How to Consolidate Your Debt
May 6, 2016
Nobody enjoys getting a big stack of bills every month. Keeping track of all those due dates and worrying about finding the cash to pay everything can elevate just about anyone’s stress level.
If you’re feeling overwhelmed, it may be time to consolidate that debt into a single loan. Financial institutions like LUSO Federal Credit Union offer a variety of options, including personal loans (secured or unsecured), home equity loans and home equity lines of credit.
Undecided? Here are some reasons why you might want to consider consolidation.
U.S. households with credit card debt owe an average of $15,355 to card issuers. If you’ve got cards with high interest rates and can afford only the minimum payments, it could take years to get out of debt. Consolidating your cards into a single loan with a lower interest rate could save you hundreds or even thousands of dollars each year.
A simplified life
Myriad bills with multiple due dates mean countless opportunities to miss a payment, damage your credit score and shoot your interest rates into the stratosphere. One bill with one due date means your debt is easier to track and, eventually, to vanquish.
Lower monthly bills
If your monthly minimums are sky-high, you could consider a longer loan with lower payments.
For example, if you had two loans that total $10,000 at a 14% interest rate, due to be paid off in three years, your monthly debt payment would be about $340 a month. However, if you consolidated the two into a five-year loan at that same interest rate, you could slash your monthly payment to $233. And if you could get a lower rate on the new loan, you’d pay even less.
While extending the loan would keep you in debt longer, and ultimately cost you more in interest, it would also free up money for other priorities, such as saving for a down payment or retirement, or paying for better health insurance.
These are just a few of the reasons you might want to consolidate your debt. However, if you feel your debt is unmanageable, you may need outside help. If this is the case, the Federal Trade Commission offers guidelines for selecting a reputable credit counselor.
Judy McGuire, NerdWallet
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