Debt Consolidation: Is it Right for You?
Are you trying to eliminate debt and dig yourself out of a financial hole that seems to be getting deeper every day? If you’re struggling with repaying your debt, you are not alone. Debt can range from credit cards and student loans to medical expenses and more. Taking control of your personal finances can set yourself on a positive path to financial wellness. It may seem scary or even impossible at first, but it will ultimately be a decision you will not regret. A debt consolidation program works best when there is a concrete plan in place to reduce the total amount of debt in a realistic and probable way without putting your other assets, like your home, at further risk. Learn more about debt consolidation below.
What is Debt Consolidation?
Debt consolidation is the process of taking debt from multiple creditors and combining them into one straightforward fixed-rate monthly payment. The most common way of tackling this is through the use of a personal loan. With low rates and a monthly payment that is tied to a term, a personal loan can allow you to take those pesky credit card payments and combine them into one easy and manageable payment. Personal loans are also great because they provide you with a clear end date as to when your debt will be paid off.
As you can see, personal loans can provide flexible terms to allow you to pay back your loan easier.
Other Alternatives for Debt Consolidation
Balance Transfer Credit Cards-Transferring your debt to one credit card could help you save money on interest, and you’ll have to keep track of only one monthly payment. You’ll need a card with a limit high enough to accommodate your balances and an annual percentage rate (APR) low enough to make consolidation worthwhile. However, if you’re unable to pay back, you could end up paying more in interest in the long run. Keep in mind, that your credit score could be impacted more with this approach in a number of different ways. Opening a new credit card means a new inquiry on your credit report. Also, if you’re close to the spending limit on your card, your score could be negatively impacted.
Home Equity Loans- If you’re a homeowner with strong credit and a solid financial history, tapping into your home’s equity could be a good debt consolidation option for you. A home equity loan could provide you with a lower interest rate and a larger loan amount than a personal loan or credit card. LOC offers two options to tap in to your equity—a fixed-term loan and a line of credit.
Auto Equity- If you own your car outright or have a small balance left on your loan, talk to us about how we can help you use your car's value to pay off other debt.
Regardless of the debt consolidation option you choose, combining multiple lines of credit into one easy payment can help:
- Increase your credit score
- Relieve the stress of multiple payment dates
- Pay down debt faster by avoiding the temptation to make only the minimum payment due
Additional things to keep in mind while considering any debt consolidation option:
- Be sure you can afford the payment on the debt consolidation plan you decide to go with
- Once you’ve consolidated your debt, make sure that you’re not adding to it. This can throw a wrench into your financial plan and set you back even further
- Debt consolidation doesn't mean debt elimination if you’re going to continue to overspend and use your credit cards
Don’t wait any longer! Our team of experts can provide a free financial review to show you the best way to consolidate your current debt. If you’re interested in learning more about debt consolidation options: