And lets be honest, you can make a lot better use of the money you save than your lender can.For instance, how much better off would we be if all that extra student loan interest money went instead to charities that help those hit by disaster such as Superstorm Sandy or this week’s Boston Marathon attack.Under a 10 year consolidation, the interest expense would be close, but can still cost you more while not lowering your monthly payments.But if you are taken in by the allure of a lower monthly payment and talked into a 20 year consolidation, you’ll pay drastically more in interest in the long run.If you’re considering consolidating your loans, here are some downsides you should be aware of.#1 Increased Interest Payments – When federal student loans are consolidated, the interest rates are weighted according to loan balances and then rounded up by one-eighth of a percent.What happens thus is that you will be effectively paying a lower interest rate on what were higher interest loans and vice versa.
See the two consolidation scenarios we’ve plotted below. Financial coaching is the most detailed and comprehensive service we offer.Our coaches will help you develop a plan specific to your financial situation.Overeating causes weight gain – first focus on eating habits.How can you get out of debt AND not waste a ton of money on interest? Watch out for the gotchas, because you don’t want to do this. Let’s say you had six credit cards with balances: A debt consolidator would take all six balances and create a monthly payment for you that is lower than all of the minimum monthly payments combined. On the surface it sounds great because they promise to: get all these things if you consolidate your debt.FPU offers weekly accountability and encouragement in addition to lessons on budgeting, debt elimination, investing, insurance and giving.We have a small team of in-house coaches who work directly for Dave.We also have a network of coaches across the country who have been trained by our team but are independent business owners.All of our coaches will give you financial guidance based on the principles Dave teaches.What happens when the bills are starting to get behind? You get the lower monthly payment by spreading out your payments over a longer time. Debt consolidation is bad for your wallet because of the added expenses it creates. Consider a couple where one of them lost their job.I don’t recommend debt consolidation, but I do recommend consolidating student loans.