The Truth About Debt Consolidation


hey guys that welcome to freedom in abudget I am Kelly this is an interesting topic this is all you need to know aboutdebt consolidation is it good is it bad yeah this is an interesting topic thisis a hot topic this is a controversial topic I don’t even know what I’m talkingabout this but it’s important it’s something that we need to talk about soI just want to preface this by saying that I am currently debt-free I do nothave any debt I paid off all of my student loans my car is paid off I don’thave credit cards and I am living cash I spend cash I use my debit card in cashbut I do not believe in debt we will be having a mortgage in a few years but Ido not have any other debt or any debt right now so I’m speaking from this forsomeone that has paid off all their loans has cash flow at a wedding and Idid not use debt consolidation to do it

I know that some people they think thatdebt consolidation is a lifesaver and that’s you know how it got them out ofit but I really want you to know exactly what you’re getting yourself into a lotof people think that it’s just to get out of free jail free card and it’s justthe answer to your prayers well it’s it can be interesting so we’re gonna gothrough some facts we’re gonna go through some hard topics gonna give someexamples of what it means and what what that would mean for you you knowrealistic speaking Liam do you say I have this then let’s let’s break it downand what it’s gonna cost number one in debt consolidation is a refinance loanwith extended payment terms what does that mean you are extending the lengthof your debt yeah that’s that’s kind of hard to swallow so many people are likeoh we’re just we’re you seeing an interest but do you realize you’repaying more down the road later on years more later on number two a lowerinterest rate is not always guaranteed when you consolidate that is a hugemisconception everyone thinks that like ohreconsolidation lower interest rate not always you have to really really becareful debt consolidation is not debt elimination that is a huge misconceptionand finally debt consolidation is different from debt settlementboth can scam you out of thousands of dollars thousands all right so let’sbreak this down a bit so debt consolidation insurance rates don’talways see the same a lot of times they’re into a introductory interestrates so you are signing on at 6% interest where before you’re paying 15yeah that may sound great but

it may be just for a year and after that year thatis gonna spike back up so you have to be really careful that if you do do thisthat it is a constant interest rate and not just for introductory period areally big big misconception with debt consolidation is your money behaviordoesn’t change and this is a big thing a lot of people they’ll consolidate theirdebt and though they’ll see it is this huge win I just you know got rid of allof this and I lowered my interest rate in all of this but then they go rightback in their habits it’s not the big wins that you get when you pay off aloan when you pay off a loan I paid off my student loans when you pay off a loanyou get that high that this is awesome I want to keep fighting I want to do thisand this and this and this and you’re really just in the game when you pay offa or when you consult your debt a lot of times you pounds up but you haven’t doneanything then you’re gonna go right back to your old habits you have to be reallyreally careful that you’re not getting into that trap and that bad mindset ifI’m just going along and then you’re gonna get right back in there and takeon more debt all right so here is a scenario for you that

I’m gonna read andit’s kinda opening like really eye-opening I was a little scared when Iread it so it says let’s say you have $30,000 of unsecured debt this debtincludes two loans for $10,000 at 12% interest in a four-year loan for $20,000at 10% interest your monthly debt payment for the first loan is fivehundred $17 and the payment for the second loan is $583 you consult acompany that promises you to lower your payments to six hundred forty dollars amonth and your interest rate is only nine percent that’s awesome right I’mcutting my payments my interest rate is lower this is great guys why isn’teveryone signing up why I don’t get it well soyou’re interested 9% by negotiating with your creditors and rolling your twoloans together into one sounds great doesn’t itwho wouldn’t want to pay 406 dollars less per month and payments yeah here’sthe downside you’re adding six years to your loan yeah you don’t realize thatwhen you consolidate and when you combine those loans you’re almost takingon a whole new term so before you only had two years to pay this off now you’reat six years so in the end your would pay more money if that’s not bad enoughyou’ll end up shedding out forty six thousand and eighty dollars to pay off anew loan versus forty thousand three hundred ninety two dollars so you sawyou’re paying less

because your monthly payments were worth less but you reallypay more because of the interest rate in the in the six years versus the twoyears for the original ined even though the interest rate was ninepercent and now you’re paying six percent you are paying five thousand sixhundred eighty eight dollars more sounds like a ripoff to me so guys if you hadto be so careful I really want you to be educated I want you to know I don’t wantyou just to jump into it without during your research without doing yourhomework without saying is this gonna cost me more in the long run do the mathrun the numbers make sure you’re looking at all the fine print what’s theinterest rate is it going up over time how long is it extending the loans forthose are really important questions to ask really important so I just want togive you all of the facts let me know if you have any questions starting thediscussion down in the comments I’d love to hear from you guys I’d love to goback and forth for you guys and it’s it’s an interesting topic so and we’lltalk to you guys later bye


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