Is Debt Consolidation A Good Idea?
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Many people debate the question is debt consolidation a good idea, as this question will be one that many people may ask as they struggle with bills and payments each month. The process of consolidating debts allows the debtor to take all loans and other similar obligations and basically sale them to a lender who will repay the balance on these loans. The debtor will then have one single payment and interest rate to pay to that lender. Determining when and if this service and process should be considered will take much thought on the part of the consumer. The personal and financial needs of the individual must be taken into consideration before making any major financial decisions.
First, the consumer needs to understand just what debt consolidation consists of. Typically, a consolidation loan pays off all or most of the consumers existing financial obligations leaving them with just one monthly payment. Ideally, this payment is lower than what the individual was paying for all of the other loans, because the interest rate is lower and the length of the loan is longer. If a person has a lot of high-interest credit card debts, the answer to "Is debt consolidation a good idea?" is usually "Yes."
One of the biggest problems with this plan is not so much with the loan itself, but with the deceptive feeling of freedom that comes from having "paid off" all those loans. Instead of changing their spending habits and working extra hard to pay down the one consolidated loan, many people simply start the cycle all over again. They open another credit card account, finance another car, charge another vacation, etc., and dig themselves even further into more debt. So, is debt consolidation a good idea? Not if the consumer does not simultaneously address the spending issues that got them into the position of owing a great deal of money in the first place.
If a consumer calls or speaks with a banker or other lender and asks, "Is debt consolidation a good idea?" the individual must be aware that some representatives work on a commission basis. Such representatives may be motivated more by their potential profits than the consumers financial well-being. Proverbs 1:5 says to seek godly counsel, "A wise man will hear, and will increase learning; and a man of understanding shall attain unto wise counsels." With this in mind, perhaps the best course of action is to discuss the situation with a respected, Bible-believing Christian for help and understanding in this issue.
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