I’m 36 in $42k in credit card debt. Feels like I’m stuck in a loop and I’ve started to miss payments.
For those of you who’ve been in this position: 30s, large debt, wanting to reset from all the financial troubles, what actually worked for you?
Please tell me I’m not the only one going feeling this frustrated!!
If you did a debt relief program, how did it affect your finances and your stress levels in the years after? How are debt relief programs vs other options?
Debt consolidation loans and freedom debt relief’s program are options I’m researching, but I might not even qualify for the former. Like, I feel like I should be enjoying life a little more at this stage. I don’t want to have to keep checking bills and my balances before every small expense. It’s why I’m even considering debt relief.
Comments
It really depends. Important things to consider are you planning on opening any new lines of credit— house, car anytime soon?
Debt consolidation loans are helpful obviously, but you have to STOP using your credit cards, so dramatically changing your spending habits. If you don’t you’re going to have loan payments in addition to higher interest credit card debt.
>I don’t want to have to keep checking bills and my balances before every small expense
Not checking bills and balances before every expense is what gets people into debt.
Unless you’re Elon Musk and have unlimited money, you need a budget… and you need to track your expenses against it as you go to ensure you’re on track.
“Debt relief” programs don’t do anything you can’t do on your own, they just charge you money for it. They make your accounts go into collections (bad), then try to negotiate with the creditors to settle your debts (which you will have tax liability for if you don’t pay your full balances… some creditors wont agree to negotiate then you would have gone into collections for nothing), and it will tank your credit score (which is bad if you want/need to even rent an apartment, and many jobs these days check credit scores during pre-employment activities).
I paid off $60k in debt in my late 20s ($40k of which was consumer debt) because I wanted to start my 30s off right. I did it the old-fashioned way: I made a budget, tracked my expenses against it, and sent every available penny towards my debts.
I initially used the Snowball method (paying off the smallest balances first), then moved to the Avalanche Method (paying the highest interest rate balances first).
It took me a couple of years of busting my ass and living like a poor college student, but I paid it all off and have been debt-free since then, minus my mortgage. I still have a budget and track my expenses against it bc I never want to be in that kind of financial hole again, and because I’m saving and on track for Early Retirement.
The sidebar of r/personalfinance has a guide called the Prime Directive to help you with your finances.
You have to fix your spending first. If you consolidate or negotiate down the debt without doing that, you’re just setting yourself up for more debt.
Saying you want to enjoy life more and check bills less is not a good sign you’re ready.
Debt relief programs are almost always a scam. If you don’t mind me asking, what’s your income? If you don’t want to share, that’s fine, but $42k in consumer debt with high interest is an emergency and should be treated like one. If you’re low income, meet with a bankruptcy attorney to see what your options are.
Bankruptcy is a constitutional right and not as catastrophic as people make it out to be. It’s not ideal, but it falls off your credit report in 7 years and then it’s like it never happened. Also, the current president has done it six times so…
I think you already have a few good responses here. I will add:
– If you’re up for some work/some time on the phone, try to talk to your creditors directly for alternative payment options. This is what debt consolidation programs do anyways but after your accounts go to collections.
– Before going to for-profit companies like Freedom Debt Relief, I suggest you check out nonprofit options. I’ve heard of the National Foundation for Credit Counseling; I’m sure there are others.
The drawback with debt relief programs is that they don’t help you learn any behaviors to get you out of debt. Budgeting, sacrifice, and changing habits are the key. Unfortunately like with dieting, the quick fixes aren’t as fruitful as they seem to be.
I’ve been liking the budgeting tool Tiller. It’s a google docs extension that helps pull in your info from every single transaction and automates the expense tracking process. Once you know where everything is going it’s easier to cut out the bullshit, meal prep, etc.
I was $20k in credit card debt at my highest and I basically did the snowball method, and took me about nearly two years to pay fully off. R/personalfinance and R/debtfree were super helpful along the way. Now I’m wrapping up federal student loans. One thing that helped me was you have to focus on building systems rather than focusing on results (I.e snowball method or avalanche method). Taking a hard look at where your money goes and budgeting is the first step. Be honest with yourself and your spending. What are your longterm goals? Retirement? Home ownership? Do you plan on having kids? Do you anticipate a certain expense every year? For me, I have a high eye prescription and have to spend a lot of $$ on my glasses, so I started a FSA through my employer to anticipate the cost of my new frames each year. Remind yourself that you’re either paying interest or you’re earning it.
I did not use any debt consolidation so I don’t have much advice there, but just know you’re not alone, it IS possible to get out of this debt, and you have to have grit in tackling your debt. Sending hugs!!
Most of his advice is complete garbage and should not be followed (he’s also a horrible person), but you should look into Dave Ramsey’s baby steps because the beginning ones (basically until you build 6 months emergency fund) are really helpful at changing the behavior that caused you to get into debt in the first place if you stick to them. I loosely followed them because my debt was from out of control spending. I had a long commute at the time so would force myself to listen to his podcast on it. Sometimes as motivation and sometimes as punishment (if you weren’t in debt you wouldn’t have to listen to this trash).
I paid off about $40K in credit card debt in my 30s. The real question here is: can you afford to trash your credit for a few years? If so, then stop paying the cards. Let them go 90+ days late. The credit card companies will call you and offer you in-house repayment agreements that are usually pretty fair. They generally require you to freeze or close the account which is why I think they’re a safer option than loans and things that let you continue using the cards. Then they reduce your interest to something very low and manageable (all of mine were like 1-2%) and give you a fixed payment for a set number of years. Once you finish the program, your debt is gone and the account is closed. While you are not paying and waiting for them to make an offer, put all the money you would have spent on payments into an account and don’t touch it. That way you will have lump sums to negotiate with if any of your accounts go to a collections agency. If they go to collections, you offer them a lump sum payment (and continuing monthly payments if you aren’t able to save enough to cover 50-60% of the total) in exchange for a “pay for delete agreement.” This means the collections agency will voluntarily withdraw the account from your credit report once it’s paid off. Debt settlement companies will do basically this exact process, but they will take a percentage of your payments. You can do the exact same thing yourself as long as you can negotiate without being intimidated by aggressive creditors.
Shared bedroom, second-hand furniture and clothes, cooking instead of take-out/eating out, less meat, less alcohol, public transportation and e-bike instead of Uber/Lyft or owning a car (car payments, insurance, gas, maintenance), no subscriptions besides a phone plan.
Max spending $1,500 a month, the rest goes towards debt.
I’m going to disagree with everyone saying “you have to fix your spending first” because the amount of debt you’re in is already past that point. It’s almost impossible to “fix” this when you’re paying hundreds of dollars in interest alone every month.
I would see if your job offers financial consultant services for free or low cost. See if they have suggestions for personal loans at a lower interest, or debt consolidation.
You can also do a combination of a low interest personal loan and a balance transfer offer but ONLY if you can trust yourself to not use the CC for anything but debt payment. But you have to stop using credit cards for expenses, and figure out what you can realistically budget for debt payments.
Overall, I’d say even if you enroll, you’ll have to address the root causes of your spending. Even in a debt relief program you’ll be responsible for making monthly payments, albeit a lower one. A lot of this will depend on what you’re currently earning and ensuring you can keep to a payment schedule.
They charge you up to 25% of your debt… on top of what you pay those you owe and destroying your credit. Is that what you want? https://www.nerdwallet.com/personal-loans/learn/freedom-debt-relief-debt-settlement#:~:text=The%20biggest%20cost%20of%20debt,how%20the%20settlement%20fee%20works.
Start by getting actual non-for profit advice instead of trying to get quick fixes and work on fixing your finances. You arent providing any context so we dont know if this is a one off that you can work through in a reasonable time by yourself or if its a long term issue, etc.
No, Freedom Debt Relief is not a good first option for most people. They are a for-profit company that will leave you with a huge tax bill because any forgiven debt is counted as income by the IRS. I recommend financial counseling with a non-profit organization. You can start with the National Foundation for Credit Counseling to find a program near you. https://www.nfcc.org/
It’s about discipline.
We get into debt because it’s a quick fix to a problem. We have to change how we think to get out of debt forever. Debt consolidation is a quick fix, it’s the wrong solution. Money is slow, not fast. Learn how to solve money problems slowly and systematically – with discipline and practical thinking.
I recommend using the Dave Ramsey “baby steps” method for getting out of debt. Yes, I know he’s annoying but his debt advice is simple, easy to follow, practical and it works.
Don’t get more loans, more debt. Take control. do the “baby steps”. That’s how I did it. Look at advice he tells people in similar situations to yourself.
there are no quick fixes. you can fix this but you’re going to have to make changes in your life. you might need more income or to sell a few things. You’ve got to change your mind first before you can ever change behavior.
how did that debt occur? and what about bankruptcy?
At that rate you’d have to be paying like $1000 a month to even make a dent in it.
I paid off ~30k of student loans in my early 30s that I had procrastinated paying properly all through my 20s. It hung over my head like a dark cloud of shame for many years. I didn’t dare apply for anything that involved my credit score.
I started really thinking about what I was spending my money on – what’s important to me? I dont necessarily agree with living bare bones but you have to decide which pleasures are worth the money FOR YOU and why. For example, i dont care to go out for suppers. Just don’t care for it so why spend that money. I dont need new clothes each season, or expensive beauty treatments. Your categories may be different – put some thought into it! You need to think about where your money goes each month. It’s not optional, sorry to say.
I was throwing around 1000$/month on my loans for a long time. I didn’t have kids, pets, drove a car from 2008, etc. The amount of relief I feel now is immense. Best of luck to you!
Can you open a 0% interest credit card and move your balance and aggressive pay off? What is your monthly income and monthly expense? Can you get a second job to pay off your cc debt?
>Like, I feel like I should be enjoying life a little more at this stage. I don’t want to have to keep checking bills and my balances before every small expense. It’s why I’m even considering debt relief.
I’ve used National Debt Relief, BUT, this statement right here is extremely concerning, because these programs are not some “get out of jail free” card to just go on ‘enjoying life’ after the fact. In fact, quite the opposite.
In my case it was after a layoff (preceded by poor life choices and running up debt that – while I could afford it – I could NOT afford it after the layoff and my income getting slashed in half despite working 3 jobs). I was seriously considering bankruptcy, and definitely would have qualified after selling off the couple things I owned that were worth a few thousand (but not enough to make a noticeable dent in what I owed).
You have to develop a very detailed budget, you need to track every expense, and you need to know where your money is going and why. If you are racking up this kind of debt and can’t make the payments, and there wasn’t a major life event (like a serious medical complication), then there is a serious spending problem that needs to be addressed. If you just go through one of these programs, in another 5 or 10 years from now you’ll be in the same or an even worse position, and will be that much older and that much worse off for it all.
I had to recognize that I was funding “fun” with debt, because I could “afford” the payments. Which seemed okay – when I could actually afford the payments. The problem was when income changed, my payments didn’t, and there was nothing I could do to reduce those huge payments (along with rent, utilities, etc). If your only set bills are rent/mortgage, basic utilities, and legally required insurance, and required gas/transport, it’s amazing how much you can tighten down a budget – unless that budget is bloated with a bunch of debt payments be that credit cards, loans, car payments, or any other variety of other debts.
Running a budget doesn’t mean you can’t enjoy life – in fact, building separate savings for “fun” can be quite liberating once you adjust to it and adjust to not always having the instant gratification. It IS an adjustment though.
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As for my experience: I did not qualify for consolidation (they tried, but couldn’t make it happen), so the other option is negotiation. This WILL take down your credit score – like decimate it. I had a secured credit card that I barely used but paid off immediately after using and a line of credit from my bank I kept paid off that helped keep my score from entirely tanking, and helped it recover a bit once I completed the program (which takes years). During that time you will NOT be able to get more credit/debt – so you really do need to learn to live in your means. You WILL still be making payments – just a lot less than you would be, and it can basically eliminate the interest you’d otherwise be paying which can be huge in the end (sometimes principle as well).
I did find utilizing their assistance a low stress way of dealing with my situation – in my case, it was this or bankruptcy, which I was very, very close to as well. I chose to go this route instead, figuring the rebound would be a little bit quicker, and I wouldn’t have to sell off the couple things of value that I owned that meant a lot to me like I would with a bankruptcy. The company took care of the stressful parts of it all, and overall I found them pleasant to deal with.
Just remember – they’re making money doing this too – they aren’t a charity. Their fees are rolled into what you’re paying as well.
I worked for a debt consolidation company about twenty-five years ago (I’m pretty sure the owner was eventually sued into oblivion or prosecuted or both), and I don’t know if that differs from the debt relief program you’re talking about but no matter what you do READ THE GODDAMN FINE PRINT.
the way it worked is that we’d negotiate lower rates/balances/whatever for customers, and they’d send us one check per month that we’d redistribute to the creditors (aggregated with payments from other customers). in theory, if you had a lot of debt with multiple creditors, signing up for the program was a sensible decision.
in practice, so many people got fucked over because they didn’t realize that we kept their first check and they were still supposed to pay their creditors directly that month. people who were struggling with debt but who had never had a late payment in their lives suddenly had missed payments, which screwed up their payment record and caused them to be charged all sorts of penalties. I would sometimes cover the front desk when the receptionist went on break, and most callers went straight into the call center queue but I still answered so many calls from people literally crying because of the damage we’d done to their previously impeccable record.
Budgeting and consistently checking my credit card balance after most if not all purchases. Once I see the purchase clear on my ledger, I immediately pay it off or take no more than 2-3 payments to do so.
Doing a “needs vs wants” assessment before purchasing. If it’s a want, I leave items in my cart for at least 24 hours then come back to it to decide (had a shopping addiction in my 20s and it contributed to me racking up $25K in CC debt).
Having a higher paying job also helped me pay off my debt aggressively, both CC and student loans. I NEVER pay minimums bc that’s also what led to a mountain of debt: if you can’t pay it in full in 1-2 cycles, you can’t afford it.
I went through the process. It is legit but it’s also devastating.
First you have to let all your debt go to collections. Stop paying everyone. When that happens they all started calling, texting, emails, letters. All scary threatening action.
When it goes to collection they’re basically the middle man between you and paying back your reduced debt. That part was “easy”.
In the meantime your credit score completely tanks. I still ended up going the bankruptcy route since I figured the program wouldn’t work for my other debt.
Carrying that much debt you’re not going to enjoy any debt pay off option. It’s always going to feel heavy until you’re at a good financial space.
You can usually get a free consultation with a bankruptcy attorney.
For me, in my late 20s, I was about 17k in debt (roughly) and had to file bankruptcy. I know it’s not a popular option but that’s the only thing that brought me relief at the time.
TL;DR: Freedom Debt Relief helped us settle about $80k in credit cards, then we finished early with an acceleration loan. No more credit card debt today, just our mortgage and a HELOC we used for home improvements. For me the most important factor was affordability, but you should compare programs to see how they affect your monthly payment, credit, and taxes.
A bit older than you, but dealing with debt is something I can seriously relate to. Both the hard parts and the victorious parts. My husband and I were buried under about $80k in credit cards a few years ago. Bankruptcy was a real possibility, but we ended up going with Freedom Debt Relief. Just know that you can regain your footing. It really is possible.
At that point, we were behind on multiple accounts and the minimums were impossible. Collection calls were constant, and the thought of getting sued kept me up at night. I felt like we were running out of options. Bankruptcy might have wiped the slate, but I really wanted to avoid the court process and the scrutiny if there was another path. We shopped around and ultimately felt most comfortable with Freedom Debt Relief.
Here is how the program worked for us. I stopped paying all my cards and instead put a monthly deposit into the account FDR set up. At first it felt backwards because the calls kept coming and I had no cards to fall back on. Once there was money in the account, they began negotiating. About four months in, one card with a balance of $5,500 was settled for $2,200. After the program fee it came out to about $3,300 total, and that account was finally closed.
Fast forward a bit. We finished the program early by taking an acceleration loan and closing out the remaining accounts. With that loan I was able to get out of debt in another two years. Now I’m sitting here without credit card debt, we have a home with a mortgage, and a HELOC helped us take care of some big home repairs and improvements.
It was not all smooth though. My credit score dropped hard in the beginning, the collection calls were stressful, and we knew lawsuits were a possibility. There is also the tax angle since forgiven debt can sometimes count as income. But even with those challenges, the monthly payment was manageable and for us it still ended up better than bankruptcy.