Is Dave Ramsey right about Debt Consolidation Loans?
Dave Ramsey has made a big name for himself by advising people about debt, and it’s no secret that he has said that he does not like debt consolidation. But, is he right to really dislike these loans? The following is a list of some of the most well-known statements that Dave Ramsey has made about debt consolidation loans, and the truth.
Debt consolidation will not help you to get out of debt.
The first thing that happens when you take out a debt consolidation loan is that your existing debts are paid off. They are replaced by a new loan, but that loan has a lower interest rate and better payment terms than your old debt. While you will owe the same amount of principal, you will be in a better position to pay it off after a consolidation.
Debt consolidation will not help you address your financial problems.
It’s true that if you have a problem with overspending and not sticking to a budget, then debt consolidation will not fix your problems. If you are going through a financial rough patch, however, then a debt consolidation loan is a tool that can help you. Sometimes you just need a way to lower your debt payments so that you can get back on your feet and resume your normal life. If that’s you, then a debt consolidation loan can help you.
Most people who use debt consolidation will just get themselves back into debt.
This is one of the most common criticisms of debt consolidation, but it’s important to realize that these loans are tools. It’s up to the person using it to make sure that they are using it to get themselves into a better financial situation. If you choose to take the money you save every month from your new loan and devote it to building up your savings, then a debt consolidation loan can really be the start of a new financial life. On the other hand, if you decide to use the savings to buy things that you really can’t afford, and/or continue to rack up credit card debt then a consolidation loan won’t help you. Ultimately, how you handle debt consolidation is up to you.