The Hidden Truth About Debt Consolidation
You’ve probably heard of debt consolidation. It’s a way to help lower your interest rates and monthly payments by packaging all of your debts into one neat little bundle.
And it can be helpful—if properly structured, consolidation can noticeably lower your interest rate.
But if you’re serious about getting out of debt, it shouldn’t be the only tool in your arsenal. Why? Because debt consolidation doesn’t do anything to attack your balance.
Let’s say you have three debts…
- $3,000 personal loan at 7% interest
- $15,000 car loan at 5% interest
- $8,000 credit card balance at 15% interest
That comes out to a total monthly debt payment of $2,160. That’s a lot of money!
Digging a little deeper..
But what if you consolidate those debts into a single $26,000 loan with a 7% interest rate? Your new monthly payment would be $1,820. Not bad!
Now consider another scenario—what if instead of consolidating your debts, you could slice your total debt burden in half?
Your monthly payment would plummet from $2,160 to $1,080. And because you’re paying less each month, you’d have more money available to put towards building wealth, ASAP.
That’s important because the sooner you start building wealth, the better. The longer your money can grow via compound interest, the wealthier you can become.
So while debt consolidation can be helpful, it shouldn’t be your only strategy for getting out of debt. It’s just one tool in the arsenal.
If you’re not sure where to start with debt, meet with a debt relief specialist. They can point you towards the strategies and relief programs you need to get out of debt—for good.
This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Any examples used in this article are hypothetical. Before taking out a loan, enacting a funding strategy, or setting up debt consolidation, seek the advice of a licensed and qualified financial professional, accountant, debt expert, and/or tax expert to discuss your options.