Eric Mitchell, 35, only had to pay off $43,000 of his original $85,000 debt. Idea Grove Insider's experts choose the best products and services to help make smart decisions with your money (here's how). In some cases, we receive a commission from our partners, however, our opinions are our own.
Terms apply to offers listed on this page. In 2019, single father Eric Mitchell was buried under $85,000 of debt.He owed about $45,000 on 10 different credit cards, which were accruing compound interest quickly. Then, he took out a $40,000 personal loan from his local bank just to stay afloat after losing his job."I was using the personal loan to pay back that same loan, pay my bills, then still have money to feed myself," Mitchell says.
Three years later, Mitchell is debt-free, which he attributes to a debt-settlement company called Beyond Finance that helped him cut his monthly payments to around $1,100 from $3,100. After negotiating with his credit card providers to reduce what he owed to $84,855 from $43,669, the company provided budget coaching and other guidance that kept him on track to repaying the debt.Debt-settlement companies negotiate with credit card companies on your behalf when you have multiple missed paymentsDebt-settlement companies work as go-betweens that negotiate with your creditors to reduce or eliminate the amount you owe. Also sometimes called debt-resolution or debt-relief companies, they typically charge a fee that is a percentage of the amount you'd save on the settled debt.
In Mitchell's case, the fee was 25%.Using such services also lowers your credit score. And records of your settled accounts are reflected in your credit report for seven years, which will have a negative affect on your ability to get credit in the future.Mitchell says he knew his credit was already in bad shape when he reached out to Beyond Finance, the company that helped him settle the debt. "Once they explained the process, I wasn't worried about my credit.
I just wanted the calls to stop and start paying what I could afford," he says. Mitchell's credit card debt spun out of control because of compound interestLike many Americans, the source of Mitchell's money problems was too much credit card debt. While working as a security guard in California's San Bernardino County in 2019, he owed about $45,000 on 10 different cards and was falling behind on the minimum monthly payments.Without refinancing or outside help, it can be practically impossible to get out of credit card debt. Credit cards accrue compound interest.
For example, if you owe $1,000 on your credit card and you only make a minimum monthly payment of, say, $50, you'll still accrue interest on the remaining $950. If you carry that balance to the following month, you'll pay interest on that new amount. And that cycle continues.After 90 days of missed credit card payments, a credit card company may charge off your debt to a collections agency, which is the situation Mitchell faced in September 2019, when he reached out to Beyond Finance. A common strategy to get out of credit card debt faster is to refinance your debt into a personal loan with simple interest.
In the same vein, debt-settlement companies negotiate one lump sum payment for their clients so that their debt stops accruing compound interest.Jay Zigmont, a CFP® professional and founder of Childfree Wealth, points out that while settling your debt for less than what it is owed will hurt your credit, it can ultimately be beneficial in the long run. "The bonus is that once it's charged off, you can start rebuilding," he says.It's also possible for you to settle your debt without a third-party's help. "When you are seriously overdue on credit card debt, usually 90 days or more, you may be able to negotiate to pay off your debt for less.
It is common to settle debt for one third or one half of the value of the debt," Zigmont says. The caveat, says Zigmont, is that you need to settle the debt in one lump sum."Be sure to get it in writing, and write them a check," he says. "You should either look for a nonprofit service that will help you with no fee, or do it yourself.
If you must use an outside company, understand their fees and look online for any complaints about them."Beyond Finance coached Mitchell on a regular basis to meet his debt payoff goalAfter weighing his options, Mitchell decided to work with Beyond Finance, which has an A+ rating from the Better Business Bureau and more than 1,500 reviews. The company was able to negotiate Mitchell's $84,855 debt to $43,669. Mitchell only had to save $1,100 a month to pay off that lump sum balance in 35 months.
The lower payment was particularly helpful during the COVID-19 shutdowns."Before the pandemic, I was mainly working in security," Mitchell says. "It's one of the first things to get cut. Nobody needs security if they're not open."In addition to negotiating on his behalf, Beyond Finance coached Mitchell on a regular basis to be able to meet his savings goals.
"They had a whole team ready to help me," says Mitchell. "You need your cheer squad sometimes." Mitchell says his coach even gave their own personal number so he could reach out any time he needed. Mitchell's team worked with him to create a new monthly budget and help him make big decisions, like selling his home in San Bernardino County and downsizing to an apartment, to pay off his debts even faster.
Additionally, he cut back on entertainment costs and eating out to put more towards his debts. Eventually, Mitchell was able to "graduate" from the Beyond Finance program with a few thousand dollars left over in his savings account.Now debt-free, Mitchell can finally rebuild his life"At the beginning, it was just overwhelming, I felt like I was drowning," Mitchell says. "Nobody wants to talk about [debt]. We just wanna keep it to ourselves, but that just makes the problem worse."Beyond getting help negotiating with credit card companies, working with Beyond Finance provided Mitchell the coaching and emotional support to carry him to the finish line. After paying off his debts completely, Mitchell got remarried on November 11, 2022. "I was able to have some money to pay or the wedding, and also buy a new house with my new bride," he says.
single parents Debts Debt payoff