The difference between the IBS Financial Compass and Debt Settlement or Consolidation programs.

I was recently asked by a new affiliate how to explain the difference between our debt elimination program, the IBS Financial Compass, and programs like debt consolidation and debt settlement programs.

We'll first compare our program to other programs like consolidation and settlement and then to the old standby method of paying down debt involving a cash out refi .

Consumer programs that consolidate debt are usually either a consumer credit counseling or debt settlement business. While they can offer a short term benefit and erase some debt, they can also damage your credit for years and could actually cost you far more than you saved in the long run. The creditors report the settlements to the credit bureaus and the clients credit score can drop dramatically. And this is after the client's score has already gone down due to late payments since they were usually in the position of not being able to keep up with their bills. Now let's say the client gets back on their feet and needs to use credit to buy a refrigerator , a car, or get a refinance or new mortgage. If they can qualify, they are going to get much higher rates due to their credit scores and the extra interest they pay on everything over the next several years could easily cost them more than they saved. Especially in the case of a mortgage, where the higher rate could cost them tens of thousands in additional interest paid. These type of programs are really for someone who is already underwater, or has negative cash flow, which may not be a client for our program today. But these programs are being aggressively marketed towards the average consumer on the radio, tv, and the internet, and many people don't understand the true cost of these programs. Someone who has already gone through this type of program and still has some debt to pay off along with a mortgage may be a good candidate for our program. We'll help protect what's left of their credit and help them to rebuild it while putting them on the right path financially as I'll explain later.

Now let's look at the typical cash out refi as done 99% of the time and how you can provide the same service and go beyond for your client ensuring more future business and earnings for you while providing a better solution for your client. The typical mortgage company will use as much of the client's equity as they can to "pay off" as much of the client's debt as possible, and will do this every time the client comes back in after having built up their debt again and again. They were not able to, and did not, give their client a lasting solution. Each time this process happens the client's equity decreases. If they continue to go through this process, as many have, they will eventually find that there isn't enough equity left to help them again and they are in deep trouble and possibly on the verge of losing their home. And you won't see any more transactions from them. You probably aren't the one who did the 2nd or 3rd cash out anyway as most people were too embarrassed to go back to the same mortgage company. What got the client into trouble? They got used to the new mortgage payment and spending the extra cash freed up and then went on to use their newly freed up credit cards. We are called consumers for a reason.

There is another way to use a cash out that benefits everyone, is better for the client, ensures additional future transactions for you, and earns you more money with a higher client retention rate. When you do a cash out refi, you "pay off" some higher cost debt (usually credit card) and transfer the debt to the lower cost mortgage debt. You used home equity to transfer that debt, you did not pay off the debt. What we suggest is that you use as little equity as possible to pay down the debt and obtain an improvement in cash flow which can be used as the margin (overage payment) in our program. We'll address all of the remaining debts in our program which will allow the client to eventually use the cash flow freed up by eliminating the debts to dramatically improve their retirement contributions. When you "pay off" all of the debt in the refi the old way, the client gets used to the new lower monthly payment and spends the money instead of using it to improve their retirement or investing it. Plus you have just sucked a portion of their equity out of the home that could take years to rebuild. And you may have left them with a loan to value (LTV) that doesn't allow them the ability to do another refi if they need one or could benefit from an improved rate change in the near future with a rate & term. You may also be able to give them a little payment relief on top of all this while still retaining a lot, or most, of their equity.

Using our method, you retain as much of their equity as you can which allows you to help them when they need another mortgage transaction and gives them options they won't have the old way. It also allows them to get used to a payment that will not only eliminate all of their debt, but go on to build their retirement or other investments. Within the monthly payout (overall debt payment) in our program we'll continuously free up more cash as we pay off each debt building up the monthly cash flow and using it to truly pay off the debts. That cash flow we free up can then be used by the client to beef up their retirement after or even while we are paying off the remaining debts. It's very important to factor into your strategy that less than 10% of your clients are building a retirement fund that will let them retire comfortably and provide for them. It's not enough to just go into retirement debt free, you need a lasting income too. Now also realize that in our program we will be helping the client to protect and build their credit, and we'll be improving their debt to income (dti) ratio which helps them to more easily qualify for future mortgage transactions when they need them. So by doing the cash out refi the smart way we can ensure that the client retains as much equity as possible, actually pays off their debts, is able to build their retirement, has more options in the future, and protects and builds their credit.

Keep in mind that the client doesn't need a new loan or a line of credit to get into our program. Learn to explain even a few of these points to your prospects and then ask them which type of company they want to work with. It makes for a pretty clear choice.

Please send any questions you may have about our program to me at

kirk@ibsbrokersolutions.com or call me at (562)743-1895.