Holidays tend to encourage spending thanks to the mixture of special offers and the desire to get the perfect gift for friends and family. Once the festive glow fades, however, you may find yourself struggling with debt from multiple sources. The various different interest rates, due dates, balances, and minimum payments can create a swirl of confusion that makes it hard to keep track of which payments are going where and can make it tricky to have a firm grasp of the situation. It is in these situations that debt consolidation can be a beneficial approach by empowering you to get control over your holiday debts and allow for easier management and payment.
The Basics of Debt Consolidation
Debt consolidation is what happens when you take out a loan to pay off multiple debts at once. This process effectively combines all of your existing debts into a single loan with only one bill to receive and pay each month. Consolidation is extremely useful for making budgeting and tracking easier, and it can help build a credit score which may otherwise have been hurting from multiple debts.
In addition to this stress-easing benefit, another reason to employ debt consolidation is a reduced interest rate. The idea is that the loan you use to pay of your debts is going to have a lower interest rate than the debt itself would, meaning that not only is the consolidated amount easier to track and pay, it won’t grow as quickly as well.
What to Look For when Consolidating Holiday Debt
When attempting to consolidate, be sure to keep the following in mind so you can make the best choices towards managing your debt.
It should go without saying that if you’re going to take a loan, it should be one you will be able to actually pay off. Look for fixed rate loans that have payments you know can be fit within your budget. It may be that consolidating all of your debts results in too large a loan for you to handle. In these cases, it may be best to only focus on the largest debts and interest rates first to ease the burden.
When dealing with debts that have different interest rates, do a quick calculation to find the average value. Ideally, you should be getting a consolidation loan that is lower than this number. Make sure the interest rate is fixed and will not grow on you at a later date, especially if you intend to only make the minimum payments.
LUSO Federal Credit Union is a member-owned, not-for-profit financial cooperative dedicated to providing its members with quality financial services and products. We, at LUSO, pride ourselves on serving the financial needs of those who live, work, worship, do business, or attend school throughout Hampden County, Massachusetts, regardless of economic status. To learn more about LUSO and our services, feel free to contact our Ludlow branch toll free at 1-844-LUSO-FCU or our Wilbraham branch at 1-800-808-5876.