Debt Consolidation vs. DIY Debt Payoff: What Actually Works and What to Avoid | 484

0:00The payment never went down. The balances never went down. She was delinquent. They were still calling her. It was such a mess. There was so much stress. Sometimes you're literally signing a line to relinquish control. And also while you're paying them, what are they doing with your money? They're making interest on your money. Their expert was hired yesterday and they're running off of a script, just like we're going to give you. And they're not better at it. We're here to tell you, you do not need a debt relief company. What if you could be free in two years or a year or three? Like you don't need to sign up for this life sentence.

0:32Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future? Do you want to get debt free but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? Hey, it's okay if you don't already know how to budget or if you're using credit cards to get through the month. Hey, it's okay if you want to seem like you have your finances all together or you're not on the same page with your spouse when it comes to finances. We know what you're doing probably isn't working, but guess what?

1:01You're in the right place. We're Shana and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money. In this podcast, we'll share with you everything we know plus everything we're working on with our clients so that you have the best chance at reaching your financial goals. We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation.

1:33We can help you no matter where you're at, whether you're the single mom who's never had$500 in her savings account, or the millionaire who's paid off four real estate moments. And we're not going to shy away from the tough love. We'll tell you what you need to hear and encourage you at the same time. This is the Financial Coaching for Women podcast. We are so excited to come on here and do an updated version of our debunking debt consolidation podcast. Yes. And so today we're going to tell you with new and updated information, why you don't need a debt consolidation company and how you can do it yourself.

2:06Yeah. Cause we know that you guys are struggling with debt and you may be considering using a debt consolidation company or debt relief company. We understand that we get maybe why you want to, but we want to show you and tell you that there is another way there's a DIY version. Yeah. And the DIY version that we're going to tell you do it yourself version is going to save you time and money, and it's going to make you get through this whole debt thing way faster. Yeah. So we're going to share a little, some stories that we have from our clients going through this same process that you may have, that you may think that you want to go through.

2:37Okay. Yeah. This is one of our first, one of our early OG financial coaching clients, right? and we had a debt payment on there and it was there was a lot going on with this particular person I told her what does she do she moved got married had twins in one year and I was like okay so it was a minute before I realized why isn't this loan going down we're paying$500 a month why isn't this debt this loan and it was also one of those ones I don't know if you have clients like this Vanessa where like they can't immediately look it up I feel like people hide the balances so that you don't ever find.

3:08Anyway, so when she finally found out that the balance didn't go down, I'm like, what is happening? And then that's when we figured it out. Right before she signed up for coaching, she had signed up for debt consolidation program. And she learned and she told us, like I told her, we told her what we're going to tell you today, what to do instead. And so she went around their backs and got out of the program, but she was able to negotiate her debt down so she could pay it off faster. she called them herself in each one that she had consolidated quote unquote and she was able to pay them all in a chunk she did do one payment plan and then the rest she was able to chunk it out and got rid of it way quicker than having someone which was her debt consolidation people go in be the in-between go-between person and so they just gave her the one payment so what they were doing is they were giving her one large payment and then they dispersed it where they saw fit but But when you do it yourself, you see the progress, you see the momentum.

4:03And so she said she was able to do it so much faster and save you so much money. And so that's when we, once that happened, we had a couple other clients were like, we need to come tell people about this, Vanessa. We need to tell these stories about how you can do it yourself. And it's way better. And I want you guys to hear what Shana just said. Because she was in, she had a contract, she was doing debt consolidation, and she just decided to take it upon herself after talking with Shana. and she did it on the side while she was still part of this debt consolidation company. Even if you had already signed the bottom line or whatever, we want you to know that you can still take control and you can still take matters into your own hands and pay off your debt faster than they are ever going to do.

4:47Because let me tell you, you are one of a thousand or one of however many to them. But you are one. You are. This is your situation. This is the most important to you. and you know that you want to take care of it as fast as you can. So my client situation, she exactly the same as far as she had signed up for a debt consolidation company before she had got coaching. And when she looked at the amount of money that she was paying, and I think it was around, it started off with just like$200 to$300 a month. And then it went up to about$500 a month when they hit the point where they were actually starting to pay off debt.

5:22Because I think at the beginning was just their fee. They were banking their fee. It was going to cost them to be able to go after these companies and lower her payment, right? So it was up to$500. The payment never went down. The balances never went down. She was delinquent. They were still calling her. It was such a mess. There was so much stress. Her credit score was tanking. And when I told her, like, no, we're going to do this together as a team, and we went through the process, she was able to take care of it and get on her own track and cancel the debt consolidation company and start working on it with her and her husband yep and so the whole point we're here to tell you about is you do not need a debt relief company you can do it yourself and i think one of the things that we know is really true about that is they're not as proactive they're not like they're not as proactive as you think and they're not some like magic fairy that's going to come in and fix the problem they don't what they do is very similar to what vanessa just said they take your money and nothing happens.

6:20They're not doing anything. They're letting it bank so that they can try to negotiate some of the deals that you're going to do yourself. But in the meantime, they're not being proactive. You're getting letters from your creditors. You're getting late fees. You're getting your accounts closed. All of the things that you are afraid might happen anyway are happening even with a debt consolidation company because they're not as proactive as you think for you. And as I said, you're one cog in a big old machine. They are not like looking at your account every day being like, how can we help her? No, it's not what's happening.

6:46No, absolutely not. And what we want to tell you and empower you to know is that you can, these conversations that they're having for you, you can have on your own. So there are some, this is very far and in between, there are some credit card companies that have signed contracts with third party debt relief companies. And so they cannot offer their people any relief because they're quote unquote signed to sending you over to them. But that does not happen very often, and Shayna, right? We're like, when we're working with our clients and we're telling them, look, we want you to call them. We want you to have these conversations.

7:1990 % of the time, they're able to make so much progress by picking up the phone and having a conversation that you didn't know you could have. And that they're telling you these debt relief companies are saying, oh no, we know how to do this. We can do that for you. And then for you, you're like, oh, praise God. Thank you. I don't have to do that. But it's no, that's not a good thing. Yeah. And you can do it yourself. Again, it's one of those things where you just don't know which we don't know. And we're going to offer you a solution here at the end of this podcast where we will tell you everything.

7:47They're not fancy. Everything they're going to do, you can join yourself. You can have the conversations. You should want to have these conversations because what they do is take the control out of you. You're not in charge of your own destiny anymore. You're not in charge of your own money. You're not in charge of having these conversations on your own behalf anymore. And we don't want that for you. You're a grown adult. You should be able to do all of that. What Vanessa said is you just don't know how. So you think like giving it to these quote unquote experts. No, their, their expert was hired yesterday.

8:14Okay. And they're running off of a script, just like we're going to give you, and they're not better at it. And so you can do it yourself. Yeah. So sometimes you're literally signing a line to relinquish control. And so if you try to even call a company on some of them, after you've signed that line, they won't even speak to you. Cause basically it's like, you've given these debt relief companies power of power of attorney over your credit card. And now you're giving them full control and they won't even tell you balances. They won't tell you anything. And to me, if I owe somebody money, but I'm not allowed to know any information about it after I sign that line over to a debt consolidation company, that is shady and that's scary.

8:51And like the other thing is they don't have any urgency. So they're not looking at your debt. Like we said, every day or every two weeks or whenever you log in to look at your budget, your debt tracker, they're not looking at me like, Oh gosh, this is really bothering me. No, they're not. What do you mean, Shayna? They're just like taking your money and like maybe someday they'll get to your account. That's how it works. And so there's no urgency that you're paying them. So you, on your side, there's no urgency. I took care of the problem. I'm making this$600 payment. One massive lump sum. And that's all done.

9:20And then on their side, they're like, oh, we're getting money. We'll deal with this in a year when actually when we can make some deals and we've made enough money on it to make it worth it. That's not how we want there to be some urgency. We want this debt payment, all of these minimums to be out of your budget so you have more money back in your pocket. We want things to happen urgently. And also while you're paying them, what are they doing with your money? Don't even get us started. Do you know what they're doing with your money? Cause we'll tell you they're making interest on your money. They're making money on your money while you're paying them until they decide to do something with it or until they decide that they've had the conversations that they need to have with these credit card companies to make a deal on your balance.

9:59So let's just hold place. Okay. I want to talk about this. I want to talk about this. Sure. So not only have you paid interest on the debt, or you're going to pay interest on the debt, now you're paying, someone else is making interest off of you too from another payment that you're making. They're getting the interest. That's how part of their fee. And as we say in all of our other podcasts, we want you to be your own bank and be making your own interest. That's a whole other conversation. It's not this conversation. But no, nobody needs to be making more money off of your money but you. We want you to be the one making the money off of you.

10:28And we want you to know too, really quick, like by law, they can't collect any fees until at least one debt is settled, which means they pool your money, right? So they're not collecting any money from you, but it's being pooled in this account, which means like Shana said, they are making money. They're making interest off of the money that they are getting from you. And it's just, it's a really wonky, really voodoo math system. And we do not want that for you. Yeah, let's just be honest. Nobody is going to call creditors for you unless they're making a profit. Like you have to believe that it's true.

11:00It is true. But here's the other thing with an urgency thing. So you're going to be you take it's like you're taking out any of the like wins or gamification of this whole process because you're picking one big payment. And it feels awful. But at least it's one. That's what you think, right? If you're doing it yourself, which we're going to teach you how to do today, you get that 30. The first one you pay off, you get that$30 payment back in your budget. And you're like, okay, that's one payment. And then the next one, you get$100 of debt minimums back into your budget that maybe you can put towards Christmas or whatever it is that you want to do.

11:29And so you have these little micro wins that really motivate you, that really help you stay consistent and stay paying off debt. And that is taken away when it's just one big lump sum. Yeah. And also when they tell you, because what they're going to do is they're going to lump all of your debts together and they're going to say, okay, how much are your minimum payments? If we add up all those minimum payments a month, what are you paying? So you're going to tell them I'm paying$1 ,200 a month on a minimum payments total with everything together. They are purposely and strategically going to tell you that the amount of money you're going to pay them monthly is less than that.

12:01So that way, in your mind, you can afford it. In your mind, this is a deal, okay? But the reality is that the amount of money that they're telling you to pay them, they're making way better deals on the back end about your debt, but they're not telling you the deals that they're making. You're paying them a certain amount of money that you've already agreed upon. So maybe you have a$10 ,000 debt and they said they're going to get it down to seven, but they actually negotiated to four or five, that difference they're keeping. Okay. And so they are, there's a lot of behind the scenes stuff that you don't know what's going on.

12:34So in the long run, you are paying them way more money than if you had just negotiated this stuff and taken it into your own hands and pay them off like one by one. Yeah. And the one by one, just to double down on this, you think that this is a better solution because it's one payment, but it's not reducing your debt amount, right? And it's not reducing your debt minimums amount. So you're never going to feel that relief until seven years or whenever they finally decide to deal with all of your debts and you finally get to stop making that big payment versus you can be in control and you can slowly pay stuff off and feel the relief as well in your budget and see the progress with your debts.

13:09You're not going to pay less debt by using them. Okay. The amount is not going to go down. They're going to collect that amount But you can pay less debt if you do it yourself because you're the one negotiating and you never sign up to make a$600 payment for five years to be able to do the negotiating. We're going to show you how. Well, in all these companies, because we've had people say, oh, this company is a nonprofit or they're free or whatever. And we're saying, okay, they may tell you that. You may think that's what's going on, but they are making money. These people have commercials. Do y 'all know how much commercials cost?

13:40A lot. Okay. Thousands of dollars, which means they're making way more than that because they're paying their employees and paying for advertising. They are making so much more money. And Shannon was saying, this is a game you're not going to win. They are way smarter than us, way smarter than you. And so that they are going to make sure that they get their money. What we're telling you guys is we promise that this is something that you can do on your own and save thousands of dollars. Yes. You can do debt consolidation, whatever you want to call it, on your own. You can do it yourself is what we're saying.

14:11And the thing is, just like credit card companies prey on people who are uncertain about their money or stressed or whatever, the debt consolidation companies are preying on you because they believe that you don't think you're smart enough to do this or that you don't know how. Or like Vanessa said, I need someone else. I don't know how to do this. I don't know what words I'm supposed to say. I don't know who I'm supposed to call. I don't think I can do it. Yeah. And so I'm going to outsource it. But we're telling you right now, so you just have to believe us because we're trustworthy. We should just believe us.

14:37You can do it yourself. And it's not that hard. Yeah. And most of them guys, when you call them, they already have a plan. They already have most of your creditors. When you call them, they have a plan already on your account. Okay. That says what you're, what they're going to offer you. You're calling them and saying, Hey, I really need some help. They already have some type of file or whatever. Yes. Way to say, okay, let's start with this offer. Can they accept this? So if they don't have it yet, it's because maybe you've never called and they never knew that you needed some help. So what we want to tell you is that we don't give up.

15:11Okay. If the first time they say no, don't throw your hands and be like, Oh, I tried. This thing isn't for me. No, we want you to be persistent. And we'll talk about that in a minute. Okay. One thing I just thought of, because I was thinking about our sweet friend, Crystal, because let me just give you the whole thing here. What I was going to say is this is if you do it yourself, it doesn't have to take as long. Like we saw with Crystal, she was paying on it and she ended up making all the progress without it taking without having to rely on them because they were gonna take longer so all that to say is you guys all you have to do is ask never be afraid of the ask the worst thing that happens is they say no and nothing changes which is very rare based on what we've known and like our past conversations with clients but what we do know is that they've said yes a lot of the time and then everything changes if you want to jump ahead go to the website budgetbesties.com forward slash diy debt relief shana's going to tell you what's in the workbook.

16:03We have a workbook for you that is going to help you do it on your own. And we're going to walk through it all in this podcast about all the whys and the hows. But you want to go to that website, Vanessa said, to get the workbook. It has everything you need step by step for you to do it on your own. All of the scripts, all of the do's and don'ts, everything to watch out for. And all of that is for you at budgetbesties.com forward slash DIY debt relief. Another reason that you should and you can and you should do it yourself is using a debt consolidation company. is like a band-aid. You're not really solving whatever the credit problem is.

16:35When you go through this problem, it's a little, or go through this process yourself, that's a little more gritty. It's a little more lesson-y. Like you're going to learn some lessons. You're going to have a little struggle and a little win. You're going to feel proud of yourself. All of that is really going to help you learn to do things differently, desire to do things differently. So the debt consolidation is a band-aid. As we saw when we were talking about my, when I was talking about my client, and she came into coaching with a debt consolidation because that she still needed coaching. They didn't fix it because that was just a band-aid solution.

17:03And the other thing that we saw with her was that she was able to do it faster without them. She had been paying them for a year that we were coaching and she was able to solve several debts. And then she went on to do the rest by herself without, and then she was able to get out of the contract with them. You can do this faster without them. You might think that, okay, if I just sign up for the seven-year process, seven years I'll have freedom. What if you could be free in two years or a year or three? Like, you don't need to sign up for this life sentence, or I guess it's not a life, but seven year sentence of your life to get out of debt.

17:33But they make it sound so good. And you made a good point, Jaina. How many clients come to us with debt consolidation lines in their debt tracker? Or bankruptcies. Right. So they have bankruptcies, they have HELOCs that they tried to do debt consolidation on their own, or they have bank loans, like personal bank loans, they tried to do this on their own. And they have seven or 10 more debts that they've added. This is not, It is a band-aid. It is not a solution. You don't learn anything this way. It is a quick fix. And what we like to say, if you really want to change your financial future, if you really are sick and tired of being sick and tired and you want to make a change, then do something about it on your own.

18:12Because one of my new clients that I have right now, they are so sweet and I love them so much. And she made all these conversations or she made all these phone calls and she had multiple conversations with these companies over and over again. and she said she took a day off of work guys took a day off of work to make all these phone calls and she said i never want to owe anyone anything ever again she said i am tired of this that right there that is where change happens and you're not going to get that if you just make one quick phone call hand everything over to a debt consolidation company and then start all over like you don't want to do that okay yes no you don't sorry i don't want to agree we know you're right we do not want to do that.

18:53I want to mention right now, because we're going to go into how to do this, how to do it yourself. But right now, I want to let you know, you can go to budgetbesties.com forward slash DIY debt relief to get the workbook that lays it all out. It has everything that you need to do this yourself. And whether you're talking about that, we have our step by step process, we have do's and don'ts, we have scripts, you guys, we have keyword phrases that you need to say when you talk to those people, all kinds of stuff, sneaky things to watch out for examples success but right now you can go to diy budgetbesties.com forward slash diy debt relief to get the workbook that lays everything that we're going to tell you out in excruciating detail and it's pretty it's pretty too and there's so much information in there about the non-profit and for-profit companies like it really gives you the tools because one of the things we said before is that these companies are preying on the fact that you know nothing yeah and they want you to know nothing so that way they can sound like they're very important and that they know all the stuff.

19:47And no, we want you to go in here with all the information you need to make the best possible decision for you and your family and your future. Please check that workbook out. The mock script alone is like so priceless. Yeah. It's perfect. It's everything you need. Okay. Okay. So the, so here's some general steps that you're going to take. Like we want you to go get the workbook so that you have something to reference and it helps you. And it has a lot more tools than what we're going to go over just in this podcast, because we've already been talking for a little while and we're going to keep going.

20:13Anyway, the first thing you're going to do is pull your credit report. How many clients do we have, have we had that added debts after the first session because they found them in the credit report, they found them later. So this is a really good, easy way. You can get it for free to grab it and see what you're actually, what you actually owe people. It's also a way like maybe there's something in there from 10 years ago that you had no idea. So it's in, maybe there's some fraudulent stuff on it. Just a really great way to see what's going on. And so that way, you know how to clean it up. Yeah.

20:41And I had a client that thought they had taken care of or settled a couple of debts and they were still on their credit report when they went and checked it. So you just want to, that's going to be their first step no matter what. Yeah, absolutely. Okay. The next thing you want to do is list out your debts, smallest to largest. Why do we do that? It's not necessarily about the snowball method. It's just really seeing like where everything is at and how much you have from smallest to largest. Because you've heard us talk about the debt minimum payment method, the debt avalanche, and the debt snowball.

21:07All those different ways of paying off debt is very specific based on your situation. But we do want you to list through your debt amounts out smallest to largest. Yeah. And then the next thing you're going to do, and we, all of our clients do this too, whether it's, so if you're considering debt consolidation, your situation, we believe is probably a little bit more severe than the typical situation. Every, I shouldn't say everybody, but almost everybody's in debt, right? So you're not alone there, but maybe your situation is a little more severe. Either way, the first thing you're going to do is now that you have that list, you know, what's what, like Vanessa said, you had all those details on there.

21:38We're going to call them. We're going to call them and you're going to have a script in the workbook to you, but you want to see, you want to get your feel out there. We have several clients that have gotten, that have called and gotten a reduced interest rate, gotten a lower minimum payment. They've had different deals offered to them without going in default, without having to, to do a big deal. Like, and it made a little relief in their monthly, but really helped them just from the first initial phone call. Yeah. We've had clients have their interest rates go from 30 % to 0%. Yeah. And no like extraneous circumstances.

22:08It was just, they literally called, made, they asked, they made the phone call and they made to ask and they offered them whatever was on their screen. So we just want you to know that there is possibility out there for lower interest rate, lower monthly minimum payment, or even pause payments. Yeah. And sometimes they'll offer you, Dave calls it pennies on the dollar where you can, maybe you owe 5 ,000, but they'll let you pay 2 ,000 just to close it and be done with it. So there's all kinds of different, different amounts. And so you just want to call different offers. And I should say, so you just want to call and see what's available.