The Truth About Debt
Consolidation |
By Dave Ramsey |
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Debt Consolidation is nothing more than a
"con" because you think you've done something about the
debt problem. The debt is still there, as are the habits that caused
it - you just moved it! You can't borrow your way out of debt. You
can't get out of a hole by digging out the bottom.
Larry
Burkett, noted financial author, says debt is not the problem; it is
the symptom. I feel debt is the symptom of overspending and under
saving. Our certified counselors will not recommend debt
consolidation for a client. he reason that we do not use debt
consolidation is because it doesn't work.
The Truth About Debt Consolidation
A friend of mine
works for a debt consolidation firm whose internal statistics
estimate that 78 percent of the time, after someone consolidates his
credit card debt, the debt grows back. Why? He still doesn't have a
game plan to either pay cash or not buy at all. He also hasn't saved
for "unexpected events" which will also become debt.
Debt
consolidation seems appealing because there is a lower interest rate
on some of the debt and a lower payment. However, in almost every
case we review, we find that the lower payment exists not because
the rate is actually lower but because the term is extended. If you
stay in debt longer, you get a lower payment, BUT you pay the lender
more, which is why they are in the business of debt consolidation.
The Real Way to Get Out of Debt
The way you get out of
debt is by changing your habits. You need to commit to getting on a
written game plan and sticking to it. Get an extra job and start
paying off the debt. Live on less than you make. It is not rocket
science, but it is emotional, which is why most people need help
getting through it from someone like Dave Ramsey. Don't try debt
consolidation! |
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