Since the beginning of the decade, America has been on a debt-fed spending boom. During this period of time, US consumer credit has risen by 7% per year to a total of $23,000 per household, up from $14,000.
Now, with the credit crisis, stock market swoon, housing price decline, and full-fledged recession, the debt that fueled the good times is causing immense stress. In a recent Wells Fargo survey, 41% of borrowers with debt beyond a mortgage think about debt every day, and 22% think about it once a week. This stress can have real health effects, as highlighted in a recent study that found a significant correlation between debt and preterm delivery.
Concerned with the increase in consumer debt and wanting to create a solution, Scott Crawford, formerly a product manager with a leading credit card issuer, teamed up with Steve Richmond, a successful Internet entrepreneur, to create DebtGoal.com, a product they hope will become the “Weight Watchers for Debt.”
“We anticipate that 2009 will be the year US consumers get truly serious about paying off debt,” says Scott Crawford, CEO of DebtGoal.com, an online solution for paying off debt. “Forty-five percent of America has a serious debt problem. Getting out of debt was the #1 New Year’s goal in 2008 and it will easily take the #1 spot in 2009 as well.”
So despite the economic downturn, Crawford feels that DebtGoal.com is poised for growth. “For years, there’s been a debt industry focused on distressed borrowers at or near bankruptcy. We think that with 45% of America in serious debt, we need a new set of tools for the do-it-yourself customer.”
Here’s how Crawford and Richmond explain the main objectives of the DebtGoal service.
Plan
“Over 65% of people who say they wish to get out of debt never create a plan,” says Crawford. It’s just too daunting for them. We have devised a process to help our users come up with a realistic plan in only 10-15 minutes. That’s it and they’re up and running. The plan tells them how much to pay on each account and can save the average user tens of thousands of dollars in interest over the life of their debt.”
Simplify
“The biggest problem borrowers face in reducing debt is visibility,” according to Richmond. “We have people with more than 25 different debt accounts. With that many accounts you simply can’t track an accurate estimate of your total balance, and once that goes your finances start to spiral out of control. In order to reverse the process, you need a system to centralize the debt account information and give you a total that you can track against.”
Optimize
DebtGoal uses a ‘snowball’ process to help people pay off debt, holding total payments constant, but allocating more and more to the highest-interest account as minimum payments come down on revolving accounts. By using this approach, a borrower can eliminate debt in 3 years that would take 15-20 years by paying only minimums. “You can do this yourself,” says Richmond, “but you’ll have to come up with a system of spreadsheets that allows you to change the amount of all payments every month. For most people, this is too much work so we created a tool that does this for them.”
Stay Motivated
We all know that positive feedback is a key determinant in success. DebtGoal seeks to surprise and motivate in subtle ways. Says Crawford: “We talk about an aspirational goal of having our users get so excited about paying off debt that they rush to their computer to make a payment every time they get a statement. Each time they make a payment, we show them exactly how much they’re paying back to themselves in principal and how much this will save in interest costs. We’ve had many customers say ‘Wow, I didn’t know that my payments can really add up like they do.’ “
Accelerate Progress
For people who want to make faster progress on getting out of debt, DebtGoal offers Accelerator Actions which help users lower interest rates or identify ways to increase their monthly payments. Richmond illustrates as follows: “One of our most popular areas of the site is a feature that let’s users negotiate with their credit card issuers. We show them the concessions that other users have negotiated and show them how to negotiate successfully. As they record their lower rates, we can actually show them how much interest this will save them over the lifetime of their debt. For a lot of people this is really exciting. They’re saving money just by making calls.”
About DebtGoal:
GoalSpring Financial is a socially responsible company, wholly focused on helping our users reduce the amount and cost of their debt. We measure our success based on our clients’ success. Unlike most financial institutions who offer advice to sell products, we are an objective organization that operates free of conflicts of interest.
Our first product, DebtGoal.com, is an online consumer application that makes paying down debt easy and efficient. If you carry balances on credit cards, have a student loan, have a car loan and/or have a mortgage, then DebtGoal can help you organize, optimize and pay down your debt.
