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Here we lift the lid on Transforming Debt into Wealth, Be Debt Free, Dump Your Debt and all of the other get out of debt programs on the market by writers such as John Cummuta, Ken Blanchard, Stephen Cooper and Robert Allen which basically all give similar information and advice. They all have 'secret information' to to help you become "debt free in 5-7 years, own your own house, car, boat!, have a 1 million pound retirement fund, eliminate all your debt and retire in 10 years".

We are going to let you in on the 'secrets' and we are not going to charge you one penny!  All the information will be on one page, spelled out in plain English, no links to yet another sales page and no request for you for you to pay for any of it!  We risk the wrath of the sellers of these programs by bringing you this information FREE of any charges.

"The Transforming of Debt into Wealth course is now the bestselling personal debt-elimination and wealth creation course in the world.   Why? Simply because my course works no matter how much debt you have. It's easy. Risk-free! And works with any income level!"  [ Claim by famous (infamous?) writer on 'becoming debt free' ].

Basically, most of the advice is the same as the advice freely given on the internet which is considerably cheaper to obtain but they try to charge you for it taking you further into debt!!!   A lot of the information in these Debt reduction programs is based toward an American reader because of the huge market in the USA however the information is just as relevant in other countries. 

What is called “snowballing” in one country is called an “accelerator margin” in another. This is money you use to “overpay” your debts one at a time until they're all gone. This is the main piece of information imparted by these debt reduction programs.   In the UK the advice they give is still relevant but we would also suggest you consider alternative methods as well as a debt reduction program. Firstly, contact your debtors (the people) you owe money to) and explain the situation to see if you can make arrangements with them to either write the debt off or freeze the interest or make smaller payments by spreading the loan over a longer period.  Take a look at the percentage interest you are paying and see if a consolidation loan (one loan to pay off all the other loans and debts) or re-mortgage would reduce the amount of interest you are paying.

Individual Voluntary Arrangements (IVAs)
An IVA is a less drastic alternative to bankruptcy. It is a legally binding agreement between you and your creditors, where you make affordable repayments for 5 years (60 months) and after this period your remaining debt is written off and you are free of your debt. As part of the IVA all charges and interest are frozen, meaning that your debt will not increase. Your creditors and any debt collectors will also no longer chase you for money, as all such letters and phone calls will be dealt with for you. Any legal action that may be underway against you will also be stopped, including any bankruptcy proceedings. An IVA can only be arranged through a licensed Insolvency Practitioner.

Debt reduction programs list several ways to Live Below Your Means (LBYM) to save a few dollars here and there and cut out ALL frivolous spending, e.g. £2 a day on coffee/colas (take a flask), £3 a day on lunch, (take a packed lunch) no biscuits or chocolate, cut out alcohol, no online spending including gambling and bingo, changing light bulbs to energy efficient low wattage ones, turn down the thermostat, never buy a new car, stop going the pub 4 nights a week, cut out smoking, lower all your credit card monthly payments to minimum in other words cut out all unnecessary spending, no spending for pleasure, buy only the absolute minimum and use the money saved to make maximum payments on the debt with the highest interest rate, etc… Simple advice that you can find anywhere.



They also advise that it is a bad idea to save money (even if you can) whilst carrying a load of debt. This is quite true. If you are paying all your debts each month and you are also putting, for example, £100 a month into a savings account, you should stop saving in an account paying a measly 5% and use the £100 to tackle the high interest debts first. You get a better return on debt payoff, as you reduce the crippling interest, rather than earn the pitiful interest. For every £100 you pay off a credit card debt, you save round 18% or whatever their extortionate rate maybe. This is nearly always much more than any interest that this will earn in a bank account.

These programs suggest you should stop ALL forms of saving whilst trying to reduce your debt, including any investments you are making in your pension fund. If you're putting, say, £50 a month into a personal pension, you should stop. If you're lucky to have an employer that pays a percentage into your fund, then you should drop your investment to match their investment (e.g. 3%) and use the money you've freed up to tackle your debt.

They state that you should be aiming for at least 10% of take home pay to pay off debt. So, if you bring home £1500 a month after tax, you should be able to glean at least £150 a month to use as your “accelerator”.

Once you've gleaned together some cash, you apply this to one debt at a time until you've paid that off. If you have credit card debts, you should reduce your payments to the minimum allowable payment as shown on the statement (usually somewhere between 3% and 5%) on all the cards except one, and use the “accelerator margin” money exclusively on one of the other cards until the debt is repaid. You focus on one debt at a time, preferably the one with the highest interest rate, rather than say, paying £50 a month extra on each debt.

If you can scrape together £150 a month as your accelerator. You would use this £150 to speed up repayment of debts by applying this to them one at a time. When you've paid off one debt, you take the payment you were making on that debt, plus this £150 accelerator and apply that to the next debt, i.e. snowballing the debt payoff. Some advise tackling the highest interest debt first but if all of your debts are of similar interest rates and you have some debts that are quite small then you could tackle the small debt first freeing up the repayments you were making on that loan to pay off the next loan.

For instance, lets say you have a visa debt that costs you £150 a month and a car loan, which is £250 a month. You take the £150 and apply it to the normal visa payment, thus making a £300 a month payment. Once the visa bill has disappeared, you take the £150 that you were paying and your £150 accelerator and apply that to the car loan, hence, your car payments are now £550 a month. The car loan will be paid off much sooner.



The advice is to list your debts and pay them off in the order of highest APR, e.g. pay off the 18.9% Visa debt before the 9.9% car loan. However if you had another debt that was costing £150 per month and you only had 2 more payments to make you could apply your accelerator to that debt and pay it off in one month and then use the saved repayment and your accelerator to add £300 to your visa card repayment making a monthly repayment of £450 a month.

Another example case study, if you have 2 credit cards, with, say, £1000 on one (visa) and £2000 on the other (mastercard), and both cards are 18.9%, and you have a £4000 car loan which is 11.9% APR and you have, say, a home improvement loan of £3000 at 8.9%. Lets say that both loans have been going for over a year, so the capital element has started to reduce as you make each monthly payment.

With the “snowballing system”, you are advised to tackle the highest APR debts. So, you continue to service your other debts at the minimum you can (car loans, HP and such usually have fixed payments, so you cannot drop those, but with the credit cards, you can reduce your payment to the minimum shown on the statement).

In the example above, you would tackle the 2 credit cards first, then the car loan and finally the home improvement loan. You would take your accelerator of £100 from above and apply that to one of the credit cards, whilst lowing the other one to minimum payment. We'll tackle the visa debt first (it's smaller and would therefore be paid off quicker than the mastercard and you would have 'victory' over one of the debts much sooner – a great morale boost).

With this additional £100 payment to the visa card, the balance will be paid off sooner. Lets say this visa's minimum payment was £50 a month (5% of £1000) – you would therefore pay £150 a month.

Once that card is paid off, you take the £150 that you were paying and apply that to the next debt, which in the example above, is the mastercard debt. This has had a 5% minimum payment too, which would be £100 per month. Now you add them together and you have £250 a month to apply to that debt.

As you can see – a snowball effect, as the debt repayment is growing – much like a snowball rolling downhill.

Once the mastercard is paid off, you then take the £250 that you were paying and apply that to the next debt, which would be the £4000 car loan. Lets say the car loan payment is £150 a month. You add that together and you start to pay £400 a month to the car loan.

Once that's gone – you now have a £400 a month snowball, which you apply to the last debt, which is the home improvement loan. Lets say you're paying £120 a month on that – now you can pay off £520 a month until it's gone.

Once that's gone – you're debt free. (except for the mortgage of course).

(note : all monthly figures above are just rough estimates used purely to illustrate the point)

Once you've paid off the “debts”, the programme says that you should take your last “accelerator”, which in the above examples, would be £520 a month, and apply that to your mortgage. As you are overpaying your mortgage, you are reducing the capital element each month (the amount you owe) and therefore the interest charged on the capital element will be less so the amount you are paying will be paying more off the capital instead ot interest and so speeding up repayment. Depending on how long you've had the mortgage, it claims that this can be paid off in full within the next 4-5 years in most cases.



Let's just look at an example :