Part 2 of Big Fat Lies in the Debt Relief Industry

5-Part Mini-course: Lesson 2

Debt Consolidation Loans: Do They Really Add Up?

Dear (First Name),

In part one of this mini-course, we discussed the most tempting of debt relief alternatives. Today, we are going to discuss the most commonly used form of debt help, the debt consolidation loan. Most of us know what they are, but few know that they actually cost consumers hundreds of thousands in interest. I am going to illustrate a real example shared by one of our Got Guts members to see just how misleading they can be. But first, let’s go over the basics of a debt consolidation loan.

A debt consolidation loan is simply a larger loan that combines all or most of your debts into one monthly payment. (The bait here is one monthly payment.) The new loan is typically amortized over a longer period, which in return reduces your overall monthly payments. As an added deceptive bonus, the new loan is usually at a lower rate than at least one or two or your existing credit cards. However, the actual amount in interest you will pay has secretly doubled or even tripled. Let’s look at a real example and see for ourselves.

Note: This is a real life example that I was given permission to share with my readers. For privacy reasons, I have changed the names, but the dollar amounts remain the same.

John and Mary received an offer in the mail to refinance their mini-van at a lower interest rate. The offer was from a well known national financing company, so John and Mary made an appointment to find out more. At their appointment, they did in fact qualify for a lower rate on their auto loan, which was exciting news since money was tight at the time.

Next, the loan officer told John and Mary that they were pre-approved for a debt consolidation loan that would not only refinance their auto loan, but all of their outstanding debts as well. This loan would save them over $500 a month in monthly payments. As you can imagine, John and Mary were definitely interested in saving $500 a month. Below is a list of their debts, interest rates, and payments.

Creditor’s Name Balance APR Payment
Capital One $6,345.00 11.30% $347.00
Well’s Fargo $12,000.00 4.30% $75.00
Bank One $800.00 24.00% $35.00
Lowe’s Card $2,300.00 18.00% $75.00
HSBC Auto $7,500.00 15.10% $145.00
American Express $3,250.00 15.40% $100.00
Mortgage $124,000.00 6.90% $851.29
Second Mortgage $30,000.00 12.00% $480.00

$186,195.00 $2,108.29

As you can see John and Mary are the typical family. They have a mortgage, auto loan, and credit cards, all of which stake a claim on their paychecks. Their debts total $186,195 with their monthly payments totaling $2,108.29. Their new debt consolidation loan will combine all these debts into one with an interest rate of 10.3%. Their monthly payment will now be $1,661.16 a savings of $447.13. Sounds pretty good, right? Let’s take a closer look at these numbers and see if this new loan really does save them money.

First, let’s take a look at John and Mary’s current financial picture. To do this, we need to calculate how much interest they will pay on their current debts. The following is a summary of their financial situation. Note: All interest values assume only the minimum monthly payments were made.

Their debts total $186,195.00

Their combined payments are $2,108.29 a month.

They will pay $170,730.61 in interest in addition to the $186,195 they owe.

It will take them 26 years to pay off all their debts.

So we can see that John and Mary are going to pay $170,730.61 in interest over the next 26 years to pay off all their current debts. This is a pretty lofty price tag, but is it higher than the new loan? Let’s put it to the same test.

Their consolidation loan totals $186,195.00

Their monthly payment is now $1,661.16 a month.

They will now pay $411,828.02 in interest in addition to the $186,195 they owe.

It will take them 30 years to pay off their loan.

Are you shocked? Even though the monthly payment was less, the new loan ends up costing a lot more – $241,097.41 more to be exact. The friendly and deceptive financial company took John and Mary’s debts and stretched them out over a longer time frame while secretly increasing their income and profit on the loan. Surely you didn’t think they wanted to save you money at the expense of their bottom line?

Let’s take one more look at John and Mary’s finances. We put the same debts, the same interest rates, and the same minimum payments into the Got Guts Wealth Builder Pro program.

Their debts total $186,195.00

They are still paying $2,108.29 a month to their creditors.

With a PLAN they will only pay $85,882.13 in interest.

They will save $84,848.47 in interest

They will be DEBT FREE in just 10 years and 10 months compared to 26 years.

If they save their monthly payments after they become debt free, their savings will grow to $1,369,026.91 in the next 30 years.

Note: Savings calucualtions assumes a monthly savings rate of $2,108.29 for 19 years and 2 months with an annualized return on investment of 10%.

By following their personalized step-by-step plan, John and Mary will be debt free in 10 years and only pay $85,882.13 in interest, while still only making the minimum monthly payments. That’s a savings of $84,848.47. Not only will they be debt free in a third of the time and save over 50% in interest, but by saving their monthly payments they will be a millionaire in the time it would have previously taken them to become debt free. Now that’s impressive. What a difference a plan can make.

One final note about debt consolidation loans; not only do these loans cost more in interest, but over time, the individual will usually take on more debt and monthly payments. Debt consolidation loans are not a real solution. They are a quick fix instilling millions of people with false hope. An effective and honest solution is a proven debt free plan backed by mentoring and a total self empowerment.

Next time, we will place Credit Counseling under the microscope.

Sincerely,
Daniel Meek
Creator of the Got Guts Wealth Building System
www.Got-Guts.com

Part 1 of Big Fat Lies in the Debt Relief Industry

5-Part Mini-course: Lesson 1

The Truth about Debt Settlements and Why They Can Put You Further In Debt

Dear Friend,

If you have searched on the internet for any form of debt relief or credit education, you have probably run across an ad promising you things like: “Reduce Your Debt by 70%” and “Plan to be Debt Free, Debt Settlement”. I know most of us just say “yeah right” and go on with life. However, if you read that ad after you just counted your change to pay for gas, or right after an argument with your spouse over the finances, these ads might get your attention. In fact, these ads lure thousands of people who are desperately looking for a solution. So are they for real? Let’s check them out and see.

If you click on one of those ads you’ll find promises to reduce consumer debts, negotiate with creditors, and stop harassment from debt collectors. These companies offer you the chance to become debt free in a much shorter time. They claim they will negotiate with your creditors and settle for an amount that is far less than what you actually owe. But sadly that rarely happens. Instead, many people are shocked to see that after making many hundreds of dollars in monthly payments, their debts have actually increased and their credit rating has been irrevocably trashed.

You might think these people are naive and deserve what they get. But that’s not the case. When you are buried under a mountain of debt, and your marriage is stressed because of it, almost any promise sounds good. In an effort to save themselves, many jump on these advertisements that offer quick fixes. But instead of becoming debt free, the debt settlement company pockets their fees and usually plunges the consumer deeper into debt. Unfortunately, the debt relief often comes in the form of bankruptcy or debt charge-offs which have long-term negative consequences.

How does it work? After a sales pitch, you enter into a contractual agreement between you and the debt settlement company. You are instructed to stop paying your creditors and cease all communication with them. Instead, you start making your monthly payments to the debt settlement company to pay for their fees. These companies often collect as much as 30% of the total debt owed in up-front fees. Finally, after months and months have passed, the settlement company begins to bring you settlement offers. At this point, you might obtain a vital piece of information that they neglect to tell you upfront. In order to settle your debts you must have cash on hand to pay the entire reduced balance. Most people do not have the means to do this. Therefore, the consumer is left bankrupt while the debt settlement company keeps their fees.

If you are truly seeking to settle your debts, you must meet the following two criteria:

You must be at least six months behinds on your payments.

You must have the cash on hand to pay your entire reduced balance.

If you don’t meet the above two criteria, then debt settlement is not a solution for you. What you need is a sound financial plan that will guide you step-by-step to become debt free.

High debt levels, the internet, and desperate emotions have opened new avenues for scam artist to take advantage of consumer vulnerability. The Got Guts Wealth Building System delivers a real solution for real people, leading people to financial freedom.

Your next installment of this series will be on debt consolidation loans. See you then.

Sincerely,
Daniel Meek
Creator of the Got Guts Wealth Building System
www.Got-Guts.com

P.S. If you are one of the few who actually qualify for a debt settlement, you can do it yourself. It’s a simple process. You call up your creditors and they will put you in contact with their delinquency department. They will mail you a standard form to complete and mail in. They will then send you a settlement dollar amount you can accept, decline, or negotiate. Warning: creditors can report the charge off to the IRS, which will count the savings as earned income causing tax liabilities.

Big Fat Lies in the Debt Relief Industry

5 Part Mini-Course

Introduction

The other day I searched for debt help on Google and was blown away by what I saw. The search engine returned over 5 million results! Yes, I checked it twice. There were over FIVE MILLION results to explore. They included any and all imaginable forms of debt management, such as debt settlements, bankruptcy, debt consolidation, debt counseling and many more. I saw promises ranging from “Reduce Your Debts by Up to 70%” to “Lower Your Monthly Payments in 30 Seconds.” I just sat there at my computer mystified by the sheer confusion and alternatives the internet has brought to those of us looking for financial help.

Who can you trust and how can you tell the scams, lies, and false promises from the real solutions? I know there are some honest, good hearted people in the financial industry that are there to truly help people succeed with their finances. However, there are also ten times as many individuals that are only out to take advantages of your vulnerability.

It’s tough to tell a wolf in sheep’s clothing when you are desperate. I know because I was desperately looking for debt relief several year ago. I was up to my eyeballs in debt, broke, and scared. Even though I was a finance major with a career in the financial industry, I had no idea who to trust or where to turn. I was desperate for a real debt solution. Instead of finding the real help, I was scammed, lied to, deceived, and mislead by greedy companies who were only interested in collecting fees and commissions, caring less what damage they inflicted on my finances and ultimately my life. My financial situation went from stressed out to absolute disaster almost over night. I was on the brink of bankruptcy when I discovered the real way out of debt.

I created this mini-course in hopes that you could learn from my experience and avoid the scams and heartaches waiting for their next victim. I’ll share with you the real solution to your debt problems and the only true way to financial freedom. But before I do, you need to clear your mind of all the garbage and false promises out there. Starting tomorrow you’ll receive part 1 of Big Fat Lies in the Debt Help Industry on debt settlements and how they can actually increase your total debts.

Daniel Meek
Creator of the Got Guts Wealth Building System
www.Got-Guts.com

Financial Reality Check!

If you truly want to change your finances, it’s going to take Guts.  If you can’t accept living in debt, like most Americans, or even like your close friends and family members, you have to make a stand and be different.  That takes Guts.  You have to let go of your secret life of pretending everything is all right.  You have to be honest with yourself and others in your life.  That takes a lot of Guts, too.  And most importantly, you can no longer rely on yourself.  You have to put all your faith and trust in God like never before, which will definitely take Guts.  Heck, just be honest and share my life with you took Guts.

 

First, let’s talk about putting all your faith and trust in God.  The bottom line is, by putting all your faith and trust in God, you are simply “Seeking God first.”  Most of you probably think you do this anyway.  I thought the same thing myself.  But like you, I was in store for a reality check. 

 

Reality Check: “If you buy things you do not need, with money you do not have, you are not seeking God first in your life.”¹ 

 

I’ll say it again, “If you buy things you do not need, with money you do not have, you are not seeking God first in your life.  If that description fits you, and you are not ready to accept that statement as truth, then you need to delete this program off your hard drive.  Otherwise, you are just wasting your time.   However, if you’ve got the Guts to accept reality and are ready to do something about it, then you are on your way to a new and exciting debt free life.  So, let’s start seeking God first.

 

Jesus told us to first seek God, and then all other things will be provided for us.  So let’s do something Gutsy and make a decision right now to start seeking God first today.  Now that you are fired up, we need to figure out exactly how to seek God first.  Thankfully, Jesus told us how to do that, too.  When a rich man asked Jesus how to do this, he told the rich man to give everything away and follow him.  Jesus also told his disciples how to seek God: to “Deny yourselves” and follow him.  But how do we apply this message today?  Does this mean we need to give away all of our worldly possessions and start preaching the gospel around the globe?  Probably not.  I don’t really think that God wants most of us to be homeless evangelists.  My interpretation of these scriptures is that I need to deny myself my material wants and desires, then truly make God first in my life.  Then, and only then, should I allow myself my wants again.  A little heads up here.  Your wants are going to change drastically after your priorities change.

 

Okay, let’s kick this off with something a little Gutsy, like a 30-day challenge.  I came up with this challenge for my friends and family.  It proved to be quite an interesting ordeal for most.  It’s quite simple.  For the next 30 days, you are going to buy nothing except the things you absolutely need.  Try to deny your daydreams of an in-ground pool and hot tub, complete with a fully-equipped outdoor kitchen.  If you catch yourself wanting, just make a mental note “I am giving it all away.  I am denying myself.  I am seeking God first, no matter what.”  I promise you, if you can faithfully do this challenge for 30 days, you will see a world of changes starting to take place in your life.  Think about it.  The worst thing that could possibly happen is you won’t rack up any more credit card debt next month.  So if you think you’ve got the Guts to hang, your 30 days starts…. Now!

 

Now you have 30 days to focus on seeking God first and shaping up your finances.  If you are like I was, you probably don’t know where to begin.  It’s simple, really.  You are going to begin with a plan.  If you look in the Old Testament, you will find a proverb that goes a little like this: “Where there is no vision, the people will perish.”  For our finances, it goes more like this: “Where there is no vision or plan, your finances will surely perish.”  Unfortunately, I was living proof of that proverb.  So let’s make a plan – a vision for your financial future.  It’s quite simple to do.  You only have four steps to take:

 

1. Account for debts, even those pesky medical bills you have been trying to pretend don’t exist.
   
2. Commit to paying all of them each and every month, even if it’s only five bucks a month. 
   
3. Use the “Got Guts? Debt Eliminator” system to knock your debts out one by one.
   
4. Start giving and saving today.  I don’t care if you only have fifteen minutes of time to give someone, or only have one dollar to save.  You must start today.  This step is crucial or the first three steps won’t matter at all.

 

That’s it.  Just 4 steps and you will be debt free for life.  Let’s take a look at each step and see how they will impact your life.

 

 

Step 1:  Account for all your debts.

You have to hold yourself accountable and recognize all your debts.  I know for me, this was a far cry from my usual approach of “If I just ignore it and pretend this bill doesn’t exist, eventually I won’t owe it anymore.”  Yes, this really was my approach, and no it did not work or I would have titled this “Living Gutless” instead of “Got Guts.”  The easy road doesn’t exist.  You have to hold yourself accountable for your debts.  So write them all down on a blank piece of paper.  List how much you owe, the interest rate, and the minimum payment.  I was shocked to see that I had 26 separate medical bills on top of my 5 credit cards, 2 installment loans, and my first and second mortgages.  Before you get all depressed here, quickly go to step two and totally empower yourself.  Huh Rah!

 

Step 2:  Make a commitment to pay them all.

Now that you have identified each and every debt, you need to start paying on them.  I cannot even begin to describe the feeling of empowerment I got when I paid $5 towards each and every one of my 26 medical bills that first month.  For the first time in my life, I was in control of my finances.  I was steering the ship.  The feeling was unbelievable and I couldn’t wait until the next month.  It only got better when I started receiving new statements from the hospitals with “Thank You” and reduced payoff options.  Wow!  It was great.  So get started and pay the minimum amount due on all the bills you can.  Then pay as much as you can afford towards your smallest debt.  Congratulations!  You are now on your way to an amazing, debt free life.

 

Step 3:  Knock out your debts with Guts.

Now put all your debts in the “Got Guts? Debt Eliminator.”  Just enter your information and click the Calculate My Got Guts Debt Elimination Plan.  There is only room for 15 creditors, so I had to lump all my medical bills together.  Since all of them had zero interest, this worked fine.  The program will prepare you a step by step plan to eliminate all your debts.  After you review your plan and put it in action, pinch yourself, because life can really be this good.  Don’t forget to check out the rest of the program.  The “Got Guts? Debt Eliminator” is designed to change as your life circumstances change.  You can view each of your creditor’s detailed schedules by clicking on its corresponding button.  You can update any debt’s interest rate as it changes, or enter annual fees.  If you are feeling really Gutsy, commit an extra $50 a month to paying off your debts and you’ll get there even faster.  This is your tool to become debt free, so use it. 

 

Step 4:  Gutsy Giving and Saving

Why is it Gutsy?  It takes a whole lot of Guts to give or save when it feels like you have absolutely nothing; but do it anyway.  The Bible tells us “we must give to receive” and “you reap what you sow”.  We must take these scriptures to heart and live them in our daily lives.  Fortunately, giving is one of the easiest and natural things we can do.  Just remember this, “If you love, you give.”  How simple and true.  In fact, God loved us so much, he gave us his only son as a ransom sacrifice.  Now that’s love…perfect love.  So if you are seeking God first, you are basically following two commandments:  “Love God with all your heart” and “Love your neighbor as yourself.”  So get out there and love your neighbor.  Next time you take your trash out to the curb, take your neighbor’s trash too.  Help someone with their finances.  You definitely know how lonely it feels to live in financial despair.  If you have some extra money one month, give it away.  I guarantee you will receive it back at least tenfold down the road.  Just give and give freely, with no intentions of receiving, and you will have some amazing stories to tell. 

 

One of my company’s dearest and oldest clients is always making the statement, “You can’t out give the Lord.”  She lives that statement daily, and is living proof you really can’t out give the Lord.  Betty, my client, started giving like most of us, when she felt like she didn’t have much to give.  About 15 years ago, she gave $4,000 to her favorite charity.  The next year she was able to give them $6,000.  When I first met her, about 10 years ago, she was able to give them $10,000 a year.  Well, to make a long story short, the section of land Betty and her family have lived on for the past 40 years started producing something about six years ago called “Oil.”  Last year alone, she gave $640,000 to charities.  Now that’s the awesome power of the Lord giving back.  I could tell you many other stories about people who started giving and received incredible blessings from it.  So muster up some courage, get your butt off the couch, and start giving some of your time and resources today.

 

In addition to giving, you need to start developing the habit of saving.  Most experts want you to wait until you are completely debt-free before you start to save.  However, I disagree.  I feel this is way too important to put off.  You need to start saving now for two reasons.  First, you must develop the habit of saving each month.  In fact, once you develop this habit, it will be extremely hard to break.  Second, you will have emergencies in your life that will require money than you currently have in your checking account.  You definitely don’t want to charge it.  You want to be able to pay cash from your savings in these circumstances.  Just make sure you’re not saving too much at the expense of slowing down your debt elimination plan.  By the way, take a look at your savings on the “Got Guts? Debt Eliminator” program.  After you are debt-free, the program automatically snowballs your monthly payments into your savings account.  Just about everyone has over $1 million in savings after 30 years.  It’s simply amazing. 

 

Got Guts? Extra Credit

There are three additional things you can do to catapult your success.  First, keep a journal and record everything that you or your family abundantly received.  For instance, write it down if someone paid for your lunch, if you got a free sample, or an unexpected tax refund.  No matter what it is, if it’s abundant, write it down.  NO, you aren’t keeping score here.  You are just reinforcing the fact that you are receiving, so you must keep on giving.  Secondly, every time something good happens in your life, raise your hand, clench your fist, then pull your fist down to your side, while saying “SWEET!!!”  Yeah, at first people will think you’re a little crazy, but soon they will be joining you.  Lastly, find two people that need help with their finances.  Share what you have learned here and make a commitment to help one another.  Remember this scripture “A cord of three strands is not quickly broken.”  So help others, form a support group, and enjoy your journey to become debt-free.

 

You might be wondering if my family is debt-free.  Not yet.  We are still on our journey just like the rest of you.  To help keep me focused on where I’m going, I often repeat these two phrases.

 

“If you are buying things you do not need, with money that you do not have, you are not seeking God first.”

 

“You can’t out give the Lord.”

 

In closing, if I have helped just one person, then this debt management system has served its purpose.  I hope you can take this knowledge and expand on it, while living a life seeking God first, giving generously, and living debt-free. 

 

To God’s Glory and Love I give all of this.

 

Daniel and Kendra Meek

 

 

¹Paraphrase from Craig Groeschel, LifeChurch.tv, Message Series: “30 Days to Live,” Week Two

 

 

Copyright 2007 Synergy Educational Services, Inc.