Dave Ramsey says he’ll tell you the truth about debt consolidation. The process doesn’t work. Debt isn’t the problem. It’s the symptom. The only way you can resolve your debt is to change your habits. And he’s right. Most of us get into debt for one reason. We spend without discipline, generally using high interest-rate credit cards.

Debt Consolidation Takes Longer and Costs More

Here’s the scenario Ramsey sketched out in his article. You go into a debt consolidation agency with $30,000 in unsecured debt that is comprised of two loans, $10,000 at 12 percent and $20,000 at 10 percent. The terms on the loans are two and four years respectively. Every month you’re shelling out $1,100 in payments and you don’t make enough to do that and live.

So, the consolidation agency says they’ll negotiate with your creditors and get your payment down to $640 a month at 9 percent. You walk out with $460 more money a month in your pocket. Ramsey says what the company doesn’t tell you is that you will now need six years to resolve your debt and that you will pay $46,080 to do it, as opposed to the original $40,392.

Debt Consolidation Companies Aren’t’ Charitable Entities

In big bold letters he says, “They make money off of you.” Well, of course they do. No one ever said loan consolidations were charitable entities. They’re in business to make a profit, and yes, you’re going to pay more for a longer period to erase your debt. And, in the meantime, you’ll eat. There’s nothing to stop you from paying more in a given month and thus resolve the debt faster. That’s what Ramsey doesn’t tell you.

He is quite right that a lack of discipline gets people into debt and that cultivating disciple gets you out. What he doesn’t point out is that most people need time to make the necessary changes to re-direct their lives, to get into a higher paying position, to live on less, and to claw their way out of the hole. Debt consolidation buys time.

Use Debt Consolidation as a Tool

When people really get into trouble with debt consolidation is when they go into the process with the same cavalier attitude that created their money problems in the first place. Never sign on the dotted line until you understand every aspect of the consolidation deal — including how much additional interest you will pay and how long you will have to work to resolve your loans.

In a way, Ramsey is almost being insulting when he suggests that people go through debt consolidation and believe the debt just disappears. Rolling all your debt into one lump sum at a lower interest rate with a single payment isn’t making debt disappear. It is managing the debt in the short term.

Yes, you can simply follow the terms of the deal, pay the extra interest, and let the time bleed out until the debt is resolved. You can also get proactive, take advantage of the decreased pressure in your life, and use the additional money in your pocket to make the very changes that will put more money in your pocket.

How Much Faster Can You Resolve the Debt?

One vital question you need to ask the loan consolidation counselor is, “How much faster will my debt be resolved if I pay X percent more each month?” Make that your goal. Know what it will take to reduce your debt faster and work toward that next level. And then when you get there, call the company up and ask the same question again.

Ramsey does indeed reveal the hard truth about debt consolidation, but he isn’t exploring the fact that debt consolidation is a tool. And, like most tools, if it is used intelligently and well, it can accomplish more than one task. Use the process to buy time and then do exactly what Ramsey says, get disciplined and get debt free.