Does It Make Sense to Consolidate Your Debt?7/7/2021 If you’re mired in debt, you may perk up when you hear about a loan that promises to: Save you money by lumping your debts into one loan with a lower interest rate. Spare you payment hassles by providing the convenience of making one loan payment each month, instead of multiple monthly payments to numerous creditors. Before jumping at such an offer, ask yourself a few crucial questions. What will really change? You might consolidate your debts into one loan in various ways, if you qualify. You could take out a home equity loan for the total amount you owe in credit cards and other consumer debt. You could put several credit card balances onto only one lower-rate card. Or you could obtain a personal loan, unsecured by collateral, to cover the total debt amount. But if you regularly over-spend and are not planning to change your behavior, then a debt consolidation loan just becomes a Band-Aid. Repeating mistakes will only put you in deeper debt. Can you afford the loan? Let’s say you’re determined to mend your ways and a debt consolidation loan is one option. You’ll replace lots of payments with one bigger payment. But be sure it fits into your budget. Consider, too, the total you’ll pay over the life of the loan. If you consolidate credit card debts into a 15-year home equity loan or unsecured loan, you’ll be stretching a five-year debt to 15 years. You could end up paying as much or more in total interest and principal. The total payment is key, not just the monthly payment. Can you trust the lender? Some lenders give loans to anybody just to make a buck. A reputable lender, like your credit union, has your best interests at heart. We will work with you to find a loan that fits your budget. Talk to one of our loan officers to discuss how to get your finances back on track. We will help you get a handle on high-rate debt. « Return to "Blog"Share: Share on Facebook: Does It Make Sense to Consolidate Your Debt? Share on Twitter: Does It Make Sense to Consolidate Your Debt?