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The following post is by MPFJ staff writer Travis.?Travis is a customer blogger for?CareOne Debt Relief Services, and also appears weekly at?Enemy of Debt.?Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he's learned along the way. As a father and husband, he provides a unique perspective on balancing debt, finances, and family.
My story is simple:? My wife and I accumulated $109,000 in credit card debt.? But we're on our way to paying it off.
The first question I get asked is, ?How in the world did you rack up that much debt??
The answer really boils down to the fact that we consistently overspent day after day, week after week, month after month for 13 years.
From there, the story gets more complicated because the next question is, ?How are you paying it off??
In July of 2009, my wife and I enrolled in a debt management program (DMP).? A DMP is a program in which a debt relief provider negotiates with each of your creditors a lowered interest rate and a monthly payment that results in the debt being paid in full within 3-5 years.? In return, your lines of credit are closed, eliminating your ability to rack up additional credit card debt. We make one monthly payment to our debt relief provider, including a monthly service fee, and they disperse the right funds to each creditor.
In that description, the thing that people pick up on most is the fact that we pay a monthly service fee for our DMP.? Some don't agree with paying a fee to an agency to help you get out of debt.? It feels like a scam to them.? This usually leads to some prodding with the intent of? convincing me that I overlooked a way I could have eliminated my debt without paying a monthly fee.??
The Statement: ??You can call your creditors and ask them to lower your interest rate.?
My Experience: ?I called each of my creditors, and even after threatening that I would no longer be able to pay them each month if they didn't help me, none of them agreed to lower my interest rates.
The Statement: ?I heard that credit card companies have hardship programs that will lower your interest rate and your monthly payments ? and they are free.?
My Experience: ?While it is true that many credit card companies do in fact have such hardship programs, at the time I was investigating debt relief options in 2009, I did not know this and NONE of my creditors offered it to me.? Additionally, most of the hardship programs are only valid for a year.? Even if all 13 of my creditors would have agreed to put me in a one year hardship program, it would have been impossible to pay off $109K of debt in that length of time.? When my year ran out, I'd be seeking options once again.
The Statement: ?Debt management programs don't do anything that you couldn't do on your own.?? The suggestion implied here is to cut expenses, increase income, or both. Learn to live below your means and pay down your debt.? No service fee needed.
My Experience: ?This method certainly works. Except not everyone can do it on their own.? I compare it to someone that is desperately trying to get in shape and lose weight.? They try to do it on their own by promising to exercise regularly and eating healthy. For some, this works out perfectly, but some are met with failure because but it takes a level of discipline, motivation, and accountability that they just cannot find within themselves.? These people sometimes find success by enlisting the help of a personal trainer.? The trainer provides the structure needed to help the client achieve their goal.
As far as getting my finances back on track, I'm one of those people that needed a personal trainer.My debt relief provider is my financial personal trainer.? Their progress tracking tools, and interacting with other customers in their online community provide me motivation.? The fact that my accounts are closed and I risk having my creditors rescind their agreement if I open new lines of credit, or miss a payment, provide discipline.? Even more importantly, my debt relief provider has resources available that have helped me learn how to track my expenses, budget, and for the first time in our marriage live within our means.
How Much Did My DMP Reduce My Interest Rates?
Our debt management program also has an important advantage over attempting to eliminate debt our own by way of the reduction of interest rates.? Prior to enrolling in the DMP,? the interest rates on my lines of credit ranged from 6% all the way up to 29.99%.? After enrolling in the DMP, my interest rates now range from 1% to 13%.
How Much Does My DMP Cost?
Had I continued just paying the minimum payments, it would have taken over 30 years to pay off my credit card debt, and I would have paid about $156,000 in interest.? With the program, my debt will be paid off in 60 months, paying $38,000 in interest.? For my $50 a month service fee ($3000 over the life of the program), my DMP will save me about $118,000, and years of debt repayment.
If you're in debt, it's important to know that you have options.? A debt management program is just one of many choices available.? The best thing that someone struggling with debt can do is to fully educate themselves on all the options, including doing it on your own, debt settlement or even bankruptcy.? Knowledge will enable you to make an educated decision.? A debt management program isn't the right choice for everyone.
It was, however, the right choice for me.How about you all? Do you think Debt Management Programs/Plans are worth the cost? Have you ever participated in one yourself, or know anyone that has?
***Photo courtesy of?photostock / FreeDigitalPhotos.netSource: http://www.mypersonalfinancejourney.com/2012/12/are-debt-management-plans-worth-cost.html
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