After I had shared my debts with my friend, I made an appointment at a bank, at her urging, to consolidate the credit cards, lines of credit, and loans into one large loan. There were two reasons behind this approach. The first was to reduce the overall interest payment, so more of my money impacted the debt principle. The second was to lessen the onslaught of bill payments into one simple easy-to-manage payment.
It was September 10, 2012, when I arrived at the appointment awkward and ashamed. I was still uncomfortable with sharing my finances - so it took plenty of courage to make the appointment and show up in the first place.
After a few minutes, the bank rep came out and shook my hand, then asked if it was okay if a trainee sat in on the meeting. Are you serious!!?? I was horrified! I couldn't stand the thought of facing one more person - who didn't know the 'real' me - and sharing my financial disaster. I said no.
Reflecting on the meeting now, I probably should have let the trainee sit in on the meeting. It would've been another moment to confront my real situation.
After downloading all the debts to the bank rep, she furiously punched away at the computer - seemingly waiting for a big green or red light to ignite. I sat opposing her, trying to read the 'finding' from her face before she was able to verbalize it. After an uncomfortable few minutes, she looked at me and reluctantly said they, "Sorry. We can't help you. The numbers don't work".
I hadn't given any consideration to getting declined.
How could that be!? How was it possible that I was doing a seamless job of carrying 19.99% interest payments; consolidating them would decrease my overall outputs, thereby reducing my costs, and leave me even more ABLE to carry this debt? Their logic didn't make any sense to me. I was furious!
I couldn't believe I spent time waiting in the lobby staring at their flashy LCD displays which proudly depicted new boats, new houses, and vacations - trying to convince me that the bank was in existence to help me growth wealth when clearly the opposite was true.
After I had left the appointment, I developed a new game plan. As I mentioned before (read My Story here), I ended up finding a second job around this time. I decided I would work my second job, reduce the debt, and revisit the bank in a few months - giving it another go.
So I did.
A few months later, I went back to the bank again, attending an appointment with the same bank rep. Not only did I have a second income source this time, but I'd put a hefty dent in the debt too. To influence the bank rep, my financial advisor suggested I mention that my mortgage was coming up for renewal. He felt this might increase their effort to approve me as they'd want the mortgage business from me.
This time I held my head a bit higher. This time I was visiting with a second source of income, reduced debt, and a clear debt repayment strategy.
During the meeting, I did what the financial advisor said - I casually mentioned my mortgage renewal. The bank rep perked up - this seemed to interest her. Again, I sat patiently as she punched all the updated numbers into the computer.
This time I was certain they would approve the loan.
Unfortunately for me, after a few minutes she gave me the same answer - sorry, we can't help you. She would love to help with my mortgage renewal, though.
I understand that the bank is not necessarily in the business of taking on a high-risk customer. So I understood the refusal during my first visit, but once I came back with a second job, more income, and a highly motivated repayment strategy, I was sincerely disappointed that they wouldn't take ME - Kelley - into consideration. I was only numbers in their computer.
Now that you've heard my rant on my attempt at consolidation, you might wonder if you should try. I think you should. You have to be certain though that if consolidation frees up any additional credit - like paying off credit cards with a lower interest loan, leaving the credit cards with 'room' on them again - that you aren't the type to start irresponsibly using them again.
Essentially, if you've been able to work within the budget you drafted in Step 4 for a few months - this might be a good strategy for you. If you haven't been able to live within your means - consolidation could just result in more debt and cause more trouble than help.
Make an appointment with a bank and see how it goes. Use any money freed up by the reduced interest payments and send it towards the debt.
I hope you have better luck than I did.