TEXT OF INTERVIEW
Jeremy Hobson: Some good news this week on the consumer debt front. Monthly default rates are dropping on mortgages, auto loans, and credit cards. That’s according to a survey from S&P/Experian.
But LA Times consumer columnist David Lazarus says debt-laden Americans should beware of a new product to help them dig out of financial trouble. David Lazarus joins us now. Good morning.
David Lazarus: Good morning.
HOBSON: So tell us about this new product.
LAZARUS: The new product is called Debt Wise. It’s from Equifax. Right now they’re the only major credit bureau to offer it, but since these guys usually move in lockstep, we can probably expect Experion and TransUnion to have a similar product. It’s basically an online tool that allows you to prioritize all of your debts and then try to pay them off in a manageable fashion. Equifax says they use algorithms and all sorts of things, with charts and all that, to make this thing as effective as it can. I’ve talked to the company and they compared it to Weight Watchers, where they say, look we’ve created a program that if you stick to it, it’ll help make you debt-free. And all of that sounds like a good thing.
HOBSON: So getting rid of debt like getting rid of weight — is there anything wrong with that idea?
LAZARUS: Well, when you look at the fine print of the brochure, Equifax makes it very clear they are not going to do anything else to help you. For example, they will not negotiate with creditors on your behalf, they won’t guarantee any results, they won’t provide you any counseling. This is all about just simply giving you a tool and then letting you do the heavy lifting. And that’s pretty good, except they’ve also put in a few other things that you might not necessarily need. Like for example, daily credit monitoring, identity theft protection, and all of that allows Equifax to charge you nearly $15 a month.
HOBSON: So what can people do if they’re facing big debt problems?
LAZARUS: Well first of all, if debt is your problem, recurring fees is probably not the answer. So you want to take a close look at that. There’s an alternative out there, it’s called the debt snowball method. I advise people to Google it and look for the nuts and bolts of it. But in a nutshell, what it is is you prioritize all of your debts from smallest to biggest, you commit to making the minimum payment for every single one of them every month, and then whatever you can spare, you apply to the top debt on the list. When you get that paid off, you move to the next debt on the list, and so on and so on. And then like a snowball rolling downhill, more and more cash becomes available to pay off your debts. Not a perfect system, but here’s the beauty of it: it’s free.
HOBSON: It’s free. And I’m still surprised that David Lazarus, you there in Los Angeles, are talking about snowballs, but we’ll leave that for another day.
LAZARUS: Fair enough.
HOBSON: David Lazarus, consumer columnist at the L.A. Times, thanks so much.
LAZARUS: Thank you.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.