It’s the New Year and you’re excited about the opportunities ahead. Before staring too far into the future, take the time now for a financial health check, especially if you used credit to buy holiday items last year.
If you find yourself facing accumulated debt from various lenders, debt consolidation could make managing those bills a lot simpler. Read on to learn how this option could make your new year a little easier.
What is Debt Consolidation?
Debt consolidation is when you combine all your debt into a single new loan that comes with just one monthly payment. These types of loans are useful for those who have existing balances on various credit cards, have multiple personal loans from lenders, or have several high-interest rate loans, according to Forbes Advisor.
A big reason to consolidate is because having outstanding balances on multiple loans can affect your credit rating. These factors may cause your credit score to drop, your debt-to-income ratio to rise and, with multiple bills to pay, you may increase the possibility of missed payments. Another reason is that having multiple loans balances means you may pay more in interest over the long run.
By consolidating debt you give yourself the opportunity to raise your credit score, obtain a lower interest rate on a single loan and reduce the number of monthly bills you need to track and pay.
How to Consolidate Debt
The first step toward debt consolidation is to know your credit score. Lenders such as financial institutions typically have minimum credit score requirements to qualify for this type of loan. For example, if your debt-to-income is too high, your loan application could be denied. You can view your credit reports for free at annualcreditreport.com.
Next, determine how much money you owe in total. Add the outstanding balances from credit cards and loans to see how much you’ll need to apply for to consolidate your debt. Once you have an amount in mind, start shopping for loans.
You can typically find debt consolidation loans under personal loans at financial institutions such as Travis Credit Union. Be sure to check the interest rate and terms and to estimate your monthly payments. You want to ensure you’re saving money by combining all of your bills. Use TCU’s debt consolidation calculator to determine what your monthly payment will be.
Apply and Pay Off Loans
Once you’ve found the right loan, check if you can be pre-qualified first before you apply, so you can avoid having your credit report pulled. Look for tools like our instant pre-qualification, which allows you to check any offers from TCU that may already be waiting for you. Once approved for a loan, be sure to deposit the proceeds into a checking account where you’ll be able write checks to pay off that existing debt.
Remember, debt consolidation is meant to help you manage your bills. It’s usually a good idea to avoid building up debt again on those paid off credit cards. It may be better to take them out of your wallet to avoid any impulse buying. A more productive next step would be taking the extra money you’re saving in monthly payments and setting it aside as an emergency fund.
Travis Can Help
Travis Credit Union is focused on the financial wellness of our members and we can help with your debt consolidation. Our knowledgeable and friendly financial representatives will explore all the options and come up with the best solution for your debt consolidation or any other financial issue you may have.
Apply at a branch or online at traviscu.org. If you’re applying online, use our pre-qualification tool to check your offers first, without affecting your credit score. Try it today. You may already be pre-qualified for a loan from Travis.
Have a great year!