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