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Should Dave Ramsey’s warning scare you away from debt consolidation? 

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If you’re paying off credit cards or other consumer debt, you might be interested in whether debt consolidation could help you do it faster.

Debt consolidation is exactly what it sounds like: You consolidate or group multiple debts into one bigger new loan. Typically, you use a personal loan or a balance transfer credit card to do that. You pay off existing lenders with the personal loan proceeds or by transferring balances to a newly opened card with a special 0% interest rate for a limited time.

If you can reduce your interest rate and the number of monthly payments you make, consolidation can lower total payoff costs and simplify your life. But finance expert Dave Ramsey isn’t a fan of this approach and he actually believes it could leave you in debt for longer. Here’s why.

Ramsey has a big warning about consolidating your debt

Ramsey explained on Facebook that debt consolidation may seem advantageous on the surface, but it doesn’t really work if your goal is to become debt-free ASAP.

And he went on to detail why he thinks refinancing and combining your existing loans into a new one could be a bad idea for you over the long-term if you’re looking for the best ways to pay off your creditors.

“This sounds like a good idea until you discover the lifespan of your loans extend, meaning you’ll stay in debt longer,” Ramsey said, discussing debt consolidation.

Instead of using this method, Ramsey recommends the debt snowball instead. That’s an approach where you focus on repaying loans in order starting with paying extra on the debt with the lowest balance and working your way up to the loans you owe the most on.

Ramsey believes the debt snowball is the best way to become debt-free fast since you’re going to be motivated to keep going with making extra payments as you repay each debt you owe and see real progress by retiring the debt.

Should you listen to Ramsey’s advice?

Ramsey’s warning about this big risk of debt consolidation is worth listening to. If you make your loan payoff time longer, your loan can obviously take more time to pay off — and it can become much costlier since you pay interest for a longer period.

But rather than opting for Ramsey’s solution — which could potentially leave you paying on high-interest debts for a very long time if they have a large balance — you should instead think about how you can be smarter about debt consolidation.

The reality is, consolidating debts doesn’t have to extend your payment time. You can choose a personal loan or balance transfer with a shorter repayment timeline than the loans you currently have (as long as you can afford higher payments that would likely result). Or you can get a consolidation loan and pay extra on it to pay it off ahead of schedule.

Debt consolidation is actually a really good idea in many cases, so you should listen to the smart aspects of Ramsey’s advice about the risk of an extended payoff timeline and embrace your own solution — a consolidation loan you still pay off quickly — instead of swearing off this debt payoff method for good.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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