Overwhelmed by Multiple Payments? How Debt Consolidation Loans Can Help
Read Time 6 mins | Written by: Rocky Mountain Credit Union
Key Takeaways
- Debt consolidation combines multiple debts into a single loan with one monthly payment, making it easier to manage and pay down what you owe.
- You’re a good candidate for consolidation if you have high-interest credit card debt, as you can potentially lower your interest rate and save money over time.
- Credit unions typically offer lower interest rates on personal loans than traditional banks.
- Before consolidating, take stock of all your debts, including balances, interest rates, and minimum payments.
- Free financial counseling is available to help you create a personalized debt management plan if you're feeling overwhelmed.
If you're juggling payments to multiple credit cards, a car loan, and maybe a medical bill or two, you're not alone. Life happens, and sometimes debt accumulates faster than we'd like. The stress of tracking multiple due dates, interest rates, and minimum payments can be exhausting and make paying off the debt feel nearly impossible.
The good news? There's a straightforward strategy that can simplify your finances and potentially save you money: a debt consolidation loan. By consolidating multiple debts into a single loan, you get a single manageable payment and a clear path forward.
Ready to explore your options? Apply for a debt consolidation loan today and secure a potentially lower interest rate!
What Is Debt Consolidation?
Debt consolidation is taking out a single loan to pay off multiple existing debts. Instead of making five or six different payments each month, you make just one. This approach works exceptionally well for high-interest debt, such as credit cards, where interest charges can accumulate quickly and make it hard to see progress on your balance.
When you consolidate, you're hitting the reset button on your debt. You use the new loan to pay off your existing balances, then focus on repaying that loan over a set period.
Because credit unions are not-for-profit, you'll typically find that their debt consolidation loan interest rates are significantly lower than what traditional banks can offer.
How Do Debt Consolidation Loans Work?
The process is more straightforward than you think.
- First, you apply for a personal loan in the amount you need to cover your existing debts.
- Once that loan is approved, you use those funds to pay off your credit cards, medical bills, or other outstanding balances.
- From that point forward, you make a single monthly payment on your new loan until it's paid in full.
With this type of loan, you’ll just have one predictable payment each month, and you’ll potentially get a lower interest rate than you're currently paying. Consolidation loans typically come with a set term, helping you to track your progress.
Is a Debt Consolidation Loan Right for You?
Debt consolidation works best when you have multiple high-interest debts and can qualify for a loan with a lower rate than what you're currently paying. It's invaluable if you're struggling to keep track of multiple due dates or feeling overwhelmed by the number of accounts you manage.
Before you consolidate, it helps to take a complete inventory of your current situation. Write down each debt you have, including the balance, interest rate, and minimum monthly payment. This gives you a clear picture of what you're working with and helps you determine whether consolidation makes sense for your circumstances.
A debt consolidation loan may not be your best option if you can’t find favorable terms that provide you with benefits such as a combined interest rate or payment savings.
It's also worth noting that this type of loan is a debt transfer. Taking the time to set a budgeted plan is the first step to benefiting from this type of loan. Building your savings, finding ways to save, and tracking progress are key aspects to reaching financial freedom!
If your debt feels unmanageable or if you're struggling to cover basic expenses, speaking with an RMCU financial counselor can help you explore all your options and find the right path forward.
Why Credit Unions Offer Lower Rates on Debt Consolidation Loans
Where you borrow matters! Credit unions like RMCU are member-owned cooperatives, which means profits go back to members in the form of better rates and lower fees rather than to shareholders. This structure allows credit unions to offer personal loans with interest rates that are often several percentage points lower than what you'd find at a big bank.
Lower interest rates mean more of your payment goes toward your principal rather than interest. Over the life of a loan, that difference can add up to significant savings!
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How Lowering Your Interest Rate Saves You Money Let’s say you have $10,000 in credit card debt at 22% APR. If you paid only the minimum payment, without charging anything new, over four years, you'd pay roughly $5,100 in interest, with a monthly payment of around $315. Now imagine consolidating that same debt into a credit union loan at 11% APR. Your monthly payment drops to about $260, and you'd pay approximately $2,500 in interest over the same four years. That's a savings of more than $2,600 just by securing a lower rate! |
As a member of RMCU, you also benefit from working with local loan officers who take the time to understand your situation and help you find the best option for your needs. There are no impersonal call centers or weeks of waiting — just genuine service from people who live and work in your community!
Tips for Success After You Consolidate Debt
Once you've consolidated your debt, a few smart habits can help you stay on track!
- First, set up automatic payments so you never miss a due date.
- Second, resist the temptation to run up balances on your newly paid-off credit cards.
- Third, consider building a small emergency fund so unexpected expenses don't send you back into debt.
Monitoring your credit can help you track your progress. SavvyMoney lets you monitor your credit score and see how your efforts are paying off over time. Plus, it’s free for RMCU members!
You Don't Have to Figure Out Debt Alone
Consolidating debt isn't about pretending the debt doesn't exist. It's about taking control, simplifying your finances, and creating a clear path forward. If you're ready to take that step, apply for a debt consolidation loan today.
If the idea of tackling your debt still feels daunting, that's okay! Sometimes it helps to talk things through with someone who understands the whole picture. RMCU offers free financial counseling to members who want personalized guidance on managing expenses, creating a budget, or developing a plan to overcome debt. Our team is here to help you move toward your goals — not to judge where you're starting from.