Is a Debt Consolidation Loan best for you?

Is getting a Debt Consolidation loan a good way to start the process for eliminating your debt obligations?

With the wave of mortgage refinance hitting a peak a few years ago, this is not as much of an issue as it once was.

Many people are still in a position from an equity perspective (in other words, they still have equity in their homes) to put themselves in a better position from a cash flow perspective. (By consolidating their debt.)

The question is, “When is it good to do this”?

 Well, quick frankly there are a lot of times when it is NOT good.

Most people that refinanced over the past few years, did NOT use the money that they were saving wisely.

Let me give you an example.

Say you refinanced some debt and were able to cut your monthly outgo/loan payments by $450.

You consolidated some Credit card debt, maybe a car loan, etc.

Now, what did you do with the extra $450 per month? (assuming that you were making the payments on the other loan obligations before the refinance. Obvisouly, some people refinance bad debt that they weren’t making there monthly payments on.)

SOO- what did you do with the extra $450?

 A large portion of the people—

—Went right back out and FINANCED OTHER CONSUMER ITEMS!!!

To put themselves right back in the same hole again.

THIS is where the “proper allocation of capital” comes in that we will be speaking of in the future.

Obviously, there ARE bad loans but most of the time it is “poor management of money” after the refinance.

More on this topic later..

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