In our introduction to the concept of “Christian Debt“, we wrote about two sides of recently unveiled coin. One side was good news: Americans are NOT as in bad of debt as our politicians or common sense tales like to say. Then the bad news: still 1 in 20 households carry a credit card debt of $8,000 or more.
For Christians carrying this amount of credit card debt, let’s take a look at the numbers. At a modest credit card interest rate of 10%, this means that a $100 minimum payment would be divided like this. First, the credit card company would take its share, which is 10% of your total debt – not 10% of your payment. This means $8,000 X .10 = $800/12 months = $66.66. So out of a $100 payment sent to pay down $8000 worth of debt, only slightly more than $30 would go towards your debt, the rest simply goes to the credit card companies. The numbers are even more frightening if there are monthly fees for the privilege of having the credit card, or, worse yet, late fees.
This example was with a credit card at just 10%. The truth is, many of you are likely to be dealing with abhorrent rates that are twice as much. If this is the case, then just to keep your debt at $8,000, with a 20% interest rate you’d have to fork over $133 a month. But you’d never pay the debt down, as this only covers the interest. If you could afford to throw $200 at this debt, less than $70 a month would go towards the debt.
This numbers are rightly frightening for anyone to look at who is dealing with a credit card debt that’s gotten out of control.
At this point, let’s address how Christian Debt Management can help a person who is dealing with a similar financial situation.
A Christian Debt Management company usually begins by offering loan consolidation or a type of credit card debt settlement. This means taking all their debts (loans) and packaging them all together in one loan. The actual debt to the credit card companies is paid off, and in its place, the person has 1 loan total, of which comes from or through the Christian Debt Management company. The reason this is beneficial compared to the previous set up is that this single loan will carry a much lower interest rate than what the credit card companies offer. It is also much easier and less stressful to have a single bill to pay to a single company, once a month, than various bills coming in all times a month from different credit card agencies, all with different interest rates and penalties and so on.
Additionally, many Christian Debt Management companies operate on a non-profit basis. They also will work with a person on more than just the numbers; they offer spiritual guidance and counseling, teaching Bible based financial concepts to help them manage their money and their debt responsibly.
In this sense, beyond offering a competitive interest rate and even operating on a not for profit basis, the spiritual counseling is a big factor that separates a standard financial or debt consolidation company from a Christian Debt Management company. If you are a Christian seeking help with your finances, a Christian perspective on financial management and debt reduction can be the missing piece in your personal financial portfolio.