Transcript
Clark Howard (0:00)
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Clark Howard (0:54)
It's my pleasure to welcome you here to the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. And you know, I want you to save more, spend less and avoid ripoffs. But what if you're already in a mess with your debt? How do you climb out without getting ripped off? We're going to talk about that and later. Oh, I have a danger out there I need to make sure you're aware of a warning for you when you travel. It's an important warning for all single travelers. So it's a cycle. And the number of people we're hearing from that are in debt with credit cards, whatever, but particularly with credit cards, is going through a cycle right now. And it's funny because. Funny ironic, not funny funny. Talked a while back about how many more people are in debt with credit cards overall. And then we're getting a reflection of that with the people we're hearing from. So I want to talk about a couple of things you got to know. So people out there who promise to be a hero and promise they're going to clean up your debt for you and they're going to do it magically. You just do the things they tell you to do. Pay them this money. Often it'll be in the upper hundreds or even in the thousands of dollars and they're going to wipe that slate clean for you. They're liars. They're liars and you end up in worse trouble than before. One of the techniques that these people will pitch you is stop paying on all your debt. Just Stop paying and everything's going to be great if you just stop paying. Let me tell you, that's not how it's going to play. Then the second scenario that is a big problem are phony debt counselors who will try to get you to pay them money up front, and they're going to counsel you into some kind of plan or supposedly negotiate for you. All that phony baloney. Then the third thing that's not a scam but seldom gets you out of debt is when people do debt consolidations where you got all these credit cards with debt, and they say, oh, we're going to just work it out where you'll have one easy monthly payment. And my experience over the years, it does not work. What does work? Well, okay, I'm going to get cold here, and I apologize, because we're dealing with something that's eating at you. If you have a level of debt that there's no way, you can see your way clear to paying, you're going to need help. Legitimate help is going to require hard work on your part, and that's to go to a real, legitimate credit counselor. Do not trust just because somebody's marketing themselves as a nonprofit. A lot of them are just scamsters hiding behind nonprofit status. One default you'll hear me talk about is nfcc, the national foundation for Credit Counseling that has standards that legit credit counselors must meet. And what they'll do is they'll see if they can work out a budget for you. If they can't, they will then go to bat for you with the people you owe money to and work out a payment plan. There's small administrative costs for managing the payment plan, but tiny money. And the goal is to get you out of debt. Now I'm going to. This is where it gets cold. People in the legitimate credit counseling business will tell you that a lot of times people don't come to them, not till the 11th hour, but the 12th hour, that the financial situation's too far gone. And that is, unfortunately, when it may become appropriate that you might have to file for bankruptcy. But I know the TV ads. And you think that's a first resort, that's a last resort to file for bankruptcy. But a payment plan, a legit payment plan from a legit credit counselor, if you can see your way to make it through, that payment plan will right the ship and get you out of debt. All right, so why do I hate consolidations so much? Because people look at that as a lifeline. I look at it as more rope to hang your finances because what tends to happen when somebody does a debt consolidation, the cards now have no balances on them, but there's been no change in what's going on in your life. So typically you're now having to make all those payments on that consolidation and creeping step by step, usually over within a year and a half the cards are charged back up and you have the consolidation. That's a train wreck. So takes hard work. If you've reached Armageddon financially, bankruptcy is there and is a potential clean slate. But none of this is the end of the world.