How can families afford to use Dave Ramsey’s Debt Snowball Plan when they can barely make their minimum monthly payments? Where do these people with good intentions but bad luck turn for help? It seems that most Americans just want some extra breathing room each month but are struggling to get by. How can they pay extra on their credit card bills when they need to put food on the table for their family?
Many have asked the same questions about this too good to be true “Get out of Debt” program but so far nobody is answering. How are Americans that have been unable to find a job going to get out of debt? What about families on fixed incomes? We put together this guide to offer an alternative solution to Dave Ramsey’s Debt Snowball Plan.
What is Dave Ramsey’s Debt Snowball Plan?
For anyone that is unfamiliar with the Debt Snowball Plan here’s a brief explanation: Dave Ramsey, a self-proclaimed money expert, believes that personal finance is 20% head knowledge and 80% behavior. He suggests that you list your debts, excluding the house, in order. The interest rates on the balances are irrelevant.
Begin paying as much as possible each month toward the smallest balance. After the first balance is paid off, put the previous payment toward the next smallest debt, in addition to the minimum payment you were already making. Continue this process until all debts are completely paid off. This is known as the Debt Snowball Plan because you gain momentum as you go along.
While this program works for people that have a steady job and substantial savings, it leaves many others wondering how they will get out of debt. What the Debt Snowball Plan fails to take into account is how people are supposed to pay off their debt when they can barely make their minimum payments. Who’s going to help them? Below we outline a possible solution for anyone that faces any of these dire situations.
1. You Need Breathing Room
It’s no secret that most people with credit card, student loan or personal debt would love to pay it off immediately. Getting in debt was not their first choice. Unfortunately, many financial experts seem to point the blame on their spending habits.
These families had done everything right but ended up in uncontrollable circumstances. Whether it be unexpected medical bills, having to pay child support or losing a job – they had to pay their bills somehow. Now they can barely make their minimum payments, let alone pay extra on their monthly bills. A program like the Debt Snowball Plan is completely out of the question.
How can they get the breathing room they need just to survive? One option is a debt consolidation loan. Below we go into more detail about how these consolidation loans can lower monthly payments, reduce stress or anxiety and provide a way to get out of debt faster!
2. You’re Unemployed
We’re still dealing with the side effects caused by one of the worst recessions in our lifetime. Even though the government reports that unemployment is dropping, millions of Americans are still having a difficult time finding a job. The worst part is that the job market isn’t going to get better anytime soon. Where do families turn for help to get out of debt when they don’t have a steady income?
One way to reduce the monthly burden is to consolidate debts into a lower interest rate loan. Many banks offer >unsecured loans for up to $25,000 that require no collateral. The application process can even be completed online in a matter of minutes.
3. You Have a Fixed Income
When reading articles about getting out of debt, it seems that most personal finance experts believe that money just grows on trees. Dave Ramsey recommends putting away $1,000 into an emergency savings fund and sending all extra money towards the Debt Snowball Plan. Where does he expect this money to come from? How is anyone supposed to pay off their debt when they live on a fixed income each month?
Today many Americans are in a situation where their income is fixed but their bills keep growing. After the economy began slowing down many companies refused to give raises and others don’t plan on adding cost of living raises anytime soon. Government employees are in the same situation with no way to increase their income. Other families are only able to get by on Social Security or VA disability benefits each month. Finding extra money to pay off debt is practically impossible on a fixed income. What are these families supposed to do?
4.You Need to Put Food on the Table
Although most families dream of getting out of debt, the reality is that most are struggling to put food on the table. They need to pay their mortgage, utilities, car payment and insurance while still finding a way to buy groceries each month.
A common phrase within the personal finance community is to “live within your means.” This saying is usually aimed at families that spend more than they make each month on vacations, shopping trips and new cars. What financial experts fail to recognize is that many families barely make enough money to cover their basic necessities. There is no place in their budget to cut back on expenses. Living beyond their means is not a choice but the only way to survive. When Dave Ramsey’s Debt Snowball Plan doesn’t work for them where can they turn for help?
A simple way to lower monthly expenses and pay off debt quickly is with a debt consolidation loan. As we have covered so far many families have found that these unsecured loans give them extra breathing room each month to pay their bills.
5. You’re a Single Parent
Today there are more single parents struggling to get by then ever before. Not only do they have to work a full time job (sometimes multiple jobs) but they also have to take care of their children. Many need to pay for childcare while they’re at work. Unfortunately many are left without financial help from child support. Any extra money available each month usually goes toward putting food on the table and unplanned expenses.
Where can single parents turn for help when trying to get out of debt? How will they ever pay off their credit cards when unexpected bills show up each month? An easy way to get ahead and be able to afford the luxuries they’ve always wanted is with a debt consolidation loan.
An Alternative to the Dave Ramsey Debt Snowball Plan
As we covered, there are many Americans that are unable to use the Debt Snowball Plan to pay off their debt. They can barely make their minimum payments and need to put food on the table for their family. One alternative to Dave Ramsey’s get out of debt program is to apply for a debt consolidation loan.
Debt consolidation loans provide a few important benefits for consumers with credit card or personal debt. The primary advantage of credit card consolidation is a reduced interest rate. By combining high interest credit card balances into one low interest personal loan borrowers can save possibly thousands of dollars in fees. Lower interest rates are directly reflected as more affordable monthly payments. This is a huge advantage for borrowers that are having a difficult time paying their credit card bills.
Advantages of using debt consolidation loans to pay off debt:
- Reduced Stress and Anxiety
- Lower Monthly Payments
- Fewer Creditors to Deal With
- Longer Repayment Period
- Increased Financial Flexibility
Benefits of Debt Consolidation Loans
A debt consolidation loan can be structured to extend the repayment period of the debt. Some financial experts discourage consumers from extending their credit card debt over 10 or even 15 years. While it’s generally frowned upon, the extended repayment terms can help consumers save money and prevent them from defaulting on their debt.
Consumers agree that debt consolidation loans help remove the stress that comes with credit card debt. By consolidating their outstanding balances consumers have only one bill to pay each month instead of multiple credit cards. Another benefit is that this payment can be automated with a bill pay system provided by most banks.
We attempted to provide some assistance to families that are struggling to get out of debt. Although Dave Ramsey’s Debt Snowball Plan has helped a small group of people, it’s still not for everyone. By reading our guide we hope you understand that all financial products come with their own set of risks and restrictions. This is no exception for debt consolidation loans. Please consult with a trusted financial adviser before taking on the loan consolidation process alone.