Debt Consolidation: Learn to live with a debt solution

It's common these days to seek the trappings of success - a high-priced watch, a snazzy sports car, an elegant home - without being able to afford it.

Our society has bankrupted itself by recklessly pursuing wealth on the dangerous road of credit. We buy certain material possessions to make a statement - which, unfortunately, is usually a lie.

Debt consolidation involves taking out a single loan to pay off many others. This is often done to secure (if possible) a lower interest rate, secure a fixed interest rate (if possible). However, the financial area of debt is clouded with more emotion, misunderstanding, and poor teaching than any other area, with the possible exceptions of life insurance. Before starting (on debt consolidation), we need to have a clear understanding of debt:

* Debt is never the real problem; it is only symptomatic of the real problem.

* Debt can be defined many ways. I define it as "any money owed to anyone for anything."

There are five different kinds of debt: (1) credit card debt, (2) consumer debt, (3) mortgage debt, (4) investmen debt, and (5) business debt.

Debt consolidation is usually advisable mostly in theory when you are paying off credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or vehicle can get a much lower rate through a secured loan using their property as collateral - which is a very dangerous decision. The total interest and the total cash flow is then paid towards the debt, which is lowered allowing the debt to be paid off sooner, incurring less interest - in theory.

However, the primary economic danger of debt is that compounding works against you rather than for you. For example, a 30-year mortgage loan on a home at 10% interest rate requires that you pay back over three times the original amount borrowed!

That may be hard for the world to understand, but we know it's true.

Many has turned to a "safety net" way out of their financial problems: debt consolidation. Debt consolidation is usually advisable mostly in theory when you are paying off credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank.

Debtors with property such as a home or vehicle can get a much lower rate through a secured loan using their property as collateral - which is a very dangerous decision. The total interest and the total cash flow is then paid towards the debt, which is lowered allowing the debt to be paid off sooner, incurring less interest - in theory.

However, the primary economic danger of debt is that compounding works against you rather than for you. For example, a 30-year mortgage loan on a home at 10% interest rate requires that you pay back over three times the original amount borrowed! It time to embrace a debt-free lifestyle by first getting rid of your debt.

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.

Action Item:

You can reduce your lifestyle expenses. For instance, make sure you've establish a realistic budget, then follow it. Finally, make yourself accountable to someone spiritually mature to avoid impulse purchases. none of these steps is easy, but you'll discover how beneficial they are for yourself. As soon as you begin to follow them.

Today's Bottom Line

We can reduce our lifestyle expenses by committing to live more simply and trusting Him for our needs.

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