Why or Why Not Consolidate

why or why not consolidate

In full transparency, and to document our debt-free journey, I will explain our credit card consolidation loan.

Related: Our Debt-Free Journey Coming Out Letter

Why We Consolidated Our Credit Card Debt

Before we started our Total Money Makeover with Dave Ramsey, we combined all of our credit card debt into one big debt with Lending Club. In May 2016, (again, before we re-committed to the Baby Steps), we decided to consolidate our credit card debt because we intentionally wanted to be forced to pay off all our credit cards within a certain time frame (it was a 3 year loan for $40,000 at a 16.9% interest rate, with payments of $1.412.02 per month). When we weren’t forced, we just made minimum payments to each card and who knows when we would’ve paid them all off! The credit card payments were with us so long they were like our pets.

We combined about 5 card balances from American Express (the bulk of the $40K credit card debt), his & hers Best Buy cards, a Sam’s Club card, and a Synchrony card.

Refinancing Our Consolidation Loan

This May (on 5/26/17) we refinanced our big credit card consolidation loan from Lending Club with our new credit union. There were no transfer fees and the new interest rate went down to 9.99%, with a new monthly payment of $1,288 for 24 months. This debt is the current focus in our debt snowball. We hope to have this paid off early, by March 2018!

Dave Ramsey’s Take on Debt Consolidation

Mr. Ramsey doesn’t believe in debt consolidation because it doesn’t change your behavior with money that got you in debt in the first place. Debt consolidation is basically moving money from your right hand to your left hand. Debt consolidation doesn’t solve the problem of debt, because the debt is still there. Consolidating doesn’t change your “bad” money habits. Without changing your relationship with money, or solving your overspending problem, there’s essentially no point in consolidating. Debt consolidation only works if you actually pay off your debt.

When we first consolidated our debt over a year ago (May 2016), we promised we’d never rack up more credit card debt. We promised that if we used cards, that we would pay them off in full each month. Guess what? We lied to ourselves and continued to use our cards, rolling balances over from one month to the next.

Finally, this March (on 3/11/17), we re-committed to Dave Ramsey’s Baby Steps, shredded our credit cards, closed all the accounts, and banned credit cards from our lives. Cutting credit cards from our lives has been the ultimate game changer in taking control of our finances, aside from getting on a budget. We tried getting out of debt using a plan that involved credit cards, but we quickly discovered Dave’s plan was the best way for us.

RelatedHow We’ve Paid Off $14,076.71 in 3 Months

Status Update

As of today (7/24/17), we have paid $22,082.30 of the $40,000 credit card debt. That means we are 55.2% complete in paying off our credit cards. We’re over half way to being credit card debt free!

Question: Would you consolidate your credit card debt, or other debt, knowing Dave Ramsey’s stance?

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