Deleveraging strategies are bad ideas | Business

I’ve seen a lot of ads lately for debt consolidation companies, debt settlement companies and HELOC. Are any of these methods for reducing debt a good idea?

No. These are all bad ideas when it comes to getting out of debt. There’s a lot of noise these days about all the ‘quick’ and ‘easy’ ways to clean up debt and take control of your finances. But the truth is that neither is ever easy. If something sounds too good to be true, it probably is.

Debt consolidation is basically a loan that consolidates all your debts into one payment. Sounds like a great idea at first, right? But then you discover that the life of your loans increases, which means that you will remain in debt even longer than before. The low interest rate that seems so attractive at first also increases over time. Extending the length of time you pay off your debts, on top of adding interest, is just plain stupid.

Debt settlement companies are terrible. These seedy outfits will charge you a fee and then promise to negotiate with your creditors to reduce what you owe. In most cases, they take your money up front, do a poor job of “negotiating” your debt, and leave you responsible for what’s left.

A home equity line of credit (HELOC) is also a bad idea. With a HELOC, you borrow against your home. Plus, you risk losing your home if you can’t pay it off on time. All of these plans are really just gimmicks that only treat the symptoms of your money problems. They never help you solve the root problem of why you landed there in the first place. Personal finance is still 80% behavior and 20% head knowledge. You must change your behavior if you want to have a positive and lasting impact on your finances!

Dave Ramsey is America’s trusted voice on money and business, and CEO of Ramsey Solutions. He is the author of seven best-selling books. The Dave Ramsey Show is heard by over 11 million listeners each week on over 550 radio stations and digital outlets. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

Dave Ramsey is America’s trusted voice on money and business, and CEO of Ramsey Solutions. He is the author of seven best-selling books. The Dave Ramsey Show is heard by over 11 million listeners each week on over 550 radio stations and digital outlets. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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