2/14/2006
Advice from Nashville's leading Financial Aid Advisor Dave Ramsey
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover
"Why are you against debt consolidation?"
Dear Dave,
Why are you against debt consolidation?
Misti via email
Dear Misti,
The idea of debt CONsolidation is to get you a lower payment. This sounds good
on the surface, but there are only two ways to get a lower payment – either
lower the interest rate or lengthen the term of the debt. So, you stay in debt
just as long or even longer.
I call it debt CONsolidation because it’s a con. These things rarely help much
on the interest, it keeps you in debt longer and maybe the best reason is that
you can’t borrow your way out of debt. Nearly 90 percent of people who fall
for debt CONsolidation wind up with even more debt because they don’t change
the habits that got them into debt in the first place.
The way to get out of debt is by getting mad and selling stuff. You do a debt
snowball, list your debts smallest to largest, make minimum payments on
everything but the little one and then you attack it with a vengeance. Then you
work your way right down the rest of the list. You will get out of debt faster
doing that, because focused intensity is more important than math when it comes
to getting out of debt.
Go crazy and get some righteous anger going on about it. You’ve got to draw a
line in the sand and determine that you’re never going to do the stupid things
that got you into debt ever again. There is no magic pill. There’s no
microwave approach to this, and that’s what debt CONsolidation pretends to be.
You cannot borrow your way out of debt!
- Dave
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