BALTIMORE — Nearly 25 percent of Americans are struggling to manage their debt, according to a recent Experian survey, while consumer debt continues to climb to record highs.
For Alyssa Lafferty, it was a cycle she couldn't break — paying minimum payments on her credit cards without making a dent in the balance. Now she's enrolled in a program that costs less than her monthly minimum payments, and more of her money is going toward the principal.
"I got into credit cards when I was younger, because I moved out at 18. So you know, it was just something that people really don't tell you about, and then I got myself in a lot of trouble with that," Lafferty said.
Her debt ballooned to over $25,000 to the point where she could only pay the minimums.
"My minimum payment basically was equivalent to how much interest was getting put on it every single month, so I was not making any progress on that," Lafferty said.
Frustrated, she knew she had to do something about it but was hesitant. She saw how a debt settlement program tanked a family member's credit, so she searched for an alternative.
"I was searching for a while for some kind of resolution," Lafferty said.
She found Money Management International (MMI), a debt counseling agency. They told her they'd consolidate her debt into one payment, without a loan, and help reduce her interest rates.
"For the one credit card, they took it from 29 percent all the way down to 9 percent which is insane, and I owed almost $21,000 on that credit card alone," Lafferty said.
The interest rates on her other two credit cards are even lower — down to 5.9 percent and 3 percent. According to LendingTree, the average APR offered with a new credit card is 24.23 percent in April.
"Did you ever try calling the credit card companies to ask yourself about reducing the interest?" asked WMAR-2 News Mallory Sofastaii.
"Yes. Yes, I did, and they did not want to help me," Lafferty replied.
MMI has developed relationships with creditors and, according to a spokesperson, creditors know that when they get involved, customers are likely to succeed.
Lafferty is on that path. Looking at her latest statement, she's already repaid 25 percent of her debt — $10,000 in the last year and a half — and is on track to be debt-free by September 2028.
"There's a small fee. It's nothing compared to what you pay in interest," Lafferty said.
Her statements show she pays a $23 monthly service fee to MMI. Lafferty also had to close out her credit card accounts.
"Don't give me anymore $20,000 credit cards. I don't need it," Lafferty said.
She added that this experience has been humbling and it's one she shares with so many others. According to the recent Experian survey, 23 percent of Americans have unmanageable debt. But the same percentage also said they have a financial Cinderella story, whether it's saving money, having paid off major debt, or having enough money to invest.
"The debt used to be hanging over my head, and now that's not really an issue for me. I can see the light at the end of the tunnel. I'm ready to become a homeowner and own something and have something for myself," Lafferty said.
Unlike debt relief or debt settlement, with debt counseling you continue making payments so your credit doesn't nose dive. That's helping Lafferty on her home search with NACA — another non-profit that makes home ownership more attainable by not requiring a down payment — but she is working on saving up six months of mortgage payments.
Resources for debt management
Money Management International is just one of many credit counseling agencies. The National Foundation for Credit Counseling has a tool on their website that connects you with the first available credit counselor. Other partner non-profit agencies include GreenPath, Navicore, and Credit.org.
The Baltimore Financial Empowerment Center also provides in-person and remote financial counseling to all residents as a free public service.
A LendingTree survey found that 76 percent of consumers who asked creditors for a lower rate got one — on average shaving about 6 points off their APR. MMI said on average their clients reduce their interest rates by about 20 points.
According to Experian, there are several key steps to getting out of debt:
- List all your debts, including the total amount owed, monthly payments, and due dates. Use a budgeting app or spreadsheet to track your monthly net income and expenses, both essential and discretionary. Determine how much extra cash you have to put towards debt.
- If your expenses outweigh your income, look for ways to reduce your expenses or increase your income. Once you have some extra money, try debt-repayment strategies like the 50/30/20 budget, the debt snowball method, or the debt avalanche method.
- The 50/30/20 budget allocates 50% of your net income to essentials, 30% to discretionary spending, and 20% to savings and debt payments. The debt snowball focuses on paying off the smallest debts first, while the debt avalanche targets the highest interest rate debts.
- Experian also recommends working with a nonprofit credit counselor, who can help you develop a personalized plan for tackling your debt.
This story was reported by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.