How to Get Out of Debt with No Extra Money

Profile of Leslie

Last Christmas was the best holiday Leslie ever had. It wasn’t great because of what she received, but rather what she lost. She got rid of $76,000 in credit card debt in spite of two layoffs that left her family with no money to eliminate debt.

The trouble started after her husband’s layoff…

Things were fine until her husband got laid off. With two kids in college, money was tight on just Leslie’s income alone. She struggled to keep the household finances up on her own while he looked for another job. They didn’t have any money in savings to help keep them afloat.

Their “saving grace” was the 12 credit card accounts they owned between them.

“I’m not a shopaholic. But when we had a car repair we just didn’t have anything in our savings to cover it. So, the credit had to come out. We had college expenses for the kids. It just seemed like one of those situations where everything kind of came at the same time.”

Leslie admits, "Every time I tried not to use credit, there was always some kind of emergency."

A single income wasn’t enough to stay ahead of the payments…

Once their credit card balances started to add up, it became tough to stay ahead. Even on months where no extra expenses came up, they couldn’t push ahead.

“I tried to pay it down on my own, but I was only going deeper and deeper into credit card debt. My payments to the credit card companies at up a huge portion of my income. Having a monthly payment here and a monthly payment there zapped my financial strength. At some point, I just realized there was no way I was going to pay it off if I kept working on it myself.”

Debt settlement didn’t seem like the right answer…

Leslie and her husband started to explore options for how to get out of debt with no money. Debt settlement was the most common answer they found online. But a little research revealed just how much this would hurt their credit.

“My husband and I had looked into debt settlement, but it ruins your credit rating. We didn’t want a solution that made us worse off than when we started.”

Debt settlement programs pay off debt for a portion of what you owe. Each settled debt creates a negative item that remains on your credit for seven years from the date of discharge. What’s more, if you don’t have money to make the settlement offer, the way you generate the cash also damages your credit. Debt settlement companies often advise you to stop paying you creditors and use the funds to generate settlement money. This is extremely risky and there are no guarantees it will work. Creditors often reject settlement offers.

Luckily, a friend had just worked through a similar situation…

“We actually found Consolidated Credit thanks to my friend Liz. We’ve always helped each other out through our rough patches. So, when she heard about what we were going through she recommended Consolidated Credit. She’d just used them.”

Leslie and her husband decided to call…

“It’s a decision I will never regret. We worked with the same credit counselor that helped Liz and he was just as kind and encouraging to us.  He never made me feel bad and that made a huge difference. Our counselor helped us realize just how serious our debt problem was, but he didn’t judge us at all. He just said, ‘You have a lot of debt, but we can help you.’ And they did.”

During the consultation, Leslie’s credit counselor assessed her budget and debt load, as well as her credit. It was clear that they had no extra money to spend, but that they were at least covering the minimum payments on their bills. That made a debt management program an ideal solution.

A debt management program got them out of debt faster for less each month…

The main advantage of a debt management program is that you don’t need extra money to pay off debt faster. The credit counseling team negotiates to lower the interest rates applied to your debt. This means a larger percentage of each payment pays off the debt you owe, rather than accrued monthly interest charges. As a result, you can get out of debt faster, even though your total payments are less each month.

“Consolidated Credit actually saved us over $200 a month on what we were paying the individual creditors. Here I am four years later and I paid off every dime I charged. Some of our interest rates before calling Consolidated Credit were as high as 26 percent. After, some were cut to as low as seven percent.”

Leslie reports, "My credit rating has gone from a 510 to 740!"

On average, clients see their total credit card payments decrease by 30 to 50% on a debt management program. Even with that reduction, most clients get out of debt in 36 to 60 payments – about 3 to 5 years. So, you can get out of debt with no extra money over what you pay now.

“As long as you have the money, you pay Consolidated Credit and they pay your creditors on time. We got not one collector phone call after we enrolled. The creditors stop hounding you and eventually they got every dime we owed them. They didn’t get the 26 percent interest, but they got their money back.”

Then Leslie’s husband was laid off a second time…

“My husband got laid off again in September when we had four months left on the program. It’s like, ‘Seriously, how did this happen to us twice?’ But we weren’t about to fail after we came this far. With the help of our credit counselor we made it work for the last four payments.”

This is a big part of what a credit counseling team can help you do. If you run into trouble after you enroll in a debt management program, call your credit counselor. They can help you make special arrangements while you rework your budget. That way, you can keep moving forward without dropping out. Although enrollment is 100% voluntary, if you drop out then your creditors usually restore your original interest rates; you may also face fees that the creditor waived while you were enrolled.

Leslie and her credit counselor ran the numbers and worked out a system where she could still be out of debt in four payments.

“Now that we’ve redone our budget, we can bring in half of what we make now and be fine. That much a debt management program taught me.”

Freedom from debt hasn’t sunk in yet…

“It feels amazing to be here now, although it hasn’t really sunk in yet with Christmas and all the extra expenses. But we’re paying for everything this season with cash instead of credit. And I look forward to my next paycheck; it will be like getting a big $500 raise. You guys are great. I can’t say enough about this program.”

Remember, the winter holiday shopping season is the biggest financial drain on most households. Spending almost always increases in November and December. That increase is fine as long as you can cover it with cash in your budget or holiday savings you have set aside.

Once the holidays are over, Leslie plans to have a modest celebration as a family:

“Since Christmas, it’s been non-stop partying with a few birthdays on top of that. But I think we will go out and have a nice dinner or a weekend getaway or something. Even a weekend trip would cost half as much as what we were paying on our credit cards before Consolidated.”

Enrolling in the program taught Leslie a few lessons…

“The biggest lesson we learned is that cash is your friend. I also learned to live on what I make. The program showed me that I can live within my means and that I don’t have to rely on credit cards. If I don’t have money in the bank to do something, I don’t do it. I swipe my debit card, but I watch my balance like a hawk.”

Leslie says, "The inability to use credit was hard, but it was the best thing that could’ve happened."

Leslie has this advice for anyone in the same situation…

“It doesn’t matter how deeply in debt you are. If you have a plan and support you can do it. Stick with the program, use the tools on the website. I used them a lot – How to Survive a Layoff, How to Survive the Holidays, etc. And don’t get discouraged! Don’t give up and eventually your debt will be gone. And when it’s gone, it’s just like a huge weight was lifted off your shoulder. If I can do it, seriously, anybody can!”