Deep considerations before debt consolidation

Debt consolidation is basically exchanging a number of unsecure loans for a singular secure debt. This is usually done to secure lower fixed interest rates. Debt consolidation is usually advisable for credit card debt, given the fact that credit card debt carries much higher interest rates than most other forms of debt.

Debt consolidation can make a lot of sense since the the interest rate is usually lesser than the cumulative financial charges of the debt that are being consolidated. It is also noteworthy that debt consolidation loans offer lower monthly payments that are spread out over a longer period. So it is wrong for a Christian to consolidate debt? Is debt consolidation the way out? Here are some considerations:

First of all, the root problems of greed and a lack of self-control must be dealt with. There is no point in dealing with the symptomatic issues unless the very root causes are addressed. Debt consolidation will give a false sense of relief since the amount of debt is "manageable". There is then a tendency to stop worrying and spending again.

Secondly, no one should take up a debt consolidation until they have come up with an effective budget and implemented for at least 3 months. This would require self-discipline. This would also mean putting a stop to new loans, especially cerdit card debt. The urge for splurging and overspending must be brought under control.

Lastly, before considering a debt soncolidation, consider NOT taking a debt consolidation. Go directly to the creditors with a schedule for debt repayment and act on it. Start with the high interest debt first. Concentrate on eliminating your debt one by one. One of the keys to repaying debt is to precommit any extra income (by reducing expenses) to debt repayment.

The average American family uses 45 to 75 percent of their household income for a 30-year mortgage to buy a home. Americans and most of the western world live in a debt-ridden society that is now virtually dependent on a constant expansion of credit to keep the economy going. That is certainly not based on God's financial principles. Borrowing is discouraged and, in fact, every biblical reference to it is a negative one. When you borrow, you must repay.

The Bible does show many ways to overcome any financial crisis. Many of these principles are laid out in our successful course, the Scriptural Financial Freedom series. To learn more, you can download the Small Groups kit from our estore.

Today's Bottom Line

Debt consolidation may be beneficial, but the ultimate prize is to be debt free.

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