Debt Consolidation
For those who are looking to consolidate debt, this is “Must read” material. If you get debt consolidation wrong, it can cost you a small fortune and set you back many years on your financial development.

Consolidation of debt is a process of pulling multiple consumer debts into a single loan. When evaluating any finance deal you need consider 3 things.

Repayment amount (mostly determined by rate)
Loan term
Total cost of finance

Have you ever heard, “Consolidate and free up cash” or “We consolidated and saved $850 a month”. Sounds good, right? Cash flow is important (repayments), but the considerations of loan term and total cost of finance, are often overlooked. If you consolidate consumer debts with your home loan, to free up cash, you could easily add over $100,000 in payments during the term of finance. Further to this, many get caught up with costly or inflexible loans, because all that is considered is saving $850 per month.

Whenever you consolidate and free up cash, what you decide to do with the cash is an extremely important decision, and one that will affect the rest of your financial life.

Many finance products and structures, lead to low levels of financial control, which is exactly what you don't want after freeing up cash. The lender has their loan and you are now on you own. If you spend the additional cash for personal use (non investment or debt reduction use), all that you have done is increased your financial obligations, ensured a poorer retirement and will generate more profit for the lender over time. If you don't have a plan, not only have you committed an additional $100,000+ of your future earnings, you are at risk of the spiral starting again.