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Tuesday, September 11, 2007

Debt Payoff: An Old Strategy Re-born

In this day an age of a “Market under Fire” consumers are inundated with all types of financial strategies encouraging them to stay on track with their credit and debt. While marketing firms for retail shops continue to create new ways to encourage the same consumers to spend smart. An interesting concept that these firms propagate is that we can save money while spending. An oxymoron of sorts seeing how you can’t save and spend at the same time… or can you?

Well, the fact is that we will always have expenses and certainly there are many strategies that can be used based on an individual’s specific situation. While there may not be a way to spend smart per say, there is a way to strategically spend whereby the consumer can create savings and retirement.

The newest strategy to hit the US market is the mortgage acceleration and debt elimination program. It is the paradigm between the need to spend and the desire to save. This program allows for the homeowner to create a checking account that combines the their mortgage and attributes from a credit card to accelerate the time it takes to payoff their mortgage as well as other interest bearing accounts. The mortgage acceleration and debt elimination programs provide consumers a great mathematical formula in a software base where the user can simply plug in the debts, payment dates, interest rates, etc. of their current debts to find an exacted date of debt payoff.

These mortgage acceleration plans can cost from $3,000 to $6,500. A combination of both mortgage acceleration and debt elimination plans can find the consumer paying in the upwards amount of $12,500. Seemingly costly however, if consumers consider that by enrolling in a program they will save on average $150,000 in interest payments. The initial cost is truly minimal and often times, is captured through some type of financing agreement so that the cost to consumers is not “felt” during the program progression.

As good as these programs are there are still questions as to who can these programs help. The answer is everyone however the limitations for most providers is that since the mortgage acceleration product requires some type of Home equity loan or line of credit, only those with a favorable credit score (that being defined as a 680 middle score or above) can qualify for the mortgage acceleration programs.

So these programs are great but unfortunately limited in scope for most. But where there is a will there is a way…

I will address some of these concerns and possible solutions in the next commentary.

Brian Green
Tri-Star Consulting Group, LLC
Managing Partner
http://www.tristarconsultinggroupllc.info
1-240-354-8817

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