What is debt consolidation?
Debt consolidation combines multiple debts into a single payment. Typically, high-interest debt is combined, such as credit cards, student loans, or high-interest personal loans.
What are some way you can consolidate debt?
There are multiple options to consolidate debt. There a few factors for you to consider, including your credit score, debt load, and income. Some common ways people consolidate debt include personal loans, credit card balance transfers, and home
equity loans or lines of credit.
What are the benefits of debt consolidation?
- Saving money! The average credit card APR is about 17%, and many store credit cards have rates up to 29%! Consolidating debt may reduce your interest rate, making repayment much more feasible.
- One payment each month. You no longer will have to make multiple payments on your debt. You will have one due date, and one amount due. It can be easier to manage, and harder to lose track of only one monthly payment.
- Can increase your credit score. If you make your payments each month throughout the term of your new loan, your credit score may be positively impacted. Your credit utilization rate on your credit cards will decrease if you consolidate your
balance into a personal loan. You should aim for a credit utilization rate of less than 30%. For example, if your credit limit on your credit card is $10,000, you would want your total balances to be less than $3,000.
- Pay off your debt faster. By paying less money in interest, you should be able to pay off your outstanding debt more quickly.
Are there any negatives to debt consolidation?
Depending on which option you choose, there may be fees applied to origination of loans, credit card balance transfers, or closing costs associated with home equities. Some financial institutions will also place a higher interest rate on balance
transfers, in addition to the fee. The great news is that at TruChoice, we have no balance transfer fees, and you’ll have one low rate on all of your balances, even transferred ones!
How will I know if debt consolidation is right for me?
Talk to a trusted financial service representative. The best way to see what option is best for you is to reach out and have a conversation. At TruChoice, we have financial service representatives ready to discuss your individual financial
needs with you. We are here to help you get your finances in a better place, and ready to answer any questions you may have! We can also help you build your budget to make it easier to decrease excess spending and get out of debt for good!