Debt Consolidation FAQs
Student loans. Credit cards. Personal loans. Medical bills. When you look at the sum of your debt, you might find yourself feeling a bit overwhelmed.
One of the ways to combat a growing or generous amount of debt is by consolidating it. While consolidating your debt won’t erase it, it does have some benefits to make paying it off simpler.
If you’re wondering if this is a good option for you,these commonly asked debt consolidation questions should provide you some answers.
What is debt consolidation?
Debt consolidation is a financial strategy designed to help you manage your debt.
When you consolidate your debt, you combine multiple debts into one single monthly payment. This can include outstanding balances from various creditors and often incorporates balances from your credit cards and other loans.
How does a debt consolidation loan work?
The most common way to consolidate your debt is through a debt consolidation loan. When you apply for a debt consolidation loan, you complete a simple loan application process. During this process, we analyze your finances to determine how much you’re qualified to borrow.
Your loan can be secured, meaning you put up collateral such as your home or vehicle to get the loan, or unsecured, meaning no collateral is needed.
You can “pay off” all of your debt with creditors using the money you get from a debt consolidation loan. You’ll then pay one monthly bill for a specific number of months at a consistent rate until you’ve paid off the balance. So instead of making multiple payments each month, each with a different interest rate, you make one.
When is debt consolidation a good idea?
Now you might be wondering when a debt consolidation loan is a good idea for managing your debt. The answer varies based on your financial situation, but here are some common factors to keep in mind that lend themselves to debt consolidation loans:
- When you owe multiple creditors: Making one payment for your debt instead of numerous payments can help you keep track of your payments and reduce making late payments, which can come with costly fees.
- When your debts have high-interest rates: One of the benefits of debt consolidation is when you can secure a lower interest rate. If your rates are high, you’re likely paying hundreds and thousands of dollars more in interest to pay off your balances. Paying off your debt with a lower interest rate will certainly save you money!
- When you have high monthly payments: Similar to having high-interest rates, if you find yourself struggling to make your monthly payments, you can consolidate your debt to pay less each month due to a lower interest rate or extending the period you have to repay.
If you’re still on the fence about whether debt consolidation is the right next step for you, please stop by a branch or call and speak with one of our loan specialists.
