I feel the same way about debt consolidation as I feel about payday loan companies… ew! Debt consolidation is a tool that many uses in an attempt to pay off debt quickly. When advertised, the debt consolidation companies promise smaller monthly payments, quicker debt pay-off and even loan forgiveness in some cases. As a former debt consolidation queen, I’m here to tell you, do not buy into the hype. It is not all that it’s cracked up to be and it is not the quick fix that you’re looking for.
At my peak of going into copious amounts of debt, I loved me some debt consolidation. I never used one of those companies that we all see the ads for all the time. I would just take out more student loan funds than my actual tuition bill and then would use the excess to pay off credit cards. The thought of it makes me a bit nauseous. You know what I was actually doing? I was using debt to pay for debt and then go further into debt. Because the thing is, I wouldn’t cut those credit cards up and stop using them. No!!! I would continue to use them and continue to max them out. Why? Because my spending habits didn’t change. That my friend is key.
For obvious reasons, I never have and never will suggest debt consolidation to anyone. Period. It’s just not a good idea. Debt consolidation may lower your monthly payments but that in turn lengthens the time it will take for you to pay off your debt. It may free up some cash flow for you monthly, but unless you change your spending habits, you’ll likely go further into debt like I did.
Also, some of those companies claim to have the ability to forgive your loans if you utilize their services. As a rule of thumb, if it sounds too good to be true, it probably is. Loan forgiveness is not a thing and never will be. You agreed to the debt when you took out the loan or swiped your card. It is your responsibility to pay for it. It’s time to adult up and stop looking for quick and easy fixes. I know those ads are romanticized and from the naked eye, it looks like a great option. But the benefit is temporary at best but most likely false. Unless you do the hard work now, you’ll have a tough time of breaking the cycle of financial stress.
So what can you do instead of debt consolidation? The first step, you’ve got to get a budget in place. I know I harp on this all the time but a budget was the number one tool we utilized to pay off our mountain of debt. My friend Sami (yes, we have the same name!) from over at A Sunny Side Up Life created an incredible course that teaches you how to budget. I’m in the middle of taking Your Sunny Money Method myself and it is perfect for non-budgeters, new budgeters or long-time budgeters alike. I am so excited for this course and the folks it’s going to help! Sami created an incredible learning opportunity and you can snag it for 15% off today! Head on over and sign up!
Remember what I said earlier about changing your spending habits?! That’s exactly what a budget will help you do! When you set a budget you’re actually giving yourself permission to spend. You’re setting boundaries with yourself as to what your financial situation can actually handle. A budget isn’t to force you to never have fun or to be miserable. Once you really learn how to do it and start using it as a tool, a budget can actually be freeing and help you to spend on things that are important to you. You’ll end up enjoying your purchases more knowing that they are paid in full and not sitting on your credit card bill. Also, if you subscribe to my blog, I’ll email you my budget templates for FREE! Now you have no excuses!
In addition to budgeting, consider getting a side hustle! I know people who deliver pizza, drive for Uber, blog, sell makeup, or work for a local craft store… The sky is the limit. Really think about something you could enjoy doing and see if you could make some extra money at it. Increasing your income and intentionally using that extra income to pay off debt if a great way to avoid debt consolidation and get yourself out of debt in the process.
If you’re like millions in the U.S. and have student loan debt, you should consider refinancing. Toward the end of our debt payoff, I was tired of dealing with my loan servicer (I had federal loans like millions of others). I decided to refinance my student loans and after doing some research I stumbled upon a company called LendEDU. LendEDU is a marketplace for student loan refinancing and their rates are killer!! You don’t have to pay anything to see what rates they can offer for your student loan refinance. It is a ridiculously easy process and one that could save you thousands. Check them out by clicking the banner below.
Just a note… I did not end up refinancing. Due to the amount I owed, LendEDU couldn’t really save me much so they gave me that feedback. They didn’t just take on my loans to gain a new account, they really evaluated my situation and made a decision from there. I felt a lot better about where my loans were and my plan to pay them off. But I wouldn’t have known unless I gave them a shot!
A few things about student loan refinancing… Never combine student loans with your spouse. Student loan debt is non-transferrable upon death unless your name is on it. So keep those bad boys separate. It’s better to be safe than sorry. Also, if you refinance your student loans and save a few hundred bucks a month, DO NOT USE THAT MONEY FOR ANYTHING OTHER THAN DEBT!! You will not pay off debt quicker if you take that money and go on a shopping spree. Throw it to principle only payments toward your debt and you’ll be on track to pay that junk of fast!
If you’ve already sought the services of a debt consolidation company, you can still use these methods to get that debt paid off quickly. Don’t beat yourself up, those marketing ploys work for a reason! If you’ve been considering debt consolidation, I cannot stress enough, do not do it! Hunker down, set a budget, get to work and pay that junk off on your own. The debt consolidation will not work out the way you’re hoping.
Until next time, spend safely!
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