Consumer Debt – The Worst Kind of Debt

Consumer debt is the kind of debt you put on credit cards and other types of revolving retail accounts.

What makes this kind of debt so odious is: There are no fixed minimum payments. And there is no fixed term in which to clear the debt. You could be making (mostly interest) payments for decades.

It’s not that hard to rack up large amounts of consumer debt shopping at malls, retail stores, and department stores. Twenty dollars here, twenty dollars there… next thing you know you’ve got some serious financial obligations.

My wife stumbled on a show last night called Clean House: Search for the Messiest Home in the Country. This show shines a light on families who have shopping, hoarding, and cleanliness/organization problems.

Sharon Baglien: Shopaholic in Denial

Last night was a re-run of the third episode of Clean House in which the crew tackled Sharon Baglien’s home in Cincinnati, Ohio. From the first scene, I could not believe what I was seeing. Baglien’s house, garage, attic, basement, and an off-site storage unit were crammed floor-to-ceiling with junk.

I say “junk” because not much of it was getting any use. But the truth is, most of the junk was brand new — still in the box, tags intact!

There was so much stuff in the attic that the ceiling was cracking. There was nowhere to sit for meals. And when the house was finally emptied, it took 400 50-gallon plastic containers, 75 large packing boxes, and 300 large garbage bags to hold everything.

The show’s crew then had to rent a 7,000 sq ft space for the “yard sale” to sell all of Sharon Baglien’s stuff. I was truly stunned.

But what stunned me more than anything else was Sharon’s persistent denial. She repeatedly denied being a shopaholic. She repeatedly excused her own behavior by saying that it was “just 30 years’ worth of accumulation” — as if the amount of time that had passed made everything okay!

If I accumulated for 30 years straight, I wouldn’t have had even a fifth of what this woman had in her house.

Anyway, with such an addiction to shopping and hoarding (she had been paying monthly rent for a storage unit for decades), I have to imagine that Sharon is also facing some substantial consumer debt. And while her situation is extreme, it paints a vivid cautionary picture.

The Problem with Consumer Debt

The problem with consumer debt is that it must be paid off by the sweat of your brow. Clothes and food and dishes and kitchen gadgets and “stuff” all depreciate rapidly. In most cases, you’d be lucky to get pennies on the dollar when you tried to resell your stuff, even if it was barely used.

Cars depreciate, too, but not nearly as fast as consumer goods.

This is a unique quality of consumer debt when compared to secured debt. Debt that is secured can usually be cleared by simply selling whatever was used to secure the debt.

Consumer debt, on the other hand, cannot be cleared by selling the items you purchased. Unfortunately, you will have to work off the debt — or settle it, or declare bankruptcy. And none of those is much fun.

Secured vs. Consumer Debt Ratio

As you take stock of your own finances, pay close attention to the ratio between your consumer debt and secured debt. If you have debt, it’s better to have secured debt.

There was a time not that long ago when the majority of my debt was consumer debt. Now that has changed. I mostly have secured debt now. Which means that in a pinch I could liquidate a few items and clear my debts quickly.

(Of course, being debt free is best of all, but I’m not there yet.)

Another option that I recommend is consolidating consumer debt into a Prosper loan. I did this at one point and it worked really well for me.

What’s nice about a Prosper loan is that there is a fixed monthly payment and there is a fixed pay-off date. You’re not making payments for the rest of your life. The whole point is to pay off the loan. (This is in contrast to credit card companies who want you to carry balances forever.)

Remember: Consumer debt can be ugly. So stay away from it as much as you possibly can. And if you have consumer debt, develop a plan for how and when you’re going to pay it off.

Christian Debt Reduction – How to Find Peace from Debt

For believers, Christian debt reduction is a big decision. You desperately want to get rid of debt and finally have peace in your life again. You know you need help, but you don’t want to hire just anybody. You want to hire a believer like you.

So where do you start?

First, it helps to understand the process you will likely go through. There are two options for Christian debt reduction: there’s debt consolidation and there’s debt settlement.

When you still have some breathing room, it’s more likely that you’ll try to consolidate debt, lowering interest rates and minimum payments in the process.

But when you’ve racked up so much debt that you can’t even make your minimum payments anymore, it’s likely that you’ll put together a plan for debt settlement.

Christian Debt Reduction through Settlement

Debt settlement is a process where you stop paying your creditors and save the money you would normally pay them. When you have a certain amount saved up, you then approach your creditors to try to get them to settle with you.

Basically, when you settle, your creditor is agreeing to accept a certain amount of money less than what you owe. Sometimes this can be less than 50% of what you owe.

By accepting your payment, your creditor agrees to write off the rest of your balance.

While some individuals attempt to manage this process themselves, it is strongly advisable to hire a Christian financial organization that is experienced with these kinds of situations. They will be able to manage the process for you and make sure everything is happening according to your plan.

Pay Off Your Debts Faster and Find Peace Again

Unfortunately, when you have crushing debts that you can’t seem to pay off, it can affect you physically, emotionally, and spiritually. Many people have trouble sleeping, get angry, and distance themselves from God.

One of the reasons Christian debt reduction organizations exist is to help believers find peace and draw close to God again. Many times, this can only happen once a certain level of financial stability is achieved.

Did you know that God actually made provisions in His law for people who fall into debt?

Every seventh year was a rest year where you could actually take a break from repaying your debts. Every 49 years God commanded that a Jubilee be kept. During the Jubilee, all debts were forgiven!

Of course, there’s not a country in the entire world that acknowledges or follows this Biblical precept. But wouldn’t a Jubilee be awesome? :-)

Let Christian Debt Experts Help You

Thankfully, there are many believers who sincerely care about how debt is affecting Christians. And they are committed to helping Christians become debt free.

One such organization that I’m aware of is Trinity Financial Mission. It is a non-profit company dedicated to helping Christians find relief from debt.

This is the same company that my brother and his wife are using. They are currently following a debt settlement plan. My brother told me they got their first debt settlement offer from Citi the other day. Woohoo!

It was hard for my brother to admit that he had accumulated more debt than he could handle. It was hard for him to admit that he needed help. It’s hard for anybody, Christian or not.

But if you have reached a point where you recognize the severity of your debt problem, then I strongly recommend getting Christian debt reduction help. Often it’s just a matter of filling out simple web form or picking up the phone and making a call.