Is Debt Consolidation Right For You? Here’s How To Find Out
Having multiple sources of debt can make you feel like you’re being pulled in several different directions at once, and can take a toll on you financially and emotionally. One option you’ve no doubt heard about (and read about) is debt consolidation. It’s exactly what it sounds like — rolling multiple debts into one. While this won’t rid you of any debt, it can help you pay it down by streamlining the payment process and potentially lowering your interest rate.
Debt Consolidation Loan
With a debt consolidation loan, you’re essentially taking out one loan to pay off all your balances. You can think of it as a bigger umbrella loan that aggregates and covers all your smaller ones.
One monthly payment can help you stay organized and ensure you never miss a payment, opposed to making several different payments which can become overwhelming and easy to overlook a note. With a debt consolidation loan, you make the same regular payment monthly for a certain term and then you're done.
This option is optimal for paying off credit card balances. Often, when you pay the credit card's minimum monthly balance, interest rates compound on the unpaid balance and that can make it difficult to get ahead of debt. Consolidation Loans allow you to avoid the compounding interest and inflated/fluxuating rate a credit card usually carries.
Before jumping in, read the terms carefully and ensure that you’ve got adequate cash flow to make the monthly payments. If you miss one, it will impact your credit score.
Help is Available
If you're considering a debt consolidation loan, but still aren't sure if it's right for you, feel free to reach out for free credit counseling. Essential Federal Credit Union Specialists are available to help you understand your options for your situation. Credit Counseling is always free and you can now schedule a virtual visit that allows you to be seen at your convenience, rather than waiting in a branch.