Are you struggling to pay down your debt? Do you look at your credit card statements each month and wonder – will they ever go down? If so, you are far from alone.
To truly pay down debt, you need to put as much as possible towards that debt. It is easier said than done especially when you’re trying to do this on multiple loans.
Debt consolidation is a great solution to overcome this common financial setback. Simply put, with debt consolidation you’ll combine all of your money owed into a single loan, allowing you greater flexibility in paying it down sooner.
When you consolidate debt, you gain the ability to pay significantly more of your debt at one time.
For example, let’s say you have five loans, each with a $50 minimum payment. Most of that minimum payment goes towards the interest on each of those loans. But, if you combine all of those loans into one new loan, you still have $250 to pay towards your debt. Now, you can apply it to one payment.
In this scenario, $50 may be applied towards interest, but you’re still putting an extra $200 towards the debt that wouldn’t be applicable to your balance before debt consolidation.
So, how can you pay your debt down faster? Here are some of the best ways to consolidate debt.
The most effective way to pay down debt is to obtain a personal loan.
Your credit union can help you open up a fixed-rate personal loan. There’s no need for collateral; and in most cases, if you have an average or better credit score, and reliable income, you’ll likely qualify.
Personal loans offer benefits such as:
A personal loan isn’t backed by an asset. This is a good thing for most borrowers. That means if you default on the loan, your collateral is not at risk.
If you have equity in your home, you may be able to get a low-interest rate home equity loan.
Equity is the unmortgaged value of your home. If your home is valued at $250,000 and you only owe $200,000 on it, you have about $50,000 worth of equity. You may be able to take out a home equity loan for this amount and use it to pay off your debt.
Home equity loans provide some great benefits:
Home equity loans are a good option if you have equity in your home. However, you also have to figure in the expense of obtaining them such as closing costs and appraisal fees.
It may be possible to obtain a larger credit card line to use to repay your debt.
For example, you may qualify for a credit card with a larger credit limit. You can then use the available balance on that credit card to pay off your other lines of credit.
There are a few things to consider with credit card consolidation:
Most people will benefit from this option if they have just a few lines of credit to consolidate.
Which debt consolidation method is right for you?
If you are ready to work on rebuilding your credit score and you hope to pay down your debt, one of the best options available to you is a personal loan or a home equity loan. This can offer an opportunity to reduce your costs overall while helping you to pay off your debt as well.
Consider a few options. Learn about those best for your situation. And, then, get to work rebuilding your credit and your financial health with debt consolidation.
For more information on using personal loans to consolidate your debt, contact Partners Financial Federal Credit Union today at 1-800-321-5617.