Lie #14: Debt Consolidation will save you interest and you will have just one small payment.
This does nothing but con you into believing that you have done something about your debt problems. The debit is still there. The behaviors that got you into the mess are still there. You just moved it.
People in the debt-consolidation business estimate that 78 percent of someone who consolidates their credit-card debt grows it back. Why? Because there is no plan to pay cash or quit buying, no plan to save for emergencies or live within their means. The problem is still there.
This con job is sold to you by claiming they reduced your interest rate and therefore your payments. That may be true, but they also extended the time it takes for you to pay it, so the lender ends up with about the same amount of profit. They win. You lose.
Lie #15: Borrowing 125 percent on my home is great because you'll restructure your debt.
Sure, it sounds great to take out a second mortgage, equity loan, or line of credit against your home and pay off those high interest credit cards. But remember that economics runs in cycles and what goes up must come down. People lose jobs and have to move to other parts of the country to find employment or the current employer transfers them.
There are currently thousands of people facing foreclosure, because they believed this bandwagon. They suddenly find themselves in a situation where they have to sell their home and they own a lot more on it than it can be sold for. They are probably going to have to take a loan to pay off the second mortgage and being paying for years on a house they no longer own. It is not exactly a wise move to tie your assets up like that.
Lie #16: Our economy would collapse if no one used debt.
The only people that would suffer would be the banks and lenders. Well, I had better clarify that statement. If every single American stopped using debit within one year, then yes, the economy would collapse. But if every single American stopped using debt of any kind over the next fifty years, the economy would prosper beyond anything we can imagine.
If you would take the billions of dollars that are spent each year in this country paying just interest, the economy would be much more stable, savings and investment would ensure people had retirement funds, giving to charities would soar, taxes could come down, and we would no longer need the government screwing things up by trying to take 'care' of us.