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What is debt consolidation and why you need it

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What is debt consolidation and why you need it

1/3/2018

Debt consolidation programs are great if you are paying on several different loans.  If this situation sounds familiar, you can make your life easier by reducing total interest and leaving you with just one monthly payment, freeing up some extra cash.  

 

Let’s say you have several credit card balances with moderate to high interest rates. With a debt consolidation program, you will be able to roll all the principle debt you owe into a set term loan making it much easier to manage the debt.

Debt Consolidation Programs Reminders
A debt consolidation program doesn’t eliminate your debt. These programs move your debt to make it easier to make the payments.  You will have to pay the money back sooner or later since you do owe it. 

One potential problem with a debt consolidation program is that your credit cards will again have large amounts of available credit for you to use - but you shouldn't. Beware of digging yourself into a deeper hole by continuing to add to these balances. 

 

How to Choose the Best Debt Consolidation Programs 
Steer clear from consolidating your debt using a new credit card.  Credit card rates from a for-profit financial institution hit upwards of 30 percent or more.  Even if there is a promotional interest rate, not having a set term or payment can mean paying thousands more in interest and adding years onto the time it will take to pay off, even if your monthly payment is lower.  Seek a credit union such as Central Sunbelt that can offer a low rate with a fixed term so your payment stays consistently low.

 

 

Remember, your main goal is to work towards a better understanding of your financial debts. You will want to learn how to take care of your own debts, assets, and financial goals through your counselor’s advice. Debt consolidation is only stepping stone towards your own financial self-reliance.  You can get free financial counseling at Central Sunbelt and / or talk to a loan officer today about saving money by consolidating your debts.

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