Nine weaknesses of debt elimination programsJoe Cornodebt elimination, credit restoration
I am a firm supporter of being debt free, including paying off
one's mortgage. This concept is starting to emerge in our industry
in the form of debt elimination business, employing patented
wizards and systems. They come in every shape and size, from
multi-level and non-profit to for-profit companies.
There are some fallacies that are inevitably at the forefront of
any freedom-from-debt opportunity. If you are going to offer your
customer debt elimination as one of your companys services, be very
careful when marketing it. Let us review the weaknesses of
1. The customer must really want to be debt free. I know this
seems a bit ironic, but most Americans do not seek to be debt free.
In order for the customer to take advantage of any debt elimination
product or program, he must be an active and willing
2. Some companies teach your customer that the way to become
debt free is to earn more. This is a supporting fallacy that claims
the customer will eliminate his debt by paying it off earlier with
increased revenue. It is not reduced income that has created the
debt, rather, it is not controlling and monitoring spending.
3. Greed becomes the motivator, and relieving debt becomes
secondary to the dollar to be earned. This is another supporting
fallacy that creates added time burden to earn more money so that
the consumer can get out of debt, when what really is established
is greed to want and have more.
If the customer who truly wants to eliminate debt would take on a
part-time second job, he would eliminate his debt quicker than
marketing the debt elimination system. The time spent would earn
the added income needed and not require selling some debt
elimination system to others.
4. Debt elimination marketers will sell the customer on his
wants. The ultimate vacation, the cabin and the car of his dreams
are all within reach. This fallacy does not eliminate debt and is
based on earning residual income.
The residual income, along with freed-up income, is only an
illusion. The customer, rather than making money instantly with a
second job, will be marketed on selling debt elimination to others
for residual earnings. The customer pays out a membership and
monthly service fee for the opportunity.
5. There are some companies that profit from a percentage of the
amount saved by eliminating debt. After a small monetary cost to
enter the customer into the system and run an analysis on interest
savings, the company will take its profit from the savings being
realized. It gets its profit before anything else is paid, and this
can be in the thousands of dollars.
Most debt elimination businesses will want control of the customer
accounts in order to auto-pay bills per the prescribed wizard
analysis program. This usually includes refinancing the existing
home mortgage with an option ARM or interest-only payment
6. One cannot keep paying from interest savings or creating
added residual income to cover expenses without soliciting others
to join. Now, instead of being in the loan business, you are in the
debt elimination business and have changed the focus of what you
7. Reworking the mortgage will create instant additional income
due to the short-term option ARM or interest-only payment
structure; however, the real key to eliminating a home mortgage is
in reducing the term, resulting in a shorter duration of the
Some companies may be completely independent of any mortgage
institution, but they still have their selected lists for utilizing
loan services. You are now being replaced as your customers' loan
contact and are surrendering your customer base to the debt
8. A small percentile (in single digits) actually will work the
plan and eliminate their debt. The larger percentile will pay for a
plan that will never bring them to the goal of being debt free.
Also, the tax ramifications of having no mortgage interest need to
be factored in.
If you have someone who truly wants to eliminate debt, you can
establish resources and plans that do not charge fees or require
the networking of additional debtors. It is everywhere for
9. Major banking organizations (often depicted as the demons and
monsters that caused your customer to get into debt) offer free,
24-hour, Web-based tools that show spending habits, suggest
strategies for improving spending and debt load and allow your
customer free consultation with bank staff.
There is a myriad of books available in public libraries on getting
out of debt. You could spend some time doing research and creating
a system for your client to utilize, without the patented
This takes us right back to Item 1. The customers must make debt
elimination their true goal. By paying off debt through the
customers' work and personal commitment (no one else cares to do it
for them without a charge attached), they can be debt free within
an acceptable time frame.
The main goal for you as their loan originator is to consult and
obtain the mortgages. There is nothing wrong with analyzing their
financial crash dates and teaching them that debt elimination may
need to be their main goal. Yet, it is the customers' choice to
eliminate debt and not yours to make for them.
Your research and studies on debt elimination can be ongoing and
make for great mailers to past customers who get them to consider
coming in to talk to you. This could be an added service for your
business to offer so that you can ask for loan-referral
Joe Corno is president of Utah-based We Be Consulting and
Seminars. He may be reached at (801) 836-2077 or e-mail [email protected]