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How I Used CareOne Debt Consolidation: The ‘Secret Sauce’ in my Recipe for Defeating Debt

True story: I paid off $80k of debt in 3 years. Here’s how I used CareOne debt consolidation to automate my payments. Learn why it worked so well.

Many of you know my personal story. For those that do not, between beginning college and turning 26, I got into $80,000 of student loan, credit card, and auto debt.

Then, I made a commitment to end the financial insanity: In three years, I paid it all off.

When people hear this, they inevitably ask: “$80,000 in three years? For the love of God, how did you do that!?”

To add to the mystery, I didn’t win the lottery in that time. And my salary averaged just $40,000 a year.

Today, I’ll let you in on a secret that helped me pay off so much debt so quickly.

That said, let me add a disclaimer: No one thing accounts for my relatively rapid financial turnaround. I was successful because:

For years I struggled to control my debt by spending less. But as someone who is not a natural born saver, I didn’t have the willpower to spend within my means. So after watching every penny for a couple of months, I would blow my progress in one free-spending weekend.

I began to realize that the road out of debt would have to involve not only learning new spending habits, but also:

  • Earning more money
  • Automating my debt repayment
  • Establishing roadblocks to spending

And that’s what I did.

  • I earned more money so I could pay down debt faster
  • I automated my debt payments so I wouldn’t spend the money elsewhere
  • And I closed most of my credit accounts so there was no way I could use them.

To help me with the last two, I enrolled in the debt consolidation program provided by CareOne Debt Relief Services* (affiliate – see footnote).

What debt consolidation companies do

Wait, what? A financial writer had to get…help!?

You bet. If there’s one thing I believe it is that – for the majority of us — we cannot rely on willpower alone to spend less and save more. We must create systems that “save us from ourselves” and make the right financial plays before we can interfere. And that’s exactly what debt consolidation (a.k.a. debt management or credit counseling) does:

  • It closes credit accounts so you cannot use them.
  • It sets up an automated monthly payment based on your budget and distributes it to your creditors.
  • In some cases, it negotiates lower APRs or reduced late fees with your creditors.

For the longest time, I put off closing any of my credit card accounts, even when they were maxed out. I wanted to believe I had the discipline not to use them, and I was worried about how closing accounts would hurt my credit score.

Finally, I realized that:

  1. I needed to close most accounts completely to remove any temptation to use them.
  2. The benefit of getting out of debt would be far better for my credit score than the negative impact of account closures.

Once I was on the debt consolidation program, the only credit I used was an American Express charge card for my monthly expenses. Because this card had to be paid in full each month, there was less risk of getting in over my head.

Each month, the program automatically withdrew my payments from my checking account and paid my creditors. Thanks to my second jobs and blog, I was also able to increase my payments a couple times along the way, speeding up the process.

Is debt payment consolidation for you?

As I said earlier, a debt consolidation program isn’t for everybody. I think the best candidates are people who:

  • Are in at least $10,000 of credit card debt.
  • Have fallen behind on one or more accounts or will fall behind soon.
  • Have some accounts with interest rates of 20 percent or more.
  • Are having trouble living with their means.

If you haven’t gotten to this point yet, good! But I would explore other options (e.g., consider closing accounts and setting up automatic monthly payments yourself).

For those considering debt consolidation, realize:

  • The program will close your accounts and your credit score may drop, at least temporarily.
  • These programs consolidate your payments, not your debt (although they will serve as a mediator between you and all your creditors.
  • Debt consolidation programs do charge a monthly fee for their services. In my case, the interest Care One was able to save me on one of my accounts meant that, even after the $39 monthly fee (at the time), I saved a couple hundred dollars by being the program. In reality, I may have saved more because I paid off my debts faster.

Researching debt consolidation programs

Debt consolidation programs sometimes get a bad rap for two reasons:

  1. The industry has scam artists and quasi-legitimate companies that take advantage of the indebted.
  2. Debt consolidation is not right for everybody, and people who enroll when they should not may have bad experiences.

Before you sign up with any company promising help with your debts, research them thoroughly:

  • Look for companies that advertise credit counseling, debt management, debt payment consolidation, or debt relief. Avoid any company that promises to “settle” your debt.
  • A company that is non-profit doesn’t mean anything by itself – it’s just a different tax structure.
  • Legitimate companies should have a mix of good and bad reviews and be registered with the Better Business Bureau — a lack of any customer feedback is a bad sign.

What about you? Have you used a debt consolidation company? What was your experience? Have you set up other roadblocks to spending or automated systems to help you pay off debt or save faster? Please share!

Affiliate Disclosure: CareOne is an affiliate and may compensate this Website if you request more information about their services. I only link to products I trust (and in this case, have used myself). This practice allows us to continue providing quality free content. If you choose to support us in this way, thank you.

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Awesome! I’m a current CareOne DMP customer….my wife and I are a little over 3 years into our journey to pay off about $109,000 of credit card debt. Looking forward to having that mountain of debt behind us. Meeting other DMP graduates is simply inspirational…..see you at #fincon this weekend?

  2. Did your debt consolidation include your student loans?

    • David Weliver says:

      Good question, Courtney: It did not. At the time I decided to break the rules a bit and only include consumer debt (credit cards and a personal loan) in the debt management plan. Ideally, they want you to include everything. My rationale for this was that because — unlike credit cards — I couldn’t go out and use the student loans again to dig deeper into debt, they were okay left as is. I could see arguments for and against including them in a plan like this.

  3. Great post. I’m in a similar situation now and it’s encouraging to hear someone who made it through.

  4. What a great post!! I am currently on the Debt Management Plan with CareOne. The program works great! I will be done paying off almost $30,000 in 22 more days. I also paid extra so was able to cut my time from 5 years 1 month to just under 3 years! I honestly can’t wait to be able to start really gaining interest instead of paying it!

  5. Wow! Thanks for sharing your story. Glad you were able to come out ahead at the end. $80K in three years! Good work!

  6. Hey Dave,

    Glad that you were able to get out of 80K in 3 years. Could you shed some light on the second job that you had?

    Right now I am searching for ways to extend my income over the weekend. What would be the best option for someone who already works 50 hours during the week? Thank you for sharing!

    Best,

    Joe Perry

    • David Weliver says:

      The longest-running second job I had was at a Starbucks! I worked 6-10 a couple nights a week and a full day on Sat or Sunday. I made some money, but the 16 hour workdays a few days a week were brutal.

      It’s not glamourous work, but I’ve known people who work as caterers or bartenders at weddings and other events which mostly happen on weekends. Also, with the holidays approaching, retail stores will need help and may take on weekend-only folks. Obviously, these aren’t high-paying gigs, but may be easier to get. Anybody else have good weekend-only 2nd job ideas?

      • Casino Parties – lots of companies need temporary folks who can deal cards…. a couple of hours on the weekend and usually immediate payout.
        During the holidays, now is the time to train and get set up…. long as you don’t make over $600, no tax implications.

  7. I’ve often wondered about talking to a debt counselor even though my only debts are student loans (127k) and an auto loan (13,800). I am current on all my payments but just wonder sometimes if I could be doing more to repay my debts, as they cause me a significant amount of stress. My assumption was that debt counselors were only for those with credit card debt. Any recommendations about seeing a counselor for someone in my situation?

  8. Inspiring story! It’s awesome that you paid off the debt so quickly. I like your point about relying on more than just willpower to save more and spend less.

  9. Congrats to you. It shows that hard work really pays off. I am currently doing the 2nd job thing to reach my mortgage payoff goal.
    I live alone however. I think it would be really hard for me to get a roomie!

  10. I really worry about being taken advantage of with these debt consolidation companies. I have looked into them in the past and felt very apprehensive about signing up. While I feel that I could truly benefit from some more control over the plan to repay my debt, I feel uneasy with signing up to a company that makes more money if I don’t pay things off faster (that’s what got me into credit card trouble in the first place). Perhaps though, CareOne deserves a second look.

  11. After reading through, I don’t feel as bad. My only debt is $65,000 in student loans and $3,500 left on a $7,000 car loan. I pay my credit card every month in full so that isn’t an issue for me. My only hurdle is my salary. I feel horrible not even being able to make $30,000 right now, but I have to concentrate on that fact that this will be short term (2-3 years) and that the experience I’m getting is pretty great. I just started a full time job in my field a couple months ago at a state public university. I’ve been employed as a Program Assistant at the same university since November. I took a pay decrease to get my current job. It was rough trying to find a job right out of my masters program. I had an internship that was an amazing experience, but without a permanent position at the end. Right now, I’m on the income-based payment plan because it is really all that I can afford right now. I completely depleted my savings $7,000 in savings once I paid off my credit cards when I first got my job in November. It’s been hard to save even $100 some months, but I’m happy I saved what I could during my undergraduate and graduate years. I feel that I wouldn’t be as nervous if I were making just a little bit more. I received the opportunity to do some additional proctoring work at the university which will help a little. My true wish is to get a higher paying job close to home, but it’s nearly impossible these days.

    Luckily the biggest drain on my income is rent and food. I love food, but I have recently made an effort to cut back on eating out. I also like to cook, so it wasn’t too difficult to do. In addition, I’m trying to eat healthier, eat less, and exercise…which really helps out too when it comes to bringing lunches to work.

  12. David! I’m so glad that you posted this. This topic has been on my mind and you couldn’t have posted this at a better time! I will definitely be following your recommendations.

    Question for you: Do you have any recommendations for auto refinance? I have a poor credit history and the loan that I have was the only one available to me at the time. I’ve had my car for 12 months now and am looking to refinance for lower payments. I tried applying with traditional banks and am still getting turned down. Is there a way to find reputable high-risk lenders?

    Thanks!

    • David Weliver says:

      Cyrus, by definition, lenders that deal with low credit scores are sketchy because they can get away with it…they figure people with poor credit either a) won’t complain because they’re just glad to get a loan or b) don’t know any better.

      Your best bet is to approach a local CREDIT UNION or two and see if they will work with you. Maybe, maybe not, but it’s probably your best shot.

    • Good stuff. Another key is that folks need to start saving more and spend less on things that they don’t need.

  13. Since I’ve started reading Money Under 30, I’ve been racking my brain as to how I can pay down my debt! I have been working a second job for the past four months, and I have even considered moving back in with my parents when my lease is up, so I can save more quickly. With my student loans and my car loan, I’m at about $65,000 worth of debt. My boyfriend and I have been discussing marriage in the next few years, and I don’t want to be the one to bring all the debt into the union. (He currently has no student and/or car loans). The only thing I feel I can do to make a significant difference is to pay off my car loan early(I have 3 years left, but I would like to pay it off in half that time). My car payment is significant so paying that off early will be helpful. Unfortunately, I don’t feel like this is enough. I have gotten rid of cable, I use coupons every time I grocery shop, and I rarely got out because I don’t like spending the money. I guess I just need to be content with the small efforts I’m making and have faith that it will pay off one day!

  14. I was looking into a debt consolidation program, but figured that since I put myself into the situation, I would pull myself out of it. Sometimes I wish I would have gone with the consolidation, but in the end, I am happy that I paid off my $50,000 in 4 years. Freelance work, budget cuts, and frugal (and I mean frugal) spending allowed me to feel the freedom of being debt free.

  15. Great Article. Thanks for sharing it. This will really help those who have problems with loans (in which I also have similar experience but I was able to solve it) and sharing it will be a great help for others There is hope in solving this kind of situation and a lot of options to choose in solving it.

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