These Deleveraging Strategies Are Bad Ideas

David Ramsey

Dear Dave,

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?


Dear Brant,

No. These are all bad ideas when it comes to getting out of debt. There’s a lot of buzz these days around all the “quick” and “easy” ways to clean. debtand 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 crummy outfits will charge you a fee and then promise to bargain 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. On top of that, you risk losing your lodge if you can’t pay it back in 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

David Ramsey is a seven-time national bestselling author, personal finance expert and host of The Ramsey Show, listened to by more than 18 million listeners each week. He appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business and many more. Since 1992, Dave has been helping people regain control of their money, build wealth and improve their lives. He is also CEO of Ramsey Solutions.

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