It is easy to see debt consolidation as a cure all for your financial woes. A lot of people start looking at debt consolidation once their finances get tight and they are unable to afford to go to the movies as much as they would like.
While it might be tempting to roll a bunch of small loans into a larger loan with a smaller payment, it really isn’t worth it if you can help it. For example: If you take a $2500 loan on your car, a $5,000 loan on your credit card, and a $2,000 store loan, you might be able to combine these into on $9,500 loan with a very low payment spread over 30 years.
While you might have a lower payment, you’ll pay far more over time, than if you just buckle down and pay them off quickly. You don’t want to be paying on your car for 30 years. You car will not last that long. Any time you are paying for something that has long ago become useless, you are putting yourself in a bad financial position. That is why most car loans are for 5 years or less–cars don’t last forever.
If you are considering debt consolidation for several small loans, take some time to see if you can pay them off simply by cutting out unnecessary expenses. In the long you’ll be far better off–even if it means you skill eating out and going to the movies in order to pay off your current debts. If you consolidate, you are basically trading your financial freedom for the rest of your life in order to make things a little easier for you today. Bite the bullet and pay off those loans. Don’t try to drag them out over the next 30 years!
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