hey guys that welcome to freedom in a
budget I am Kelly this is an interesting topic this is all you need to know about
debt consolidation is it good is it bad yeah this is an interesting topic this
is a hot topic this is a controversial topic I don’t even know what I’m talking
about this but it’s important it’s something that we need to talk about so
I just want to preface this by saying that I am currently debt-free I do not
have any debt I paid off all of my student loans my car is paid off I don’t
have credit cards and I am living cash I spend cash I use my debit card in cash
but I do not believe in debt we will be having a mortgage in a few years but I
do not have any other debt or any debt right now so I’m speaking from this for
someone that has paid off all their loans has cash flow at a wedding and I
did not use debt consolidation to do it I know that some people they think that
debt consolidation is a lifesaver and that’s you know how it got them out of
it but I really want you to know exactly what you’re getting yourself into a lot
of people think that it’s just to get out of free jail free card and it’s just
the answer to your prayers well it’s it can be interesting so we’re gonna go
through some facts we’re gonna go through some hard topics gonna give some
examples of what it means and what what that would mean for you you know
realistic speaking Liam do you say I have this then let’s let’s break it down
and what it’s gonna cost number one in debt consolidation is a refinance loan
with extended payment terms what does that mean you are extending the length
of your debt yeah that’s that’s kind of hard to swallow so many people are like
oh we’re just we’re you seeing an interest but do you realize you’re
paying more down the road later on years more later on number two a lower
interest rate is not always guaranteed when you consolidate that is a huge
misconception everyone thinks that like oh
reconsolidation lower interest rate not always you have to really really be
careful debt consolidation is not debt elimination that is a huge misconception
and finally debt consolidation is different from debt settlement
both can scam you out of thousands of dollars thousands all right so let’s
break this down a bit so debt consolidation insurance rates don’t
always see the same a lot of times they’re into a introductory interest
rates so you are signing on at 6% interest where before you’re paying 15
yeah that may sound great but it may be just for a year and after that year that
is gonna spike back up so you have to be really careful that if you do do this
that it is a constant interest rate and not just for introductory period a
really big big misconception with debt consolidation is your money behavior
doesn’t change and this is a big thing a lot of people they’ll consolidate their
debt and though they’ll see it is this huge win I just you know got rid of all
of this and I lowered my interest rate in all of this but then they go right
back in their habits it’s not the big wins that you get when you pay off a
loan when you pay off a loan I paid off my student loans when you pay off a loan
you get that high that this is awesome I want to keep fighting I want to do this
and this and this and this and you’re really just in the game when you pay off
a or when you consult your debt a lot of times you pounds up but you haven’t done
anything then you’re gonna go right back to your old habits you have to be really
really careful that you’re not getting into that trap and that bad mindset if
I’m just going along and then you’re gonna get right back in there and take
on more debt all right so here is a scenario for you that I’m gonna read and
it’s kinda opening like really eye-opening I was a little scared when I
read it so it says let’s say you have $30,000 of unsecured debt this debt
includes two loans for $10,000 at 12% interest in a four-year loan for $20,000
at 10% interest your monthly debt payment for the first loan is five
hundred $17 and the payment for the second loan is $583 you consult a
company that promises you to lower your payments to six hundred forty dollars a
month and your interest rate is only nine percent that’s awesome right I’m
cutting my payments my interest rate is lower this is great guys why isn’t
everyone signing up why I don’t get it well so
you’re interested 9% by negotiating with your creditors and rolling your two
loans together into one sounds great doesn’t it
who wouldn’t want to pay 406 dollars less per month and payments yeah here’s
the downside you’re adding six years to your loan yeah you don’t realize that
when you consolidate and when you combine those loans you’re almost taking
on a whole new term so before you only had two years to pay this off now you’re
at six years so in the end your would pay more money if that’s not bad enough
you’ll end up shedding out forty six thousand and eighty dollars to pay off a
new loan versus forty thousand three hundred ninety two dollars so you saw
you’re paying less because your monthly payments were worth less but you really
pay more because of the interest rate in the in the six years versus the two
years for the original ined even though the interest rate was nine
percent and now you’re paying six percent you are paying five thousand six
hundred eighty eight dollars more sounds like a ripoff to me so guys if you had
to be so careful I really want you to be educated I want you to know I don’t want
you just to jump into it without during your research without doing your
homework without saying is this gonna cost me more in the long run do the math
run the numbers make sure you’re looking at all the fine print what’s the
interest rate is it going up over time how long is it extending the loans for
those are really important questions to ask really important so I just want to
give you all of the facts let me know if you have any questions starting the
discussion down in the comments I’d love to hear from you guys I’d love to go
back and forth for you guys and it’s it’s an interesting topic so and we’ll
talk to you guys later bye