Between the hassle of keeping track of different payment schedules and the potential cost of high interest rates, many people are losing time and money dealing with multiple debts. If this situation applies to you, it might be time for you to consider consolidating your debt into a single monthly payment.
What Is Debt Consolidation?
Debt consolidation is the process of collecting all your debts into one place so it’s easier for you to make payments. This will often be handled by a third party who figures out the payment logistics and charges you a single monthly fee. It’s important to distinguish debt consolidation, which collects your debts in one place to more easily make payments, to debt settlement, which focuses on helping you end payments and negotiate a lower repayment amount to creditors.
What Are the Benefits of Consolidating Your Debt?
For anyone with multiple debts from different creditors, the main benefit of debt consolidation is simplifying your payments. Rather than juggling multiple repayment plans, you only need to worry about making one payment. This makes it easier to avoid any late fees or additional interest and gives you a clear plan and finish line to work towards becoming debt-free.
Additionally, if you can consolidate your debt with a product that has a lower interest rate than your current debt (e.g., a high-interest debt such as a credit card), you can save money on interest. This means lower monthly payments overall and the opportunity to apply those savings towards repayment and getting yourself out of debt entirely faster than without consolidation.
How Do You Consolidate Your Debt?
Methods to consolidate your debt include:
- Debt consolidation loans
- Balance transfer feature on credit cards
- Debt management plans
- Home equity loans
- Retirement account loans
By joining a member-focused credit union like Bellco Credit Union, you can benefit from competitive loan rates and personalized service that can help you make decisions to positively shift your financial future.
