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Guide to Debt Consolidation

Guide to Debt Consolidation

Debt consolidation can be a good strategy to help reduce your overall debt. If you can secure a lower rate than you are currently paying, you can save substantially on interest over time. Consolidating multiple debt payments into one easier-to-manage payment can also help you to pay off debt faster and more efficiently. A good credit score is necessary for securing the best rates on loans. There are several effective ways to consolidate debt. They include:

Credit Card Balance Transfer

If you can find a low credit card balance transfer rate, it can be a good opportunity for consolidating balances from higher-rate cards. For example, Choice One Community Credit Union is currently offering a special 2.99% APR* VISA balance transfer rate which is valid for six billing cycles from the date of transfer. When searching for a good balance transfer credit card, look for one with no balance transfer fee and no annual fee. If you find a low-rate card, but it has a high balance transfer fee and an annual fee, the fees may outweigh most of the potential savings. Choice One’s VISA credit card features no balance transfer fee or annual fee. As an added bonus, you can build points towards rewards.  It’s always best to search for and compare offers when considering credit card balance transfers.

When transferring the balances of higher rate cards or other high-interest debt to a low-interest balance transfer credit card, aim to pay off as much of your balance as possible during the low-rate introductory period. Keep in mind that any remaining balance after that time will revert to a regular credit card rate. Paying down your balance quickly is key to saving on interest.

Personal Loans for Debt Consolidation 

A low-rate personal loan can be a smart option for paying down high-interest debt. Personal loans are most appropriate for paying down lower balances. For example, Choice One Community Credit Union enables members to borrow up to $10,000 in the form of a fixed-rate personal loan for up to 72 months. Consolidating debt into a personal loan would give you one monthly payment to budget for and focus on. Tap to view Choice One Community Credit Union’s competitive rates on personal loans.

Consolidating Debt with a Home Equity Loan or HELOC

When struggling with higher debt balances, you may want to consider a home equity loan. Home equity loans can be an excellent choice for consolidating different types of debt. Because your home is used to secure a home equity loan, they typically have lower interest rates than credit cards and many other loans. Home appraisals are required when you are borrowing against the equity in your home, so keep that in mind when determining if it’s the right move for you. Subtract the cost of the appraisal and any other fees from the total you are saving in interest to see if consolidation still makes sense. When comparing lenders, look for a home equity loan with no closing costs, such as Choice One Community Credit Union’s no fee** home equity loan. Added fees will cut down on your savings when consolidating debt.

Home Equity Loan Rate Comparison Vs. the Average Credit Card Rate

Home Equity Loan:

$20,000 Borrowed

58 months

2.49% (possible home equity loan rate)

Monthly payment $366.35

Total of 58 payments $21,248.35

Total interest $1,248.35

Credit Card:

$20,000 Borrowed

58 months Loan Amount

17% (average credit card rate)

Monthly payment $507.98

Total of 58 payments $29,463.13

Total interest $9,463.13

As you see above, you would not only benefit from a lower monthly payment but also huge savings in interest over the life of the loan. It’s important to remember that whenever using your home as collateral for a loan, you are taking a chance that you will lose it if you default on the loan.

Get on the path to better finances by consolidating higher-interest debt 

Debt consolidation is an important financial strategy that helps you combine your high-interest debt, such as credit card debt and small loans, into one single payment with a lower interest rate. The goal is to reduce your monthly payments into a single amount you can afford and to pay off your debt faster. The method you choose for consolidation should be based on your individual financial situation.


*2.99% VISA Balance Transfer Rate is valid for 6 billing cycles from the date of transfer. Rate returns to the current rate at that time. Choice One’s current Platinum Visa Credit Card Rate is 8.90% APR and Classic Visa Card is 13.50% APR with No-Annual Fee. Balance Transfer offer is good on any new or existing Choice One Platinum or Classic Credit Card. 2.99% balance transfer rate is for balances transferred from another institution only. Transfers may not exceed the credit line a member is approved for. 

**No Closing Cost Promotion applies to first lien only. Third-party fees will be reimbursed for the cost of originating your loan excluding any property tax or transfer fees. Fee Reimbursement-The lender may have paid some third-party fees associated with this loan. Please refer to the Closing Disclosure provided prior to loan closing for an itemization of third-party fees paid by the Borrower (if applicable), and those paid by the Lender on the Borrower’s behalf. The Borrower agrees to reimburse the Lender the actual amount of bona fide third-party fees paid on the Borrower’s behalf, as permitted by applicable law if the loan is paid off within twenty-four (24) months after consummation.



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