget Forms and Tools
David’s New Book - Jesus on Money
David’s New Website - www.stewardshippastors.com