(WSPA) – With inflation high and COVID stimulus checks gone, Americans are racking up debt at levels we haven’t seen since the great recession in 2008.
Credit card debt, in particular, hit an all-time high of $930 billion this month.
Therefore 7NEWS “Here to Help” got expert advice on programs and methods that have proven success in dealing with debt.
Ashley Jeter, in Spartanburg, said she is proof anyone can pay off debt.
Today she is a real estate agent and investor who flips homes that need major repairs, but it wasn’t that long ago that the biggest thing she had to fix was her own finances.
“Back in 2019, I was struggling financially. I had two children and I was the only one working at the time, so every bill you can imagine, I was paying it with a credit card, gas, food, daycare, everything,” Jeter said.
In just two years, Jeter racked up $28,000 in credit card debt.
Finding trustworthy help
Desperate for help, Jeter researched non-profit credit counseling agencies. You can find a list approved by the Department of Justice, and filter your search by state.
Jeter chose American Consumer Credit Counseling after reading reviews.
“They took care of calling each creditor and negotiating lower interest rates and so there was one credit card where they actually got me a zero percent interest rate,” Jeter said. “My highest one was 12%, but compared to a 24% interest rate, that helped a lot.”
How debt management companies work
Debt management non-profits have a lot of experience helping people pay off debt and stay on task. The step-by-step process often looks like this:
- they help you set a budget
- require you to close your credit cards
- negotiate down your rates where possible for the cards you closed
- collect one payment from you each month which they divvy up to your creditors
They do this for a small monthly fee. Jeter said it was about $5 a month per card, and she had six cards, so for her it was an extra $30 a month to start, and then as each card was paid the monthly fee was reduced.
One word of caution, watch out for debt settlement companies. They are not the same as debt management companies because they are “for” profit and typically charge high fees.
Local credit union help
One option which can be free, is to explore getting help through a local credit union.
Carolina Foothills Federal Credit Union (CFFCU), which has offices throughout the Upstate, is one that offers free financial counseling to all members, including methods on reducing debt. Plus it has specific programs to promote healthy finances like:
- Credit Builder Loan
- monthly payments into a pre-funded savings account, payments that are reported to the credit bureau so your score improves
- First Time Home Buyers Program
- complete homebuyer education and are offered down payment assistance and low interest rates
- Moving Families Forward
- program in partnership with other agencies where homes are built for families of the Cleveland Academy in Spartanburg, and CFFCU offers a 0% interest mortgage
- CFFCU offers auto loans with interest rates well below dealer financing. If you are a first-time car buyer, the “Right Path” program is an educational program designed to help people own a car without falling behind
Terri Hendrix, with Carolina Foothills, said many of their members have gone from in debt to homeownership under their guidance. She explained the most effective strategy to get out of debt.
“First of all, know where you are now. Set that budget. And come to us, can we refinance higher rate loans you have elsewhere, free up cash,” Hendrix explained. “And then attack those different obligations starting with the smallest one first.”
Best techniques for paying off debt
The technique Hendrix mentioned of paying the smallest debt first is often referred to as the “snowball” method because you start small and then move to the bigger debt.
Another method is called the “avalanche.” That is where you pay off the credit card with the highest interest rate first.
The avalanche does make financial sense, but many credit counselors say the snowball method is more effective for the average debt payer because those quick rewards keep you on task.
Jeter took on a second job, moved in with family and will have her debt paid off by April.
“That’s really exciting for me because it’s been 4 years,” she said.
She also got her real estate license, has flipped one home and is now selling a home at 402 Chatham Avenue in Gaffney that she renovated.
“It was a lot, it was a hard time, during that time,” she said looking back.
“I’m proof that you can do it,” Jeter said.