Episode 27: Pocket Change Podcast
Feeling overwhelmed by the endless cycle of debt? You're not alone. Debt consolidation can be a powerful tool to manage your finances and get out of debt faster. In this episode of the Pocket Change Podcast, Angela Utley, a senior underwriter at Leaders Credit Union, dives deep into the world of debt consolidation, equipping you with the knowledge and strategies you need to conquer your debt and achieve your financial goals.
"It can help free up monthly income, improve your cash flow, make things just a little bit easier for you. It also can allow you to save money, put some money to the side, or even pay off debts quicker. It allows you to focus on your debts, and it also just causes you to be less stressed. Debts can become overwhelming and can cause you stress." Utley says.
Summary
Debt consolidation can be a powerful tool that can simplify your debt, slash your interest rates, and put you on the fast track to financial freedom. This episode of Pocket Change explores the nuances of consolidation loans and explains the differences between secured and unsecured loans.
Co-hosts Shea and Maddie also discuss the different debt repayment methods with Utley. The Snowball method is where you pay off small debts first and the avalanche is where you pay off your highest interest debts first. Utley is a fan of the Snowball method because "...you have a sense of accomplishment a lot quicker, and that's motivation to get out of debt and to keep going."
Key Takeaways
- What is debt consolidation? Combining multiple debts into one manageable payment with potentially lower interest.
- Benefits: Frees up monthly income, improves cash flow, allows for saving, reduces stress, and helps pay off debt quicker.
- Types of loans: Secured (with collateral) and unsecured (based on credit score and income).
- Other options for consolidating debt: Credit card balance transfers (introductory rates) and HELOCs (for homeowners).
Ready to learn more? Schedule a free check-up with a financial champion at Leaders Credit Union to discuss your debt consolidation options and take control of your financial future.
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Full Transcript
Shea:
Hey, this is Shea.
Maddie:
And this is Maddie.
Shea:
Welcome to Pocket Change podcast.
Maddie:
Where you'll learn better ways to spend, save and invest and take control of your financial journey.
Shea:
Maddie, in episode 25, we talked about ways to improve our members and listeners financial health. And another way to do that is through a debt consolidation loan. And there's different options and different factors surrounding that. So that's what we're going to get into today.
Maddie:
Yeah, and this is a topic that I haven't really had to deal with and that I don't know a ton about. But I know that a lot of our members probably are facing debt this year, and so debt consolidation would be a great option for them on their financial journey. And I'm excited to talk to an expert today and see what she has to say. So we're excited to welcome Angela Utley, who is a senior underwriter here at leaders, to the podcast today. Welcome to Pocket change, Angela.
Angela:
Thank you. Thank you.
Maddie:
We're happy to have you. So first, just tell us a little bit about yourself and your journey here at leaders. Okay.
Angela:
Well, my name is Angela Utley and I've been here 28 years.
Maddie:
Long time.
Angela:
Very long time. I've grown up here. My children have grown up here. It's been a great 28 years. Started out by happenstance is what I call it, or fate. Well, I started my journey here as a member in here, taking care of my own personal business. Did not even fill out a job application and was offered a job. And, 28 years later, here I am.
Maddie:
Yeah. So what are some of the jobs that you've had?
Angela:
Started out as receptionist. I call myself the call center. I was the original call center receptionist. Moved to member services shortly after that. Assistant branch manager, branch manager, indirect lending, direct lending, and now senior underwriter.
Maddie:
Wow. So what does your job involve here at leaders?
Angela:
Daily I look at loans and analyze them, doing my best to make the best decision for the credit union while helping our members.
Shea:
That's right. Because the best decision for the member may be to, it may be different than what they are expecting. So you're trying to make the best decision for not only the member, but the credit union.
Angela:
Exactly.
Shea:
That's really a tough job, I think. That's a lot of responsibility.
Angela:
Well, yes, it really is, but I enjoy it. It gives me gratification daily to do it.
Shea:
And I think someone with your history at the credit union really is able to make those solid decisions. So, Angela, what is debt consolidation, and how would you define that for our listeners?
Angela:
Debt consolidation is where you combine all or as much of your debt as possible into one manageable payment.
Shea:
I like that word there. Manageable.
Angela:
Manageable, yes.
Shea:
A lot of times, different debts, credit cards, things can get out of hand. And so being able to put that into one payment and arrangement, that is manageable. I think that's the key word.
Angela:
And affordable.
Shea:
Right.
Angela:
Because sometimes we end up with more debt than we can handle. So making it affordable helps.
Shea:
That's right.
Maddie:
So instead of it being spread out between credit cards and loans and all that, it's in one place.
Angela:
Exactly. Or multiple credit cards. Yeah.
Maddie:
So how can debt consolidation help members on their financial journey?
Angela:
Well, first of all, it can help free up monthly income, improve your cash flow, make things just a little bit easier for you. It also can allow you to save money, put some money to the side, or even pay off debts quicker. It allows you to focus on your debts, and it also just causes you to be less stressed. Debts can become overwhelming and can cause you stress.
Shea:
I think being able to take a lot and put it into one, potentially, and having that maybe one payment. What I like about it is it has an end date. Many credit cards, if you're only paying the minimum payment, end date may not be in sight. But a consolidation loan is an installment loan that might have, that has an end date. So that can be helpful for a lot of people.
Angela:
Exactly. Makes life easier, like I said, relieves stress.
Shea:
That's right. That's what we want to do and tell people about on our pocket change podcast.
Maddie:
Yeah.
Angela:
And it helps you get out of debt quicker because if you continue to use the credit cards, you're in a never ending cycle.
Shea:
That's right.
Angela:
So pay them off. Try not to use them unless you know you can pay it off at the end of the month or when the bill comes out.
Maddie:
Yeah. And I love that because here at leaders, we're trying to help people on their financial journey and be in a better financial situation. And so helping them get out of debt quicker, that does that for people. So, I love that that's your job here at leaders.
Shea:
So there are different types of loans. Some may be unsecured or secured, and there may be some collateral assigned. And these are all these lending words that maybe not a lot of people know. So can you kind of explain the difference between unsecured and secured and what collateral might look like on a loan.
Angela:
Absolutely. So an unsecured loan is basically a loan that we allow someone to get, and it's based solely on their signature. There's no protection for the credit union in the event of default. A secured loan, on the other hand, is when there is collateral, you provide us with something tangible that we can use. That has value, keyword tangible with value, that we can use in the event that there is a default on the loan. And we can, I hate to say the word, but repossess and sell that to recoup some of our money in the event that you default on the loan.
Shea:
And that's really a protection for the credit union, but also it's a way to make it more affordable for the borrower if there's a collateral associated with a secured loan.
Angela:
Exactly. And the thing about the collateral loan or secured versus unsecured, a secured loan is usually going to have a lower interest rate because there's less risk involved in those type loans.
Shea:
That's true. That's helpful information.
Maddie:
Yeah, that makes sense. That's a good distinction there. So are there any other options for people who are wanting to consolidate debt?
Angela:
One thing that a lot of people do is credit card balance transfers. Credit cards, if you get offers in the mail to do a balance transfer, usually they're at a lower introductory rate. And those are definitely good options in the event that you want to choose that versus doing a consolidation loan. Because sometimes, as with our leaders credit union, there is a 0% introductory rate.
Shea:
That's right. So that could be helpful if you're needing to transfer a balance or make purchases. Sometimes there's those intro rates that can save on interest.
Angela:
Correct.
Shea:
That's something that members and listeners can look out for too.
Angela:
Exactly. So there is another option for secured loans. It's called a HELOC or a home equity line of credit. So if you own your home, utilize the equity in your home to borrow money to consolidate debts or anything else that you may need to do around your house. So it's definitely a good option because those have longer draw periods, meaning you can take money off of those and use it in emergency situations. But the good thing about those is they're perfect to consolidate debts into one lump sum payment.
Maddie:
And we did a whole episode on helocs here on Pocket Change. So for our listeners, they can go back and listen to that episode and get some more information on HELOCs.
Shea:
That's right. So what factors affect the amount that you could qualify for, for a debt consolidation loan?
Angela:
So there are two main factors. Now, there are lots of factors, but two main factors, credit score and income. So we use those things to determine what amount we would allow you to borrow. We will do up to four times your monthly income, depending on how high your credit score is, and up to $40,000, depending on where your income is. So both of those things are key factors in determining how much we would allow someone to borrow as an unsecured loan.
Shea:
Yeah. And in some cases, with the term four or five years, I can spread that out and make it an affordable payment for some people. So that's helpful.
Angela:
And the other thing it can do is give an end date to your debt.
Shea:
That's right.
Angela:
Credit cards, like we discussed earlier, don't have an end date, but if you put it on an unsecured loan with a term, you have an end date.
Shea:
That's right. There's different types of plans and ways to pay down debt we've heard of, and I don't know why, but they both have to do with snow for some reason. I don't know where that came from. But the debt snowball and the debt avalanche. Tell us more about those.
Angela:
Well, I'm personally a debt snowball kind of girl. I love the debt snowball philosophy. I do remember a long time ago, before I even started finance, Dave Ramsey came to Jackson, and he was at one of the bookstores, and I was sitting at my desk at North Highland, and they were going to do a giveaway. And my husband had told me, make sure you go and sign up for the giveaway. He was giving away $3,000.
Shea:
Wow.
Angela:
So I knew what time they were going to do it. And I took my lunch at that time, and I went to the bookstore, and I was one of the last people to walk in the door. I registered, and I won $3,000 from Dave Ramsey. And it was great. It was really cool. And I brought the check to the credit union and paid it on my leader's credit union visa.
Shea:
Wow.
Angela:
I was like, so that was the beginning of my journey of getting out of debt. So the snowball method, to me, I personally like it because there's instant gratification, pretty much. You pay the smaller debts off first.
Shea:
Okay.
Angela:
And then once you pay off one of those debts, you go to the next debt and apply everything that you were paying on this first one that you've paid off to the next one. So you have a sense of accomplishment a lot quicker, and that's motivation to get out of debt and to keep going. Now, the avalanche method, you pay off the things that have the highest interest rate first. So that saves you money on interest. So it depends on what your goals are and if you need that instant gratification or if you are good for the long haul.
Shea:
That's true. Yeah. It just depends on your situation and how you're going to respond to those factors.
Maddie:
You've been here for a long time at leaders, and so in your 28 years, what are some of the most significant lessons that you've learned while you've worked with our members?
Angela:
One of the main things that I've learned is we have to meet our members where they are. Their values may not be exactly what our values are. They may not have the same goals, but everyone deserves an equal opportunity to be heard, listened to, and helped to the best of our ability.
Shea:
I think that's a great lesson. One of the other podcasts we did recently, our guests talked about showing up where our members are willing to change, and so there may be different willingnesses, willingnesses, is that a word?
Shea:
We'll keep it.
Shea:
But wherever they're willing to change or whatever they're willing to accomplish, you've got to meet them where they are in their situation. So I think that's really helpful.
Angela:
Exactly. That's something that I learned in my financial counseling classes. Meet them where they are, their priorities may not be yours.
Maddie:
Yeah. And someone might be applying for a loan for something that you're like, "I don't know why you'd want a loan for this," or maybe a different situation, but that's really important in your line of work, too.
Angela:
Exactly.
Maddie:
Seeing their perspective.
Angela:
Exactly. I cannot judge them for what their priorities are.
Maddie:
Yeah. So we have one final question for you today, Angela. It's a very fun one. So if you had any extra change in your pocket, what would you do with it?
Angela:
I have three amazing granddaughters, and what I would do is put that money to the side in my coin jar and split it among their savings accounts, because I want to help my grandchildren build wealth and not have to go into debt and just have money and understand that grandma, or Lala, as they call me, prepared me for the future. When they go away to college, this may help buy books. Just one less debt that they have to get into.
Maddie:
Yeah. That's so kind of you.
Shea:
That might be the best answer we've heard on the podcast. Saving it for the grands.
Angela:
Yes, saving it for the grands.
Maddie:
Well, thanks for being here, Angela. You've given us a lot of really helpful tips for our listeners.
Angela:
Thank you for having me. It's been a pleasure being here.
