Welcome to My Finance Coach.

This week's question is:

Q: Should I CONsolidate my debt into a home equity loan or go to a Debt Consolidation company to reduce my payments?

I will answer this question in two parts.

A1: If you CONsolidate your debt into a home equity loan you have not changed anything except a little interest, a longer term, and now that Big Mac you purchased at Mickey Dees on your credit card will take 30 years to payoff. Some people say that Debt CONsolidation saves interest, and you have one smaller payment. This may be true but you have a longer term and consequently you pay more interest over the long haul.

Debt CONsolidation is dangerous because you treat only the symptom.

Debt CONsolidation is nothing more than a "CON" because you think you've done something about the debt problem. The debt is still there, as are the habits that caused it - you just moved it!

You can't borrow your way out of debt. You can't get out of a hole by digging out the bottom.True debt help is not quick or easy. True debt help is not a microwave oven rather a slow cooker.

Larry Burkett, noted financial author, says, "Debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving."

At " My Finance Coach" I will not recommend debt CONsolidation for a client. The reason that I do not use debt CONsolidation is because it doesn't work.

A2: Debt CONsolidation through a Debt service as advertised on radio and TV is a bigger CON. The first problem is as soon as you use their service your credit is looked at as if you had filed for bankruptcy. The second problem is having someone else making your payments and negotiating deals with the creditors and you just handing your money over to the CONsolidation company. (How do you think these CONsolidation companies make their money for all that advertising)? Also many of these companies have fallen way short of their promises (example AmeriDebt).

Debt CONsolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case we review, we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, BUT if you stay in debt longer, you pay the lender more, which is why they are in the debt CONsolidation business.

Anyone can become debt free. Debt reduction is plain common sense. True debt reduction is 20 percent knowledge and 80 percent behavior. If you're going to get out of debt, you need to get: tired of doing the same thing over and over and getting the same results, you need to get sick and tired of being sick and tired; you need to want to make a change in your behavior, get mad at your debt. You do not need Debt CONsolidation.

One step to financial freedom is: To quit buying things you don't need, with money you don't have, to impress people you don't particularly like.

Debt CONsolidation is a CON; it leads you to think you have paid off all debt when all you've done is move it to a new location. Nothing has been done to change the behavior and habits that got you into this mess. Studies show that the over 80% of people that try Debt CONsolidation are back in debt within 2 years, most of the time for more than they owed the first time.

For more information you can contact Randy Christ at:

www.myfinancecoach.com

Email: myfinancecoach@adelphia.net

Phone (772) 224-6880