Hi fellow Lions,

Today I wanted to talk about the allure of some financial products, and how it's actually dangerous!

Debt Consolidation is Bad

I wanted to talk a little bit today about something that I realized a long time ago, and that is the nefarious idea around "debt consolidation".

Living in America and likely some other Western countries, we hear many commercials for debt consolidation services. Credit card debt, student loans, and other forms of debt. The payments can add up and it can really become challenging to get that stuff straightened out. In comes this glorious company to alleviate all your debts!!! They sell it as consolidate it all and make it one monthly payment, you will win!!

The unfortunate reality is that is absolutely not the case. Here is why! When we have debt, as difficult as it is, it's important to have many different sources of that and hopefully small balances. This gives you the best opportunity to pay these debts off, even if the interest rates are a little obscene. If you can pay money to each of the different debts, you have a much greater chance at paying them off. This is because the overall balance with each of them is different but it doesn't add up into a single giant loan amount that you only have the ability to throw monthly payments at.

I was thinking about this the other day because I, like many people in the country, have student loan debt. I've heard countless commercials on TV, the radio and elsewhere about how we can consolidate that debt and have a low monthly payment and get out of debt faster! The trouble is, that is all a complete load of shit that is designed to keep you in debt, not allow you to pay it off!

The way I am slowly paying off my student loan debt is to obviously make the monthly payments but also by working a little bit extra. I take the money that I'm earning from the side job I've got and applying that money directly to one of the loan balances! Because I have a few different loans for the different semesters that I was in college, I have different balances and some are bigger than others, while others are certainly smaller.

The idea I am employing is to take the money that I am earning, save a little bit and also put that directly towards one of the smaller loans. If you can take 50 or 100$ a month extra from the money that we have coming in, and apply it directly to one of those loans above and beyond the normal monthly payment we are contributing, then it knocks down the principle balance you will be paying. This also reduces the interest burden that you are holding, because it's less interest that accrues over the life of the loan.

This is where it ties back into the loan consolidation scam. If I have 27,980$ in student loans and split that up into a few different balances, let's make it easy and do one loan for 10,000, another loan for 11,000, one loan for 3,000, one loan for 2,000 and one loan for 980 and use the principle I was laying out above, if I take money from my check and throw it directly at the 980$ loan every month, and do that for 9 months you can pay that loan off entirely and close that one out. If you had one single consolidated loan balance of 27,980$ you can absolutely pay some extra money towards the loan, but overall you aren't going to be paying off the loan considerably quicker than if you were able to chip away at the individual balances.

This is one of the things that I tried to explain to a family member of mine who was trying to weigh the pros and cons of loan consolidation. Unfortunately I didn't win that argument and they made the mistake of going through with the loan consolidation despite laying out the facts for them. Some people don't see the bigger picture, they only see the propaganda that the companies are feeding them and that was unfortunate indeed.

I know that it's going to take a while to pay off these darn student loans but the good thing is that each time I'm working, I am bringing in not only more money for us as a family but I am able to take money and hit at these damn things directly to pick them off one by one. This will be a really good strategy to employ for many other things in life, so it certainly doesn't only take hold for student loans. Keep these things in mind for other types of debt that we end up accruing in life!

^-CmplXty. _{Real human written content, never AI.}

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