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Which Debt Consolidation Loans are Right for You?

Which Debt Consolidation Loans are Right for You?

That’s a question that many consumers ask themselves when facing high-interest debt challenges. Two of the most common ways to consolidate debt are with debt consolidation loans or with a low-interest balance transfer credit card. Both options can help you to consolidate several payments into one single monthly bill. It may even help you lower your monthly debt payment. Read on to learn more.

Time to consider debt consolidation loans

Knowing the right time to consolidate debt can be a bit tricky. It can also be different for everyone, depending on your individual circumstances. Here are some typical cases where it may be the right time to consolidate your debt.

  • You want to get off that never-ending payment merry-go-round. You’re overwhelmed with multiple payments each month and are finding it harder to keep up with those payments and keep track of due dates.
  • Your financial situation has changed, and those debt payments are no longer fitting into your budget. You need to reduce your monthly payments.
  • You’re looking to save money on interest by securing a lower-interest option.
  • Your credit score has improved, and you believe you would be eligible for a lower interest loan.
  • Your cash flow is good, and you want to pay down your debt faster and more efficiently.
  • You’ve gotten in over your head and are committed to making changes to your spending habits to get yourself back on track.

Are you facing any of the above issues? If so, it may be time to look into debt consolidation loans. Consolidating credit cards and other debt could help simplify your finances and possibly even lower your monthly payments.

Debt consolidation loans

There are many different types of loans that can be used for debt consolidation. This includes home equity loans and home equity lines of credit, as well as personal loans. The debt consolidation loan you choose depends on the amount of debt you are looking to consolidate, as well as your credit history and your home’s equity if you are a homeowner.

Home Equity Loans. If you are a homeowner, you may be eligible to borrow against the equity in your home to help you meet your debt consolidation goals. The amount you are able to borrow will be determined by the equity you have built-in your home. This is the value minus any outstanding liens. With a home equity loan, you can benefit from a fixed interest rate and pre-set monthly payment. A HELOC, on the other hand, has an adjustable-rate and a payment that may fluctuate. Because home equity loans and HELOCs are secured loans, using your home as collateral, they are typically lower-interest options for debt consolidation loans. Just beware that you are using your home as collateral, so you risk losing it if you default on your loan.

Personal loans. Personal loans are another option for consolidating debt. They are ideal if you are looking to borrow a lower amount or are not a homeowner. The fixed-interest rate you are eligible for and the amount you can borrow with a personal loan are dependent on many factors. This includes your credit history, your income level and your income to debt ratio. The better your credit score and your income to debt ratio, the better the rate you will qualify for. 

Consolidating debt with a balance transfer credit card 

In case you were unaware, a balance transfer credit card allows you to move the balances from one or more credit card account to a different card. Some balance transfer cards, such as a Choice One VISA credit card, can provide you with a special low-interest balance transfer rate for a specific period of time. This may give you the time you need to pay down your debt faster without the fear of high interest piling on. If you’re considering this option, there are some things to keep in mind. First, look for a card with no balance transfer fees. If you have to pay an exorbitant fee to transfer the balance, it might outweigh the interest you are saving.  Second, beware of extremely short promotional periods.  You’ll want to give yourself a good shot of paying down the majority of your debt during that period. Finally, beware of what the credit card rate converts to once that low-interest introductory period ends. You don’t want to be deceived by that low balance transfer special and then end up with an interest rate that’s higher than your current rate.

Applying for debt consolidation loans

Are you ready to break free of high-interest debt? Debt consolidation, when handled responsibly, can help you simplify your finances and have a clear plan for paying down your debt. At Choice One Community Credit Union, our goal is to help our members break free of high-interest debt by consolidating into a lower-interest loan. Learn more about the various options for debt consolidation loans on our website. You can view rates to consolidate debt with a home equity loan, home equity line of credit, personal loan and VISA Credit Card balance transfer. You can also apply for a loan right online. We’d love to help you manage your debt in a smarter way.