Money Donuts® Episode 6: Financial Check Up Part 2: Quick Tips For Dealing With Debt

Steve:
Welcome to this week's episode of Money Donuts. I'm Steve. And this is part two of the cinnamon twist. Last week, we talked about financial checkups and credit scores. And this week we brought back Heather, one of our comprehensive lending specialists at Royal Credit Union to give us some quick tips for dealing with debt. But first Heather, Cooper, I have a pressing question that I need to know before we move on. If you had to pick up your financial spirit animal, what would it be? What is your financial spirit animal? I'll give you a couple of seconds to think. Well, I give you mine. Crocodile kept coming to mind because sometimes I'm just too aggressive with what my plans. And sometimes I'm just floating around the body of water, just hanging out.

Heather:
I think you're right. And mine was actually a Wolf. That's what I thought of right away. We can be sleeping during the day, just hiding out, hibernating. And then all of a sudden, one day you'll wake up and you're like, I'm super excited or hungry to buy a car, or I'm eager to get this and that. And the other thing. And so you kind of wake up from that hibernation state and you just get after it and then you aggressively use your credit and then you go back into the sleep mode and just hang out.

Steve:
Cooper did you think of one?

Cooper:
I'm notorious for my clarifying questions. So this is how I am with my money, or I am working in a credit union?

Steve:
Yes. No. Let's go with how you are with your money.

Cooper:
I'm going to go with a flamingo. Okay. So I'm going to go with a flamingo and I'm going to tell you why, because flamingos like to stand on one leg, right? And I pictured them switching, between one leg and the other, because they're trying to balance and your leg probably gets tired. And I think that's personally how I am and what I also try and teach as a financial educator. You got to do what's best for you and that's money's personal. So kind of like the flamingo, some probably sit on their left legs, some probably stand on their right leg. They're just kind of switching and doing what works for them that day. And that's what you have to do. And what I have to do, like some days I really like to spend all my money. Sometimes I really save it, it's the nature of it. And taking that step back and trying to be smart about it too.

Steve:
I like it [crosstalk 00:02:29].

Cooper:
I'm a flamingo.

Steve:
You're a flamingo. We should had a round where we tried to guess each other's financial spirit animals. That would have been fun.

Cooper:
Oh my gosh. That would have been-, since James isn't here, what do we think his financial spirit animal would be, a giraffe?

Steve:
Giraffe. Well, you had that one ready to go.

Cooper:
It's cause he's very tall. James is very tall.

Heather:
He is actually in Toastmasters with me and I would have to say that a giraffe would be pretty right on track for him. It's tall, team, timid, but aggressive when it needs to be. So yeah, I feel like you're right on point with that.

Steve:
My gut reaction was sloss. I could see spirit animal, just taking everything in and just moving slowly and figuring everything out. That's my-

Cooper:
He does do that.

Steve:
You can't see, but this is my impersonation of a sloss.

Cooper:
He's got his arms out and is moving very slowly.

Steve:
Okay. If somebody's looking to analyze their debt, how can you help?

Heather:
We ask if you would be open to us pulling your credit report, and then we would pull that TransUnion credit report and we have a loan savings calculator. It is an amazing tool. And so all you have to do is input information off of the credit report. And it will compare the current rates with Royal Credit Union's rate, pull up your mortgage rates, pretty close with the dates off of the credit report and compare with rates now. So we would be able to go through all of that with you. If you were open to us, pulling your credit report.

Steve:
What can we do to go after that debt? What are some methods that we can use?

Heather:
Well, I think that there are so many different ways that we can go about attacking the debt. So it really depends on your flexibility in your budget, what and what you're looking for. So for instance, some members will come to us and they will be completely comfortable in their monthly payment. However, they are just like, I don't want to pay 50 different creditors anymore. Okay. That makes sense. So we will look at combining some of the different creditors and putting them into a one lump sum at a lower interest rate so that they are not only paying down the principal faster, but their conveniences is there. Some members are like, hey, my payments are just way too high. What can I do? So we will look at free and clear vehicles. We will look at other potential loans so that we can take the uncollateralized, which is credit cards, unsecured debt, to a collateralized loan, meaning that it terms out in whatever term you choose, whether it be three years, four years, five years, something like that.

Heather:
But it's at a lower interest rate because it has that piece of collateral. We can leave what you have alone. If for instance, if you're on 0% interest on a couple of different promotional items, that your washer went bad and you have 18 months interest free. Well, you're going to want to pay that off in the 18 months. Otherwise, what happens is you will get back credited all of that interest, so from day one. So that can really, really hurt a person financially and also in your brain, right. Because you had that certain amount of time and you didn't complete it. So now you're getting penalized. So that's a hard pill to swallow sometimes. So I guess it just depends on what your scenario is and what you have out there really is how to look at your financial wellness. And there's all sorts of different theories out there.

Heather:
There's Dave Ramsey. So you could read a book or listen to an audible book on him. He has some great insight on what to do, start with the lowest and work your way up to the highest. You can do it that way. There are some other self-help books out there and authors that will tell you the exact opposite. So really it just depends on, what are your financial goals? I have five years and I need to get all this paid off because I want to do this in five years. Okay. Now you've set your goal. So what are your flexibilities to get there then? Our we keeping everything's right where it's at? Or are you able to increase that payment to shorten terms, things like that.

Cooper:
So Heather, what is one commonly unknown tip you would share with people about credit reports?

Heather:
Did you know that you can contact to the people who reported you and to collections and actually have it removed from your credit report, like it never even existed. That's another thing, there's a paid collection on your credit report and then there's completely taking it off and completely taking it off is going to be your best option.

Cooper:
Yeah. I think that's actually a really good point, that a lot of people don't know. When you are checking your credit report and looking at everything, if there's a mistake or if you see something you're not sure about, call in and talk to them or call your financial support person at your financial, that's super important. I don't know if people realize you can do that or request changes.

Heather:
Right? And it's so important because just having that conversation, knowing who to call, if you, let's say for instance, it's Mayo Clinic and you call Mayo and they say, well, we don't actually handle that. We put that into a collection agency, and this is the name and phone number. Then you would call them, yes, it's going to take a little bit of time, but over the rest of your life, it's going to help your credit significantly by being able to pay that and get it off your credit report completely.

Heather:
And I always tell members that there's an app called Credit Karma. It is a free service. So the information in there is not always complete, the rate on track. I wouldn't use it for your credit score or anything of that nature. What I use it for is that way as somebody pulls my credit, I know instantly. So that way, if I'm not applying for that particular credit, then I can call right away and get that taken care of. It shows new accounts that are opened up. It shows if you were to have collections, it'll notify you, missed payments, it'll notify you things of that nature. So it is very helpful for those sorts of items. However, the overall scoring, I wouldn't take that into consideration.

Steve:
What would be your number one tip that everybody could do today to start helping with their financial health?

Heather:
I would say, get that free credit report, look at stuff out there and call some local financials rate shop. There are a lot of free services that people don't know about. So for instance, a financial review here at Royal is free, we would be more than happy to take a look at what you got, bring it on in, let us look at it and refinancing vehicles. A lot of times there is no fees to do such a thing. So if you've got your loan, you don't have to keep it there, move it, do the things, but get your credit report and make some calls.

Steve:
And that's like one of the biggest hurdles, are people just not engaged enough with their financial situation to take those steps?

Heather:
Most of the members that I talked to don't even realize that you can refinance the vehicle with another financial, without a penalization, without a fee that's so large that makes up for all of that interest savings. No, it costs $25 to move the lead, $13 to move the lead depending on what state you live in. There are no other fees. Balance transfers are another one. You can move on to, from a 28% card, to a 0% card. But if you're not reading fine print and seeing how much it's going to cost you to move that bailey, then you can get yourself into some trouble there because you might be paying a thousand dollars in fees where if you would have moved it to, I'm just going to throw out Royal Credit Union's credit card, that's currently at 7.75. We don't charge for balance transfers. That's one of the awesome things about being a credit union. So when you figure out what you would have paid in fees versus 7.75 interest over a certain amount of time, typically you pay less than the interest.

Heather:
You can't spell challenge without change. So if your offer the challenge, you had better be ready for the change that comes with it.

Cooper:
I like that.

Steve:
That is great.

Heather:
It goes with our whole conversation about financial wellness, all of that, you know what? It's all challenging and it's going to take change. And whether it's your spending habits, whether it's your credit cards, whether it is just how much you pay yourself out of your paycheck and set aside for the life struggles or the dream wedding that you have put. Saving up for the vacation, when you can finally fly without worrying about contracting Corona virus, whatever the case may be, it's going to take some change and some challenge.

Steve:
Oh wow. There's a lot of great information from Heather. I want to thank her for joining us in this podcast. We might have to kick James out and bring Heather in all the time. I'm just saying that, I'm floating it out there. If you agree with us, feel free to hit us up on social and let us know what you think.

Cooper:
James or no, James, leave us a comment. We should do an Instagram poll.

Steve:
Wow. We're so brutal. It's turned kind of [crosstalk 00:13:52].

Cooper:
We do love him, I swear. Love's kind of a strong word though. Love is this I don't like, do I actually love him? We like him a lot.

Steve:
I miss him. Let's say that. Any big takeaways from talking to the Heather that you took out of today.

Cooper:
I don't have any takeaways. Well, I guess I do, I do have a takeaway, is that our comprehensive lending specialists are awesome and amazing and thank goodness for them and everyone should get a loan with Royal so they can talk to Heather. That's what I think.

Steve:
Let's leave it at that. Thanks for listening. And we'll talk to you next time or at least we'll talk and you'll listen. All right.