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In this episode of Financial Advisors Say The Darndest Things, A.B. Ridgeway breaks down the financial quicksand that is credit card debt and shares strategies to regain control of your financial future. With interest rates climbing to as high as 23%, getting out of credit card debt seems harder than ever. But with the right approach, such as leveraging personal loans, improving credit scores, and negotiating with creditors, you can begin to make real progress.
Here’s how to approach it:
3 Key Takeaways:
Use a Personal Loan to Escape High-Interest Debt Credit cards can carry overwhelming interest rates, but personal loans often offer much lower rates. Use the loan to pay off your credit cards, then focus on chipping away at the loan itself. This can help avoid paying upwards of 23% in interest fees.
Good Credit is Your Golden Ticket Whether it’s getting a personal loan, refinancing debt, or negotiating better interest rates, good credit is the foundation. Focus on improving your credit score before making any major financial moves, as it significantly impacts your financial opportunities.
Always Negotiate for Better Terms One of the best-kept secrets in personal finance is the power of negotiation. Don’t hesitate to call your credit card company and ask for a lower interest rate. Studies show that this works over 76% of the time—simply asking can save you thousands in interest over time.
3 Powerful Quotes:
"Who wants to pay 23% interest? Nobody." — A.B. Ridgeway This highlights the crippling effect high-interest rates can have on your financial freedom.
"Credit is like telling the world, you have not paid off the people you owe." — A.B. Ridgeway This vivid analogy underscores how crucial your credit score is in the financial world.
"It is very dishonest to take money from someone and refuse to pay them back, whether it's your student loan, credit card, or anything else." — A.B. Ridgeway A reminder that integrity in finance means honoring your commitments and paying off debts.
This episode emphasizes the importance of taking proactive steps to manage debt, protect your credit, and negotiate better financial terms. It’s not just about paying off debt but building a strategy that protects your financial future.
💵Sign up for a Christian Finance Consultation and create your Financial Plan Today!
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🏠 Visit our Website: https://www.abrwealthmanagement.com
*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.
Video/Audio Credit: Today
TRANSCRIPT:
Disclosure: The transcript is auto generated and may contain errors
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Welcome back, brothers and sisters.
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It looks like the Feds have decided to cut rates
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and not by a quarter percent, but by a half a percent.
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So what does this interest rate cut mean
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for people like you, for your housing,
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for your car, and for your consumer debt?
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Well, we're gonna listen in and see what they have to say,
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and I'm gonna come back with my analysis.
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Let's get a closer look at the impact on our wallets.
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We've got NBC's Vicki Nguyen.
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Hi.
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Vicki, let's start with the housing market.
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So how is it gonna affect you?
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Okay, here's the thing.
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We waited for a very long time.
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Good things finally came to those who wait,
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but the rates fall so much slower than they go up.
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So zooming out, let's look at the 30-year fixed rate
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right now, 6.15%.
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So what the Fed does, it's a benchmark rate.
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It doesn't directly set mortgage rates,
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but it does have a major influence.
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But look at what's happened since 2021,
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the same time, September, rates were 3%.
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The next year, they jumped to 6%, doubled.
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So last year, in October, by the way, it was 8%.
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Brothers and sisters, I do want you to keep this in mind.
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When I used to work in the banking system,
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we used to call these lists.
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And basically what it was was a refinance list.
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So when rates start to go down,
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you will call your clients and say,
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Mr. Client, it looks like rates are going down.
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You know, you had a 6% or 7%.
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It looks like it's down to 3% or 4%,
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would you like to refinance?
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A lot of people said, no, I don't wanna refinance.
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I wanna keep it everything the same.
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But why did they do that?
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Because they said, well, I don't wanna sign
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another 30-year mortgage.
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And that's true.
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The majority of people that refinance,
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they usually sign up for an additional 30 years.
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But I'm here to tell you a secret.
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If you have paid 15, 20 years into your mortgage,
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you have 10 years left,
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you sign up for a 10 or 15-year mortgage.
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You don't have to sign up for a 30-year mortgage.
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So you can still get that interest rate.
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You could pay less in interest,
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and you don't have to renew that cycle
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over and over and over again,
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and perpetually never pay off your mortgage.
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And here, do you see how low the rates actually went?
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And guess what?
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They skyrocketed back to 8%.
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Now these people can't refinance.
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They can't do anything with their homes.
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And it's even more difficult to make a home.
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And this is just in three years.
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This is what we call opportunity costs.
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A lot of people missed out on saving
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thousands and thousands of dollars
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because they were just waiting for the rates
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to continue to go down, down, down.
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Listen, don't get greedy.
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If you find an opportunity to save you a few thousand dollars,
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take it.
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If you miss it when it goes down, so be it.
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Maybe wait for the next cycle or whatever it may be.
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But don't just do nothing when you know
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that there's money on the table to be taken.
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Now, obviously you have to add in additional costs,
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like closing costs, things of that nature.
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But once you know your numbers
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and know that you could save money in the long run,
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you may want to take a chance.
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Now at 6%, that's helpful.
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Everyone was anticipating this rate cut.
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But Fannie Mae and Freddie Mac,
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the two financial institutions are predicting
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that by the end of next year, we'll be down to 5.7%.
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That doesn't sound like amazing,
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but the Fed chair has said he doesn't think
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we're gonna see 3% ever again.
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So if you are in the market for a house,
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here's what you should be doing right now.
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Number one, making sure you do everything
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to improve your credit score.
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That means paying down high interest loans,
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making sure you're not opening any new credit cards,
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getting all your financial paperwork in order.
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Also hiring a really experienced real estate agent
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who knows the market, because guess what?
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The inventory is still low.
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So competition is going to be fierce.
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You wanna make sure when you make an offer,
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you are as competitive as you can be.
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So that's if you're looking to buy a house,
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what about, let's say you got locked in
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at one of those interest rates when it was north of 6%.
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Is this the time to refi
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or the Fed meets again in a few months?
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They're expected perhaps cut rates again, should you wait?
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So the experts say it's so tempting
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to try and refinance right now,
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but you're absolutely right.
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The Fed will meet again in November after the election
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and in December.
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They're projecting another half point cut.
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So if you can wait even into early next year,
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they say go ahead and wait, because here's the thing,
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refinancing isn't free, right?
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So here's what you wanna think about.
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Number one, would you refinance to a new rate
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that's one to 2% lower than what you're paying?
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Okay, maybe think about it.
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Refinancing costs two to 6% of the new loan amount.
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Sure, the lender's gonna say,
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we'll roll it into your monthly payments.
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You don't have to pay it all upfront,
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but you gotta do the math.
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Look at the monthly payment and see,
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now you're extending your loan longer.
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Will the savings outweigh the costs?
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This is some great advice, some great general advice.
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Let me get a little bit more detailed.
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My name is AB Ridgeway.
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I'm a certified private wealth advisor professional
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with over a decade of experience.
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And as far as the housing market is concerned,
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she said something that made my financial advisor ears
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kind of perk up.
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She said, inventory is already low.
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So you're telling me you want these people to wait a year,
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maybe even a year and a half,
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to get a smaller percentage for inventory
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that's already low.
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If somebody wants that house,
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they're going to take that house now on the one to 2%.
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And now you're going to be rubbing your hands,
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hoping that you get your dream home
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and it's going to be sold
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and someone's going to be living in it
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and they're going to do it the right way.
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But she also said exactly what I had said.
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There's other fees that are associated
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with refinancing your home.
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But once you know those numbers, you can pull the trigger.
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Don't wait for an additional one or 2%,
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hoping the feds do something
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because that house may not be on the market.
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And now you're forced to live somewhere.
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You don't really want to be.
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And how miserable it will it be to live in a house
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you don't want to live in for 25 years
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because you want to wait 12 months.
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And also brothers and sisters,
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before I get back to the video
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and she continues what she was saying,
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remember what I told you?
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She gave you the same advice that I warned you again.
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She said, oh, you're extending for another 30 years
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or you're extending your loan.
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You don't have to extend your loan.
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There are other options.
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Just because you keep your same monthly payments the same
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doesn't mean that it's going to be a better deal.
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It may be better for you to maybe even increase
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your monthly bills by $50 or $100
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to make sure you're paying off the loan
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so the interest doesn't go to the bank.
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Every year that you extend your loan,
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more interest is being paid to the bank, not to you.
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It seems like it's giving you more time to pay it off.
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But if you don't need it, you have the assets
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you've been saving, you have your down payment,
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everything is working like clockwork,
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go ahead and shorten the long term.
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All right, let's talk car loans.
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I know a lot of people are in the market for a car.
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So what should we be doing this weekend?
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Should we be looking, shopping for cars or should we wait?
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Yeah, just last week we were talking about
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how car prices are falling.
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That is great news.
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The average price for a new car, $47,000,
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but the median price is much lower,
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depending on what kind of car you're shopping for.
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A used car average price, $27,000.
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So that's fantastic.
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Incentives are back, inventory is back.
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The loan rates won't fall as quickly, you know,
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because it takes a little bit of time
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for all of this to trickle down.
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The average rate for a new car loan right now,
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7% according to Edmunds, 11% for a used car.
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But here's the thing, you don't have to accept
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the loan that's offered to you at the dealership.
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Go to your bank, go to your credit union.
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And if you are a veteran, USAA has new car loans
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starting at 4.49%, the low rate.
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So if you have excellent credit,
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you could get an even better rate.
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This is great, great advice.
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Let me add on to this.
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Yes, you're going to get your rate prior to going
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to the car dealership because they make their money
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on the what?
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The back end by charging extra.
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So what they will do, they say, what's your bank?
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They say, oh, I shop at XYZ Bank.
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Okay, let me see what they're offering you.
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Then they'll go to their little computer
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and XYZ Bank will say, oh, you're approved for 7%.
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And then guess what the car dealership does.
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Hey, Mr. Ridgeway, you are qualified for 7.5%.
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Isn't that great?
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You know, the average is 11%.
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You qualify for 7.5 and you're all excited.
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You jump out of your chair, you sign the deal
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and you go on with your car and guess what?
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They get 0.5% of that interest for the length of that loan,
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whether it's four or five, six years or whatever it may be.
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That's how they make their money.
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So how do you avoid that?
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You go to your bank, you get pre-qualified.
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They're going to say, hey, you're eligible for 7%.
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You go perfect.
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You go to the dealership,
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but you don't brag about your rate
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because all they're going to do is either increase the price
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or something trying to take your money away from you.
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So this is what you do.
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You're quiet.
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You let them go through their spill.
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You test drive the car.
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You let them give you a deal.
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He said, is this the final number?
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Yes, okay.
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Do you want us to run your credit
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to figure out what your rate is?
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Yes, go run it.
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They'll come back, says congratulations.
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You're eligible for 7.5 for this vehicle.
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And then you go, no, I'm not.
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It's 7% or it's 6.95 or it's 6 point something.
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And you put that on the table and says, that's my rate.
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That is how you're going to get ahead
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and not get in trouble on the backend.
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Okay, that's just a little tip from me.
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Make sure that you go to your credit union,
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get your number, keep it a secret,
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get your final digit or your final number for that car,
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and then use the rate.
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And that's how you're going to save some money.
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If you like tips and information like this,
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and I know we have to get back to the video,
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but make sure that you subscribe, click that like button,
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click that like button, click that like button.
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It helps with the algorithm
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and pushes this out to more people
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so more people can know how to save money just like this.
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Do you usually get a better rate at a bank
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versus at the dealership?
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Is that generally the case?
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It's going to depend on the car that you're shopping for
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and what kind of incentives that dealer's offering.
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And if you have excellent credit,
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some dealers are offering rates as low as zero to 2%.
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Credit card debt.
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I mean, over the last few years,
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Americans have racked up nearly a trillion dollars
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in credit card debt.
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What does the Fed's decision yesterday mean
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for folks trying to pay down their balance?
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Eventually, it's going to be great news,
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but we have seen credit card interest rates
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hit record highs over the last couple of years.
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Right now, they're sitting around 23%
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for a new credit card.
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This is according to Wallet Hub,
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21% for an existing credit card.
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Think about it.
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That means if you spend $100
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and you don't pay it off right away,
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you owe $123.
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That's financial quicksand.
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Don't get into credit card debt in the first place,
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but if you are, pay off your high interest cards first.
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That is number one.
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Here's what can help you.
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Transferring all of that debt to a new credit card.
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For a year, a lot of credit cards will offer you
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0% interest.
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If you can't get one of those deals,
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go to the bank and ask for a personal loan.
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A lot of times, those interest rates are much, much lower.
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You use that personal loan,
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you pay off all your credit card debt,
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and then you chip away at that personal loan.
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But it's so important.
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Who wants to be 23% interest?
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Nobody.
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A lot of financial strategies going here.
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I'm trying to break this down as simple as possible,
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and I want to take it from the top.
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One, no offense to any political party,
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but when President Biden told credit card departments
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that, hey, we're gonna have a max for overdraft fees
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and things of that nature,
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credit card department says, oh, okay,
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we're just going to raise the rates.
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And that's exactly what they did.
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They are not losing money.
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You could say you capped overdraft fees
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and things of that nature,
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but to get a little quick win with the people,
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but these credit cards are going to win.
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And that's what we see here.
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23%, something like that for a credit card.
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But she is right.
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It is financial quicksand.
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She says something very important as well.
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You can take a personal loan.
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You could pay off your credit card debt.
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But before you rush to your bank to get a personal loan,
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there's one key element she keeps talking about
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that she is blowing over,
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and I think it goes over your head,
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but as a financial advisor,
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I hear it with bleeding ears.
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You have to have good credit, good credit.
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She said, if you have good credit,
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the dealership may give you a good deal.
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If you have good credit, you can transfer your assets.
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If you have good credit and available credit,