Smart Ways to Use Debt Without Getting in Trouble

Episode 75: Pocket Change Podcast

The Pocket Change Podcast is presented by Leaders Credit Union. To learn more about Leaders, visit leaderscu.com.

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Full Transcript

Shea:
Hey, this is Shea.

Carrie:
And this is Carrie.

Shea:
Welcome to the Pocket Change Podcast. 

Carrie:
Where you'll learn better ways to spend, save and invest, and take control of your financial journey.

Shea:
We're still early in the new year, and I know a lot of people make financial resolutions, want to get their finances right, so they still can. I want people to know you still have the time and the ability to do it.

Carrie:
That's right. There's plenty of time to, you know, think about what your financial goals will be for this year and setting yourself up for the next years to come. So today we're going to get to talk to one of our financial champions who specializes in that.

Shea:
Yeah, and really helping our members, you know, get out of debt or maybe, you know, use debt, wisely so that, you know, it can be beneficial for them.

Carrie:
That’s right. We're excited to welcome our guest, one of our financial champions here at Leaders, Keagan van Wijk. Welcome to Pocket Change.

Keagan van Wijk:
Thank you, Carrie. Thanks for having me. I'm really excited.

Carrie:
Yes. So tell us a little bit about yourself and your role here at Leaders.

Keagan van Wijk:
Yeah. So I'm originally from Johannesburg, South Africa. Went to school there and everything until I was about 18 or 19, graduated high school and then moved to London, to study undergrad. And when I was there, I studied undergraduate degree in law. Got a graduate degree in law, which is kind of like setting the bar exam. Practiced as an attorney for, just shy of three years. And then when my green card came in, we moved to the US, which is just over two years ago. 

Shea: 
Wow. 

Keagan van Wijk:
Yeah. My wife's from here in West Tennessee. She's from Memphis, but she kind of grew up overseas, and we met in South Africa. 

Carrie:
Oh, wow. 

Keagan van Wijk:
And then she moved to England after we got married and waiting on the green card stuff. But yeah, we've been here for just over two years. And now while I'm here at leaders, I've been in a couple roles, but currently I'm our Director of Consumer Lending, which essentially means all of our consumer facing loans. So those are all loans really excluding mortgages… that’s credit cards, auto, personal loans. And HELOCs. 

Carrie:
Okay.

Shea:
So that's a nice jumper you have on... So tell us, you know… some might call it a sweater but what are some other differences we might hear from across the pond?

Keagan van Wijk:
Yeah. This… there's a couple that have got me into trouble that, not nothing terrible, but… Well, the first one that comes to mind is the word diary. So instead of saying a calendar, I'll be like, I'll check my diary. And sometimes people give me grief about a grown man checking a diary, you know? That one always comes up, this South African one, which is kind of crazy, but we call traffic lights, robots. 

Carrie and Shea:
Robots?

Keagan van Wijk:
And I didn't think about it my whole life until I met my wife. And she was like, that is insane, and I agree. 

Carrie:
Yeah.

Keagan van Wijk:
A robot, and one that came up last night actually was, the front hood of your car. We call it a bonnet, which I think is for your hair or your hat, you know, something like that.

Shea:
It's a covering. 

Keagan van Wijk:
Yeah.

Shea:
Protection.

Keagan van Wijk:
My wife broke down last night when I told her that. So that's, those are a couple that that pop, pop up.

Carrie:
Well, I have a question for you. Do you say pastels or pastels for or a pastel color?

Keagan van Wijk:
We call it a pastel.

Carrie:
Pastel. Okay.

Keagan van Wijk:
It's somewhere in between.

Carrie:
Okay. All right. Well, I've heard other people say it differently, so I was wondering how you said that.

Keagan van Wijk:
That that might be the South African side we have. Their a brand there. But yeah we, yeah I think we call it pastels.

Carrie:
Okay. Curious. Okay. So what was it like to transition from being a lawyer to banking?

Keagan van Wijk:
Yeah. So from being a lawyer to, to the lending side, this actually, you know, kind of quite a bit of overlap, especially for the type of law that, that I was involved with. So I was more involved with numbers, finance, you know, a lot of companies doing that side of things. So I got to spend some time at Barclays, which is a British bank, and they have some presence here, but they're a British bank.

Shea:
We might say Barclays in America.

Keagan van Wijk:
I mean, yeah, got to do what you got to do with what they offer… moving into a new market. That's their name. But I was involved in their team, the I think it was the debt capital markets team that's raising debt for them to then use, you know, for lending or other purposes. But most of the time I practiced, helping, you know, hedge funds and private equity funds get set up and, and run so that a lot of that's numbers driven or that's more business related. So the overlap was quite a bit, and it may not immediately be clear, but when you underwriting, when you're assessing risk, that's kind of what lawyers do anyway. So they just call it due diligence versus, you know, underwriting in a lending case. So the thought processes are similar. What you're assessing is different. But when it comes down to the problem solving and coming up with solutions, there's, there's actually quite a bit of bit of overlap between the two.

Shea:
Yeah. All about assessing risk and, you know, making the best decision for a company or the member in this case. So why might people take out a loan. You know, it's still, still in the new year. And so people are maybe exploring options. So what are some of the different reasons? 

Keagan van Wijk:
Yeah I think with debt and lending generally I think it can serve it can serve people if it serves a purpose and there's a reason why you're getting it, then it can be really beneficial. It can also be really risky for people.

Shea:
Right? 

Keagan van Wijk:
If it's, you know, not being used correctly or if you're overextending yourself, but it can really serve a purpose and be beneficial to people.

Keagan van Wijk:
The example, you know, kind of springs to mind for us is when we moved here from England, we didn't have the money to pay cash for a house or, you know, for two cars. Whatever it was, we had down payments for them, but we didn't have, you know, the liquid cash to go in and, and buy all of that. So buying a house, having somewhere to stay and that be something we own versus renting… We were in a apartment in England. We wanted to make sure we had a house here, that we could raise a family, and that's something that enabled us to own, you know, the home and keep that for many years. And also, you know, for a car, it serves a purpose. I can use it to get to and from work. So does my wife. So there was something that we were able to do. We weren't overextending ourselves on the debt. But it's not it wasn't just something that we oh, we wanted, you know, pair of shoes. And, you know, I'm going to go get, you know, a personal loan for that. It served a purpose. And that's why it can be really beneficial for, for people if it's used correctly.

Shea:
I think sometimes we hear, financial experts break up like good debt and bad debt. You know, you can take on debt. And if it serves a purpose, like you're saying, or it's going to help you, increase an asset like your home is going to increase in value, or you take out maybe a student loan because you're going to increase your education. That could increase your salary in your buying power. So our car allows you to get to and from work, and that gives you a salary. So I can see the difference between maybe a good or a bad debt. And so that's the way it can help people if it’s used properly.

Keagan van Wijk:
Yeah, 100%.

Carrie:
So what solutions do we offer here at Leaders for our members to help pay off debt?

Keagan van Wijk:
In terms of paying off debt specifically we have a few options. We have, you know, your traditional personal loans, which can be unsecured and that we personal loan or a specific, debt consolidation loan. We also have HELOCs and we also use, you know, auto cash or refis on auto. So those are usually the, the primary ones. And then we also have balance transfers on credit cards.

Shea:
So tell us a little bit more about a HELOC. What's a HELOC stand for? And you know what does that entail?

Keagan van Wijk:
Yeah. So HELOC stands for a home equity line of credit. Essentially what happens there is we're looking at how much equity you have in your home. So how much your home is worth versus how much on a mortgage or how much debt is on it already. So you think you own your home. It's worth $200,000. You have $100,000 left on your first mortgage. Will that difference of $100,000 is equity. And you're allowed to get an additional loan based on that equity. The line of credit part comes in in terms of allowing for flexibility. So usually, financial institutions will have a period where you can use the money, you know, freely meaning use it, pay it off, use it, pay it off. And that's usually, you know, 5 to 7 years with Leaders, that’s that seven years. And you'll be able to use whatever the available funds are for that period. And then at that cutoff point, it becomes like a regular loan that pays off over, an extended period after that. But that really allows you to take advantage of either the value increase on your home or the debt that you've paid off. And typically it comes with a lot lower interest rate because you're securing it with your home, which is why it's a really helpful tool for, for a lot of people, especially when they're paying down high interest debt.

Carrie:
Okay. So you mentioned cash out refinancing. How does that work? How can it be helpful?

Keagan van Wijk:    
Yeah it works similarly to you know a HELOC in terms of it takes an asset and looks at the value. But the difference between the value and how much is owed. That one is more like on an auto or for vehicles. And same concept applies car is worth $20,000. You've got $10,000 worth of debt on it in that type of situation we say, okay, we could give you $20,000 and then we would refinance your existing loan. So it would pay off the $10,000 that's owed. And then you would just, oh, $20,000 on this one. And that difference in cash, that $10,000 difference is for the member to choose to use how they want to. Which if you're paying down debt, you know, paying off a credit card or other high interest debt, it can be really beneficial to pay all of that off and just have one payment in the car versus the 3 or 4 that you may have, at any given time.

Carrie:
Sure. That makes sense.

Shea:
So we've got the HELOC, cash out refinance. And then, you know, some people have concerns about credit cards. So how can they be beneficial?

Keagan van Wijk:
Yeah, credit cards can be beneficial in a couple of ways. You know, sometimes you have an interest free period on a credit card. That's gonna be really beneficial if you're lining up a, a larger purchase that you know I s on the way. But it also can be really beneficial in terms of the reward side. So, you know, at Leaders, we offer a couple of rewards cards. One that's points, one that's cash back. So our Compass Black card is a cash back card and it's 2% flat. We do have, you know, promos that can allow it to go up to 3%, but kind of as a base, it's 2% on anything. No limits. And essentially what that enables you to do is earn rewards on things you’re already spending. So I think if you go to the grocery store, you can pull out your debit card spend with it. That's fine. Or you could go and use your credit card, get 2% cash back and then pay it off. You know, a week later we'll make sure, you know, rolling a balance, make sure you pay it off. But if you use credit cards the correct way, it can be a really beneficial tool for, you know, for people to save up. On our side, we've been using this the Compass Black cash back card for just over a, you know, nearly two years now. And it's going to help pay for vacation for my wife and I later this year. So that's something that we didn't have to save for. It was just happening in the background. And it was just, you know, we're going to Walmart, going to Aldi, whatever it is, you're you swiping that and you're earning money off the back of it, which can be really beneficial for people and not having to save specifically for certain things.

Carrie:
So what have you found to be most helpful for our members?

Keagan van Wijk:
At the moment? We see, a few things. First one being HELOC, that's kind of the easier one for people who've got kind of debt to pay off. I say it's easier in the sense that, you know, the usually the rates are lower and we can offer a bigger amount, you know, if you've got a larger amount of debt that you need to pay off or you've got debt with multiple institutions, you can use that to wrap everything into one payment, which will you know, usually be lower than what those are. We also seeing cash out refinance is coming back in. And those can be really popular, especially for people who don't own a home. They can leverage that as an asset that they have and can use that to pay down. But then we also have, you know, just our regular debt consolidation and just regular personal loans. But the important thing is that we meet the member where they are. And that's where our financial champions and, you know, underwriting team really assess each person's needs specifically. You know, we're not just going to offer you something we think, you know, it's one fit for everybody. It needs to be individual and specific... And that's, you know, working with our teams, that's where they really can help find something that's beneficial to that specific member, which may be different to the next member who's walking in. And it's hard to say just generally what it is. But we typically see those, you know, different tools and then the members, you know, with their story, whatever it is, the specific debt that they have. And maybe life, you know, changes or whatever it is. That's what we kind of work through those solutions with them. And because we're a credit union, we can be, you know, more quicker than some of our competitors here. We're more flexible, and we can be more precise to what the member's needs are. And when we assess the situation go through, you know, figure out some more of the background... We can really hit the nail on the head with what, is affecting the member and come up with the best solution for them.

Shea:
And I think that's really helpful in all these different, you know, tools to either manage debt or pay off debt are helpful to our listeners. And so with that advice you've already shared, what's the best financial advice you've ever been given?

Keagan van Wijk:
I have a couple. One, you know, some people may have heard of before, and it's from Warren Buffett. And it's one that says, if you know, when everyone's swimming, everything's fine. But when the tide goes out, when you see who's swimming naked, essentially, for me, that's just a measure of, you know, who's taking on the risk, because you know when times are good, everything looks good, everyone's swimming, but it's when the tide goes out and when things aren't so good, when you see, the people who've set themselves up for success. And for, you know, in a full personal context that, you know, am I overextending myself? Am I trying to, you know, you know, chase the Joneses and that sort of thing versus setting myself up financially? The other one is something my grandfather shared. It's a common saying, but I remember it, you know, look after your pennies because the pounds will look after themselves or look after your pennies and the dollars will look after themselves. And that's something that's kind of stuck with me, is if you're mindful of everything, even the small things, the biggest stuff will tend to look after itself. And this is the same grandfather who I remember being like 7 or 8, and he had like a pound coin or something in his wallet. And I was like, why are you carrying foreign money and thinking South Africa has the rand? And he's like, well, if I carry foreign money on me that I can't use, I always have money on me, which means I'll never be broke. So I have some South African rands on me, you know, it's like $0.20 worth of money, but I always have that on me as well because that's stuck in my head.

Carrie:
That's great. I love that.

Shea:
I'm never going to be broke.

Carrie:
Okay. So this is the Pocket Change Podcast. So we do ask all our guests this question. And I'm sure you've heard it a time or two since you're one of our biggest fans… So if you were to find some extra change in your pocket that you could actually spend, what would you spend it on?

Keagan van Wijk:
I'm really into my sneakers. You know what works? Kind of wear the same or similar things as my work uniform, but on the weekends I'm really into my sneakers. I have a, I do try to flip some on the side, so buy them and sell some… But I have my, my eyes on a pair right now that I'm looking to go into and hopefully that can get in the next couple weeks. But if I was, if I had some extra money… that’s what I’d go for.

Carrie:
That's where it's going.

Shea:
Don't need to take out a loan for those…

Keagan van Wijk:
Hopefully not. Yeah I mean definitely not if that would not be a good one. But yeah, not for those.

Shea:
That might be bad debt.

Carrie:
Bad debt. Yeah.

Keagan van Wijk:
Yeah, bad debt on that one.

Carrie:
All right. Well thank you so much for joining...

Keagan van Wijk:
Well, before we end, I have a couple questions for you guys. Got maybe a curveball to throw in there.

Carrie:
We never get asked the questions.

Keagan van Wijk:
So that's kind of… want to change it up maybe a little. If you guys could have anybody on the podcast, who would it be and why?

Carrie:
Oh goodness.

Shea:
Oh wow.

Carrie:
Oh I know who I would have…

Shea:
Go ahead. Since, you know, I gotta think…

Carrie:
Probably my favorite author, Brené Brown, she's an author, speaker. She's bit into data analytics with, psychology in the mind. And, she's just really interesting to me. And I would love to pick her brain.

Keagan van Wijk:
I would ask some questions there as well, and I would be great.

Shea:
I guess thinking financially, we talk a lot about, you know, finances and financial education in the community, so why not, ask Dave Ramsey to come on? That'll be my suggestion.

Keagan van Wijk:
I mean, he’s also down the road. Pick his brain a little bit.

Shea:
Yeah. He's in Tennessee.

Keagan van Wijk:
The other question I have is, you know, you guys do a lot of work with the, the community, but what drives you guys every day to come in and, and help our members?

Carrie:
That's a great question. Yeah. And since Shea and I work on the same team, I think it's unique because we both understand, you know, what gets us up every day.

Shea:
I think for us, you know, kind of like what this podcast does, we're able to educate, people in the community. So a lot of what we do day in and day out is, is teaching about finances, just talking about it. It's a lot of people don't talk about it and they want to, you know, keep it quiet and are unsure and don't know. And so we just want to be able to talk about it with people. So we do a lot of that. And so being able to help people, even people who have been unbanked or underbanked, become a part of the financial system in our, you know, community and have access to banking, I think is what brings us back. And just seeing the light bulbs go off and they can say, hey, if I save this much, I'll have X amount by the end of the year, or I can achieve my financial goal by doing this. So I think those things help us come back every day.

Carrie:
Yes. To piggyback off of what Shea says, the fact that we get to go out and actually educate our, members or nonmembers, that's one of my favorite parts of the job. And I believe, my favorite part personally, is getting to go to the schools and, and talk to you, you know, seventh graders and up, usually is the ages. And you know, there's a lot that that aren't aware of, you know, what banking is. And so to kind of start planting the seed now so that hopefully the more they hear it, the more they become aware of it. And hopefully it'll make a difference. And maybe they can break some generational cycles of being in debt.

Keagan van Wijk:
Yeah. Those are those are the main two I had. I was really curious to hear your thoughts.

Carrie:
Thanks for asking us. Good questions. All right. Well, thanks for joining us today, Keegan.

Keagan van Wijk:
Thanks for having me.