Why an MBA Decided a Debt Management Program was the Best Debt Relief Option for His Family
MBAs like Dan often earn a high income, but like many of us, he spent more than he brought in and started getting into credit card debt. Dan also had student loans to deal with. The average student loan for an MBA degree is close to $66,000, which is on top of undergraduate loans. Additionally, MBA and Ph.D. graduates often have significant credit card debt, on average $4,000 or more.
The debt that occurred from his student loans, plus additional credit card debt, quickly got out of control, even with Dan’s high income. Dan needed to know his best option for debt relief.
Money management often becomes an emotional issue…
Despite a high level of education, Dan’s money issues remained emotional instead of logical. Dan first had to understand why he got into debt in the first place.
“I believe that many of us are born into debt,” Dan explains. “By that, I mean we grew up in family cultures that weren’t strong in financial literacy and/or strong enough to discuss finances and budgets in a productive and healthy manner. We should have as a family culture been able to speak in a more constructive manner about debts and budgeting.
“Funny enough, I also have an MBA,” he continues, “so one might think I would know something about money, interest rates, time value of money, or careful financial planning. The good news is that there is always light at the end of the tunnel, and I can testify to that from both the logical and emotional parts of my experience.”
Dan’s debt load was also taking a toll on his mental health…
Like many clients that share their debt stories with Consolidated Credit, Dan admits that he was feeling completely overwhelmed by his debt. This kind of mental strain can make it difficult to focus on dealing with debt, even if you know you can’t afford to wait to find a solution.
“Crushing and suffocating are two of the feelings I can relate to when I am ready to acknowledge that there is a problem and that problem is getting worse.”
Dan also began to worry about his credit score…
With all of the debt that he was taking on, Dan’s credit score and borrowing power began to suffer.
“Income to debt was a key driver of my low credit score. However, without this viable solution, I may have given up hope which would have exacerbated all my problems financial and others.”
Debt-to-income ratio is a key factor that creditors look at when deciding to extend you a loan or a new credit card. It measures the amount of debt you have relative to your income. So, even if you have a high income, your debt-to-income ratio will suffer if you have high levels of debt. This can make it difficult to use do-it-yourself debt relief options like debt consolidation loans.
Another problem with high credit card balances is that they will hurt your credit score, which also affects your ability to borrow at low interest rates. Credit utilization measures your total current credit card balance versus your total available credit limit. It’s the second most important factor used to calculate consumer credit scores. So, when your balances go up, your credit score can go down quickly.
Dan became determined to find the right solution to get out of debt…
Even with a good income, that debt was becoming insurmountable. He decided he needed debt relief to regain control of his financial life. However, he knew that there must be a better way than what the debt settlement companies were telling him.
“Upon deciding that my current financial situation was untenable, I was seeking solutions,” Dan says “The first solution offered was that I turn over my debts to an organization which would neglect my payments on my behalf so to get the attention of creditors then negotiate on my behalf. NO THANK YOU.”
Naturally after hearing about ignoring payments he became suspicious. He was given many promises, in fact too many promises.
“To be a fair I was suspicious and skeptical. However, mountains of debt have a crushing effect on the soul, the mind, and the body which opens an individual to the hope that there may be a better solution. I can neglect my payments on my own, but I believe there must be a better solution. Then I got a call from Consolidated Credit about another approach.”
His goal was to have a good credit rating and pay off everything…
“I can neglect my payments on my own, but I believe there must be a better solution,” Dan continued about the approach from Consolidated Credit “This approach did not miss payments but insisted I must meet a prearranged payment plan each month to a transparent and affordable amount.”
Dan was skeptical but began to trust the process…
After talking to a certified credit counselor Dan understood that Consolidated Credit is a nonprofit organization with a unique mission. As nonprofits, credit counseling agencies like Consolidated Credit are not out to make a profit in helping people get out of debt. Instead, Consolidated Credit’s team is here to be your advocate, working with creditors to reduce the interest rates applied to your balances, stop penalties, and arrange a payment plan you can afford.
“I was skeptical but willing to believe that there could be an organization that could use its mission and power to help me and people like me.” … “This approach used existing relationships with creditors to reduce my interest rate to an APR of between 2.5 and 5.5%.”Consolidated Credit bought me time. It bought me room to breathe again. — Consolidated Credit Client Dan B. #credit #debtfree Click To Tweet
Together, Dan and his certified credit counselor came to a solution that was in his best interest…
Dan now had a logical plan based on his unique needs and capabilities. Money was no longer longer emotional; it became reasonable and rational.
“I held somewhere in the range of $40,000 in various types of credit accounts and enrolled about 5 or 6 ‘credit cards’ into the program which include credit cards you never see or touch like a PayPal account or other account purchased by Synchrony bank.”
When debt levels get this high, it can take decades to pay them off with regular monthly payments, especially if you’re only making minimum payments. In fact, at an average interest rate of 20% APR, it would have taken Dan nearly 30 years to pay off his credit cards with minimum payments. And it would cost over $49,000 in interest charges—more than the principal balance he owed…
Consolidated Credit was able to lower his interest rates.
Nonprofit credit counseling organizations have established relationships with creditors and proven records of helping people pay off their debt. As a result, our team can often work with creditors to get favorable repayment terms, even when a creditor wasn’t willing to work with the client on their own.
This exact situation happened to Dan. He explains “Here is where it gets good. I called one of my Chase accounts that did not get folded into the program so that I may negotiate a lower interest rate and better deal by cutting out the third party. The agent on the phone offered nothing remotely close to what Consolidated Credit was offering. I asked how it is possible not to get a better deal by cutting out the middle person to which she said, “That is a great deal. I would go with that. They (Consolidated Credit) have prearranged agreements… you will not do better.”
When you enroll in a debt management program, creditors agree to reduce the interest rates applied to your balances by a set amount. In some cases, they will agree to eliminate interest completely. On average, clients enjoy interest rates between 0-10% when they work with Consolidated Credit. This is another reason that a debt management program is often the best debt relief option someone can find.
Dan finally had a real plan to pay off $40,000 in credit card debt…
“Consolidated credit offered a solution that was palatable with an attainable end in sight that I may pay and work my own way out of debt, out of my own trouble, without the pain of phone calls and letters from collections,” he explains. “I get a way out that I can manage without missing payments purposefully but making payments and interest rates humane so that I could achieve financial freedom once again in a matter of five years.”
Dan has advice for people who are not addressing their financial situation.
Since Dan has gone through the program, he has some strong advice for people in the same position that he was in.
“Breathe. Take a moment. Seek wise counsel and, more importantly, seek others with similar experiences that have moved forward. the lesson my wife taught me was that it is better to take our time and grind it out without shortcuts than to take chances.”
Dan will be recommending Consolidated Credit services to others…
“… without hesitation because not enough people know there are viable solutions and that financial hygiene is something that can be addressed, and may need to be addressed multiple times in your lifetime and the lifetime of your family.”
Now, he will soon be celebrating freedom from his debt…
Dan has almost finished making his payments – all of them in full and on time – and is looking forward to becoming debt-free.
He says. “There is no better celebration than the feeling of not owing anything to anybody. Every day of life is your celebration. Knowing you got there ‘on your own’ without giving up against the odds allows a human being to hold their head high. Knowing inwardly and outwardly that you are as good as your word is the celebration.”