Understanding debt consolidation

Understanding Debt Consolidation

When you're facing money problems, you might think about debt consolidation as a solution. Debt consolidation isn’t just one thing – it's a broad term that includes various ways to deal with debt issues. To figure out if it's the right choice for you, the first thing you need to do is understand what debt consolidation is all about.

Debt consolidation essentially involves combining multiple debts into one new debt. The main goal is to simplify managing your finances and potentially save money. After completing the consolidation process, ideally, you'll only have one payment to make, aiming for the new loan to have a lower interest rate. If all goes well, your payment amount may decrease.

Many times, credit card debt can be the driver of financial stress.  In this case, you may have a couple options. One is to find a credit card that offers a 0% interest balance transfer option. This would allow you to transfer that debt to the card with no interest for a specific amount of time, saving money on interest. The other option is to look into a signature loan or even a personal line of credit. Often, these options will feature lower rates than credit cards, and would allow you to consolidate multiple credit cards into one simple payment, with one due date.  

In other cases, you may have multiple debts and combining them into one payment can really help simplify your finances. This can include credit card debt, personal loans, medical bills, and more. The key is to consolidate into one personal loan or line of credit. Or maybe you have some collateral, such as a paid-off vehicle that can be put up for a secured loan, which could lower your interest rate and save you money. If you’re a homeowner, another great option can be a home equity line of credit. HELOCs allow you to use the equity in your home to pay off debt, and often at very attractive rates. Plus, having one loan with one due date really makes managing your money easier.

If you feel like you’re struggling with debt, it’s important to know that you’re not alone. The friendly, knowledgeable staff at Heartland Credit Union is here to help. We’ll take the time to listen to your personal situation and help you determine if debt consolidation is the right option for you and how to best fit your needs. We’ll also be there for you with tips and advice on how to better manage your money and avoid the stress debt can bring. 

Darren Werth
Darren WerthAVP of Marketing

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