What Do I Need To Know About Debt Consolidation?
Debt consolidation is the process of moving several (possibly) high-interest debts into a new loan or line of credit. Debt consolidation can help you pay off your debt quicker, with less money going toward overall interest payments.
Here’s what you need to know about debt consolidation.
What are the benefits of debt consolidation?
- Saving on interest payments. Moving your debts to a new loan or credit line with a low interest rate can translate into big savings.
- One monthly payment. Say goodbye to scrambling to keep track of and make all your monthly payments!
- Fixed payment timeline. How does knowing when you’ll be debt-free sound?
- Boost your credit score. Amp up your score with a balance transfer or loan.
What are the disadvantages of debt consolidation?
- May stretch out the payment timeline. More time in debt? No thanks.
- Won’t eliminate irresponsible spending habits. You won’t turn into a budgeting beast just because you’ve relocated your debt.
- Lower interest rate may not last. Many low- or no-interest credit cards only offer these features as a temporary promotion. Once time is up, the high interest rates hit. Ouch!
How can I consolidate my debt?
- Personal Loan — This will allow you to pay off all your outstanding loans immediately and move your debts to one low-interest loan. Personal loans usually have origination fees and other charges. Also, the interest rates on these loans can be sky-high. As a member of Texas DPS Credit Union, though, you have access to personal loans with no fees and interest rates as low as 9.99% APR*.
- Home Equity Loan — Use your home as collateral. The drawback here is that you risk losing your home if you don’t pay up. Also, repayment terms can be upward of 10 years. On the flip side, interest payments on home equity loans will be affordable with rates as low as 3.99% APR* and possibly tax-deductible.
- Balance Transfer — Move your debt to a new credit card with a low interest rate. The disadvantage with putting more plastic into your purse is that you may rack up a new credit card bill. As a member of Texas DPS Credit Union, you can take advantage of our fixed rate credit cards with rates as low as 7.99% APR* to help you get out of debt quicker. With it being a fixed rate, you don’t have to worry about a special offer expiring or the rate going up.
* APR = Annual Percentage Rate and rates are effective as of 4/22/2021.
Start a conversation today with a Lending Representative to see if Debt Consolidation is right for you and which option may fit you the best.