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April 9th, 2010
11:24 AM ET

To Consolidate or Not to Consolidate: Debt is the Question

I've heard it said that debt is not the problem but rather the symptom. Overspending and under-saving is usually the real problem. I'm convinced that debt consolidation can work, but it must be accompanied with a mindset change. Sure you can find a company willing to give you one big loan that will pay off all your smaller high interest rate loans, but can you make that one payment? Have you changed your spending habits? Are you actually saving some money now for the "inevitable emergency?"

Debt consolidation can seem appealing because there is a lower interest rate on some of your debt, thus a lower payment. You have to watch out for the old "shell game" that many consolidation companies play. Often instead of giving you a lower consolidated rate, many companies just extend the time you have to repay the debt. This method does give you a lower payment, but ultimately keeps you in debt much longer.

The truth is debt consolidation can work if the plan is right, if you are educated about your options and determined to change your money mindset. If none of these things are altered, you are basically throwing your hands up to say, "I can't handle my responsibility, so I give it to you to place a band-aid on my gaping wound in hopes that it will stop the bleeding." Change your mind, change your life.

Look for Clyde Anderson's Home School segments in the 7am ET hour of CNN Saturday Morning with TJ Holmes.

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soundoff (2 Responses)
  1. Carl

    If you consolidate and never change your spending habits then you are doomed to create even more debt. Restrain yourself and change your lifestyle first. Financial Guru Jonathon Pond always says, "Live BELOW your means".

    April 9, 2010 at 2:57 pm |
  2. K.I.M.

    I love the idea od consolidation, it gives you an opportunity to sort of start over. With all the debt rolled into one account, it does not seem so bad and it helps to prevent anything from falling through the cracks. I also, agree there has to be a mindset change as well. One cannot forget and start spending are creating new debt just because they only have this one major bill to pay each month. We have to began to make better choices with our finances, so that our children will have a future.

    April 12, 2010 at 7:01 am |