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When Andrel Harris was growing up, her grandmother, turned to her as she was cutting up credit cards and uttered this warning:  “Don’t get into this trouble.”

Don’t Get Into Credit Card Trouble

As a result of her grandmother’s warning, Andrel sought to stay away from credit cards. She started cosmetology school in Greensboro, NC, but three years after she began, she got a job at a Fortune 500 company.

It was 2004 and at the age of 23, Andrel was making more than her peers – even without a college degree. She stopped cosmetology school, content with the amount of income she was taking home. She was able to buy whatever she wanted and decided to open a 401(k) and a CD.

Though the company she was working at offered employees credit cards, the words her grandmother had warned her with when she was a little girl stayed in her mind. She resisted opening a credit card.

“I was told repeatedly that [having a credit card] could increase my credit score, and that I should have it for emergencies. No one ever told me about having an emergency fund,” says Andrel.

She caved in at 2006, at the age of 25, and opened a credit card. At first, she only used it to make small purchases and quickly paid the card back in full each month as a way of establishing credit. In 2008 she built her first home and furnished it using store loans, with the plan of paying off the debt in full relatively quickly.

And then the marked crashed in 2008.

“But I was counting on money that I didn’t even have yet. This was a valuable lesson of what not to do. [My] company ended up making job cuts, and I was one of the casualties,” says Andrel. “I was fortunate enough to get another job a few months later. However, because my income reduced by nearly half, I was forced to make ends meet with my credit card.”

Andrel’s debt spiraled out of control as she tried to keep up with her payment schedule. The problem was, she now had a lower salary to pay back the debt with. As a result, she drained her 401(k) and savings, and then turned to credit cards as a crutch. She opened two more cards, and was soon faced with the following debt picture:

American Express: $655.34

Wells Fargo: $5,118.59

Capital One: $776.28

Personal loan: $3,034.69

Debt total: $9,584.90

Realizing that the debt was starting to get out-of-hand, Andrel realized she was going to need to put a serious plan in place as a way of getting out of debt and reclaiming her financial stability. She put herself on a plan:

Decrease Expenses

“My strategy was to immediately cut back on my discretionary monthly expenses. For instance, I cut off my cable, I took advantage of savings from my employer on my cell phone bill, I monitored the electricity use in my home, and I called my car insurance company and negotiated a lower rate. I also made a final move to transfer a credit card balance to another card at 0%,” says Andrel.

Increase Income

In mid-2009, Andrel decided it was time to complete the cosmetology exam that would grant her the necessary license to practice. “I realized that I needed to have a plan B at all times,” she said. In September of 2013, she went to work at a salon part-time in addition to her full-time job. This move was so she could supplement her full-time income.  All of the additional income she earned was put toward her debt and her new emergency fund.

Ban Extraneous Spending 

“Because I loved to shop, particularly for shoes, I accepted that I would no longer be able to indulge every impulse,” says Andrel. “The rules were to not shop at all. No clothing, shoes, or accessories of any sort. When it came to grooming, I did my own manis/pedis and hairstyling. I also put off all vacations and dining out during this time.”

The s”shopping ban” was implemented on August 17, 2013. By April 8, 2014, Andrel was debt free. Still, Andrel held fast, and continued the shopping ban until August 17, 2014. During that year, she did not take a vacation, did not dine out, only purchased food and necessities, all while bringing in both full-time and part-time income. And now, two years later, Andrel is still working her full-time and part-time jobs. She says she’s learned the importance of not leaving yourself vulnerable. For her, that means keeping a side-job.

“I would say I know [now] that you can achieve more by being willing to sacrifice a little. Short-term sacrifices for long-term gain.”

If you are struggling with your own debt, you might want to consider working with a debt consolidation company.

Debt Consolidation

Debt consolidation means that all of your smaller loans get paid off with one large loan. So you essentially get one lump sum to pay off your smaller loans so that you only have one monthly payment rather than several monthly payments. The theory behind this is one payment is easier to manage than several. And the main goal is it lower the interest rate and monthly payments while paying off your debt in a quicker amount of time.

Debt Settlement

It’s important to note that debt consolidation is not the same as debt settlement. Debt consolidation allows you to pay your debts in full without causing negative consequences to your credit. Debt settlement is the process of paying off debt to a creditor once a mutually agreed to sum is reached. This sum is usually less than what is owed. Typically, only unsecured debt (for example, credit cards and medical bills), is eligible for debt settlement. Debt settlement is often considered a risky process.

Understanding Secured vs. Unsecured Loans

A secured loan, such as a mortgage or a car loan, means you pledge the property, your home or your car, to secure the repayment of the loan. Here’s an example: you obtain a mortgage loan – the house is security for repayment. If you do not make the home, the mortgage lag lender can take the house back through the process of foreclosure to satisfy the loan.

Unsecured loans differ in that they are based only on your promise to pay. These loans are not secured by property that can be foreclosed on or repossessed to pay back the loan. Credit cards and student loans are technically unsecured loans because there’s nothing that can be directly repossessed if the borrower does not pay the loans back. Unsecured loans have higher interest rates because they carry more risk for the lender.

Debt Consolidation Through Secured Loans

Debt consolidation is a little easier when it comes to secured loans. Because there are physical “securities” that exist for repayment, they are seen as safer for the lender. For example, you can refinance a home, take out a second mortgage, or get a home equity line of credit. Another example is your car loan – the automobile is used as collateral in case you cannot pay back the loan. Assets can also be used as security for a loan. A 401K loan uses your retirement fund as collateral. Life insurance policies can be used if they have cash values. Financing firms can often loan you money against lawsuit claims, lottery winnings, and annuities.

Pros of Consolidating With Secured Loans

Often, secured loans carry lower interest rates than unsecured loans because they are safer for lenders. This fact can help you save your money on interest payments. Lower interest rates tend to make monthly payments lower and thus more affordable. Rarely, but in some cases interest payments are even tax deductible.

Cons of Consolidating With Secured Loans

The biggest con of consolidating with secured loans might seem obvious: when you pledge your assets as collateral and you cannot pay back the loan, you are putting your property at risk of being foreclosed on or repossessed. If you’re unable to pay the loan back, you run the rid of losing your house, car, life insurance, retirement fund, or whatever else you might have used to secure the loan. And certain assets, such as life insurance or retirement funds, may not be available to you if the loan is not paid back before you need to use them.

Debt Consolidation Through Unsecured Loans

Unsecured personal debt consolidation loans used to be quite common, but they are less likely to be available to people seeking them today. Usually this type of loan requires a borrower to have very good credit. A credit card or personal loan debt for consolidation is often given with a no interest, or low interest, introductory rate. Often times this amount balloons after a specified amount of time.

Pros of Consolidating With Unsecured Loans

The biggest benefit to unsecured debt consolidation loan is that no property is placed at risk. Also, an interest rate might balloon to higher than the rate on a secured loan, but it can often be distributed over several different credit card balances, thereby lowering your interest burden and your payment.

Balance Transfer Options

Balance transfer options on no-interest or low-interest credit card offers can be a very useful tool, but they can often be tricky. Check there is no transfer fee in the fine print which negates the savings.  Also, the no-interest or low-interest period is generally limited to a set amount of months. You’ll want to be sure you can pay the debt off during this time. If not, you run the risk of paying a much higher interest rate once the period expires.


If your debt is too high to be consolidated, you might want to consider bankruptcy. A bankruptcy attorney will be able to look at your financial situation and determine if bankruptcy is a viable option for you. They will also evaluate your options for avoiding bankruptcy if other options exist. There are many different ways to discharge your debt and find the financial relief you have been looking for.

Working With a Bankruptcy Attorney to Help Consolidate Debt

At RHM LAW LLP, we will help you explore all of the debt relief options available to you. Though we specialize in bankruptcy law, we do not suggest bankruptcy as an option if we do not think it is the best option for them. We are committed to helping our clients resolve their debt problems, achieving true debt relief and avoiding potential debt consolidation scams. Contact us for a free consultation.

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