Debt Consolidation

Debt Consolidation is when you get a new loan and that new loan combined some loans you already had together.  Usually it is done because the cost and/or terms are better overall than what you are getting on the old loans.  It can save you interest at times. It can also make the repayment period longer so your monthly payment is lower.  Or, it can do various other things. The bottom line though is that all you are really doing is bringing all your loans together, it’s like a loan potluck.

The issue I have with any debt movement is that you are treating the math side of the equation usually but not treating the issue that caused you to get the debt to begin with.  Are you consolidating consumer debt that was accumulated due to overspending? If so, take a close look at your budget and make sure you are now living below your means. Are you consolidating debt before you have reached out to the places that you have the original loans with?  They may be willing to modify your loan terms and that could have the same net effect as consolidation. All that being said, my preference is that you instead focus on paying off all of your debt as soon as humanly possible to reach your Financial Independence.

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