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By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.

Debt-Consolidation-Loan

A Debt Consolidation Loan can Help you Get Back on Track

 Aug 06, 2021
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It probably won’t surprise you to learn that finances are the leading cause of stress for Americans. And it’s easy to see why when you learn that the majority of Americans are living with sizable debt. You don’t need to panic, because these figures do include debt sources such as mortgages and auto loans. But there are still plenty of folks trying to get out from under things like large credit card bills and student loans.

 Much of the stress that comes with debt is about how to manage it. Once you’ve figured out how to organize your finances and start making progress on paying off your excess debts, you’ll feel a whole lot better. That’s what a debt consolidation loan is all about.

Debt consolidation can help you clean up the mess.

Debt consolidation is when you combine multiple debts, usually high-interest debt like credit card balances, into one payment. A debt consolidation loan works like this: You use the money from the loan to pay off your other debts, and then you pay off the loan in installments over a set amount of time. At the end of the loan’s term, you’re done.

This means you don’t have to waste your time and energy keeping track of everything and juggling payments. A debt consolidation loan helps you make a plan, make regular payments, and get on with your life.

Isn’t taking out another loan a bad idea?

Well, no. Not if you’re doing your research. Plus, a debt consolidation loan can actually help you in ways you might not expect.

As we’ve mentioned, one of the first benefits you will notice is turning multiple payments into one, easier-to-manage payment. By condensing your payments this way, you’re going to save yourself a lot of stress every month. And, of course, consolidation can result in lower payments, often through lower interest rates or managing the term of the loan. Or you might choose a shorter term with a higher payment so you’ll be done sooner.

Another financial benefit is that a debt consolidation loan could increase your credit score in the long run as your debt/income ratio improves.

 

Pay attention to payoffs

This might sound obvious, but one important step in paying off cards and other debts with a consolidation loan is to make sure they’re really paid off completely, then make sure the accounts are really, truly, 100% closed for real. That way, you’re not on the hook for any annual fees that might be coming up, and you’re not tempted to keep using the cards.

This might take some follow-up and persistence on your part; some companies can be a little stubborn. Just cutting up your cards isn’t enough; you have to actually close the accounts permanently once the balance is zero.

How do I know if a debt consolidation loan is right for me?

There’s no one-size-fits-all, perfect solution that works for everybody. You might consolidate with a Debt Consolidation Loan, an AgFed credit card, a personal loan, a Home Equity loan, or even a mix of AgFed loans.

But it is easy to get started! Make a list of your debts, the balances, your payments, your interest rates, and call or email us. We’ll help you run the numbers and figure out the best solution for ditching your debts.

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