Take control of your debt and enjoy peace of mind.
If you’re up to your eyeballs in debt, the one thing you may wish for more than anything else is a blank slate. If you had a chance to wipe your slate clean and start over, things would be different. Of course, barring a winning lottery ticket, nothing is going to make that much of a change overnight.
There is, however, another option you can take for getting your debt under control. You can use a personal loan to refinance your existing debt. That means you’ll have one monthly payment at one interest rate instead of having to manage a bunch of smaller bills coming due on different days of the month.
Let’s take a look at the questions you might ask yourself before you take on a debt consolidation loan.
1. Have I fixed the debt problem?
Think long and hard about why you’re in debt. For a lot of people, it was a medical bill, the loss of a job, or some other temporary hardship that got them behind with payments they couldn’t make right away.
If, on the other hand, you accumulated debt by overspending on credit cards, then there may be other steps to take first. Try making a budget you can stick to, learning how to save, and gaining responsibility in your use of credit. Getting a debt consolidation loan without doing those things first is a temporary solution, but it’s important to address your spending habits to help better your financial health in the future.
2. Can I commit to a repayment plan?
Before you speak to a loan officer, figure out how much you can afford to put toward getting out of debt. Your loan officer can work backward from there to figure out terms, interest rate and total amount borrowed. Consider whether you have a consistent income, or does it fluctuate each month? Are your goals to pay off your debt faster, or to lower your monthly payment?
3. Is my interest rate the problem?
If you’re dealing with credit card debt, high interest rates are likely part of the problem. Credit card debt interest regularly runs in the 20% range, more than twice the average rate of personal loans. Refinancing this debt with a personal loan can save you plenty over making minimum credit card payments.
However, for some people, the biggest chunk of their debt is a student loan. Debt consolidation for student loans, especially subsidized PLUS loans, may not always be the best option. You’re better off negotiating the repayment structure with your lender if the monthly payments are unrealistic.
4. Will a personal loan cover all my debts?
If you have more than $50,000 in credit card debt, it’s going to be difficult to put together a personal loan that can finance the entire amount. Instead, it’s worth prioritizing the highest interest cards and consolidating those instead of trying to divide your refinancing evenly between accounts. Get the biggest problems out of the way, so you can focus your efforts on picking up the pieces.
Debt consolidation doesn’t work for everyone, but it can do wonders for many people. The ability to eliminate high-interest debt and simplify monthly expenses into one payment for debt servicing can change a family’s whole financial picture. The only way to know if a personal loan to consolidate debt is right for you is to sit down with a loan officer to go over your situation. Schedule an appointment today to start consolidating your debt!