Before I get into this post let me be clear that I swear I have nothing against Quicken! I like some of their software (what I’ve tried I generally like). But I’m not sure I’m a big fan of their personal finance “advice,” like yesterday’s post where I discussed their thoughts about when it’s a good idea to go into debt. I don’t usually highlight two posts from the same website two days in a row, but this one was so juicy I couldn’t wait!
Today we’ll talk about Quicken’s “How to Get Out of Debt.” Don’t worry, I’ll give you all the details you need to judge it by yourself, but feel free to check out their post if you don’t believe me! The essence of the post is summed up in five suggestions (with my standard two cents):
1. Roll your debts into a lower-rate loan. Seriously!?!?!? How the heck does this get you out of debt? If anything, following their advice will keep you in debt longer! I seriously had to read this twice because I thought I was missing something. I wasn’t. In the interest of full disclosure this is their explanation of how this would help you get out of debt:
Perhaps you can reduce your monthly payments by combining your major debts into a longer-term loan at a lower interest rate. This can be an especially rewarding strategy for credit card debt, which clobbers you with the highest interest around. A home equity loan may make sense. The rate will be lower, and you’ll reduce the number of checks you have to write each month. But before you take this step, learn about home equity loans.
That’s a quote. I know they say to get a lower interest rate. But I don’t care about that part. Remember their post was about “how to get out of debt.” The first thing on their list is to get a debt into one with “a longer-term.” In case you’re new to the English language a “longer term” means you’re in debt “longer.” Term means time. Longer means longer. Am I missing something?
Don’t get me started on their suggestion about home equity…
2. Switch to a lower-rate credit card. I promise I won’t trash every one of their suggestions, so I’ll just give this one a grade. On a scale of 1-10 I give this a “meh.” (That’s somewhere between 2 and 3). If you can lower your interest rate and keep your debt unsecured I won’t argue with you. But that’s not going to cure your problem.
3. Check your credit record.
Yes, check your credit report. I check mine multiple times a year. I was up to 6 times per year, but I’m back down to 3 (one every four months) via http://www.annualcreditreport.com/
. Here’s some more info on my aggressive credit check strategy
. Checking your credit is important for a number of reasons. Although Quicken doesn’t explain why it’s good to check your credit when trying to get out of debt I will mention three good reasons. First, it gives you a hit list of debts to pay off. Second, it gives you a chance to fix inaccuracies. Third it will help you figure out if you are a fraud victim.
4. Confess to your creditors. I generally don’t disagree with this. If you’re behind (or about to get behind) with creditors sometimes they show grace if you call and talk with them before it gets ugly. A long time ago I had one of those “no interest and no payments for 12 months” credit cards and called at month 5 saying I was new at my job and wasn’t sure how long it would last, so could they extend the “no interest and no payments” period for 6 more months. They did! This went on for two years total and I eventually paid it off and never paid a dime of interest. It can work. This was well before I “saw the light” and am happy the debt is long gone – even at zero percent. (In case you’re wondering, I was pretty nervous about my job security at the time and figured I would just call and ask and the worst they couldsay was no.)
5. Get help. Quicken suggests contacting the National Foundation for Credit Counseling, which is a nonprofit that operates all over the country. I don’t really object to NFCC, but some of their locations are better than others. Also, if it involves settling your debts for less than you owe you’re going to drop a bomb on your credit report. At the end of the day I’d do this before bankruptcy, but I’d certainly suggest trying everything else first.
Wow! OK. I made it through their list without puking on my keyboard (barely). I cannot believe they suggest getting a longer loan as a way to get out of debt…
How about stop borrowing money? How about tracking your spending and getting on a freakin’ budget (help with that here
)? How about spending less than you make? How about an action plan – a budget? How about a budget? Did I mention a budget?
I have my preferences as to which plan works best and why, which I’ll highlight here soon, but until then remember one thing: If you want to get out of debt the best plan involves actually paying off debt. Cool?
Seriously shouldn’t there be something about actually paying off your debt? I can’t get over that…
Until next time, put your credit card down and slowly step away from the mall!
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Image: Stuart Miles / FreeDigitalPhotos.net