I have a cousin who woke up a few years back and realized he was $15,000 in debt. He said he couldn’t figure out for the life of him how he managed to get so far in debt. “I really didn’t think I had used my credit cards that poorly,” he told me. “I carry about a half a dozen different cards and guess I just never realized I was running up big balances on all of them.”
Consumer credit counseling
My cousin, let’s call him Fred, decided he should go to one of those consumer credit counseling agencies. He did and was immediately assigned a counselor who sat down and reviewed all of his finances with him. The counselor then suggested a payment plan and offered to contact all of Fred’s credit card providers to negotiate better interest rates. However, given the recommended plan, it would take Fred more than five years to become debt free. Plus, he learned he would have to surrender all of his credit cards and would have to make all of his monthly payments without fail or could lose his plan and end up in even worse shape.
Fred’s next step
Fred told me he didn’t like the agency’s payment plan or the idea of having to shred all his credit cards. So he went to his bank and asked about a loan he could use to consolidate all of his debts. He quickly learned that to borrow the $15,000 he needed, he would have to get either a second mortgage or a home owner’s equity line of credit. He did like the idea of having just the one monthly payment that would be lower than the total of his current monthly payments but again was put off by the fact it would take as many as 7 to 10 years to pay off the loan. He was also discouraged by the fact that he would have to pay so much more total interest than if he just paid off his credit cards in three or four years.
Renegotiate his terms
Fred next contacted all of his credit card providers and tried to negotiate better terms to get more favorable payment schedules. Even though this was the first time he’d gotten into financial trouble, he got turned down by all of them. They were just not interested in giving Fred a break and suggested that he should get a debt consolidation loan instead.
The dirty little secret
As Fred eventually figured out the traditional ways to consolidate debt, whether it be a consumer credit counseling agency, a debt consolidation loan, negotiating with lenders or even borrowing from a retirement plan – they all have a dirty little secret. It is that not one of these options would actually reduce Fred’s debt. This meant that in Fred’s is case no matter which of these alternatives he chose he would still be $15,000 in debt. And no matter which of these he selected, it would take him five years or more to pay it all off.
Then came debt settlement
I suggested to Fred (and the option he finally chose) was a debt settlement plan through Debt Consolidation USA (DCUSA). It has debt relief providers that can negotiate with the credit card companies to actually get debts reduced – usually by thousands of dollars. Plus, DCUSA offers a simple 100% satisfaction guarantee so families – and Fred – have nothing to lose by putting them to work. In fact, one of DCUSA’s debt consolidation providers created a payment plan Fred could easily afford and that will get him out of debt much faster than any of the other options.
Fred is now a much happier person.