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What Exactly is Debt Consolidation?

Posted on: January 24, 2019

Everyone’s financial situation is different; however, an overwhelming theme is that people carry a lot of debt. In fact, consumer debt in America is over $13 Trillion (yes, with a “T”)!

 

The economy has improved and it seems that everywhere you look these days, someone is wanting to loan you money. Plus, as cash becomes more and more obsolete, Americans are becoming increasingly comfortable borrowing money that they can’t realistically afford to pay back.

Unfortunately, using borrowed money can have an extremely negative impact on our lives and overall mindsets. Interest rates and fees begin to pile up and before we know it, we find ourselves scrambling to simply make minimum payments and entering into a downward spiral of debt which can lead to stress, anxiety, depression and marriage problems.

You’ve likely heard about it more than once but what exactly does debt consolidation mean and how could it benefit you?

What is debt consolidation?

Debt consolidation is a way to combine all your outstanding loans into one debt. When you obtain a debt consolidation loan, you will receive one lump sum to pay off all your existing debts. Having one debt means one interest rate and one payment to focus your efforts on paying down. It also cuts down on the number of overall bills you have to remember to pay every month which can mean less late fees, fewer collection calls and less confusion overall. Debt consolidation works best when your credit score is good enough to qualify for a loan with a lower interest rate and better terms than your current loans.

What can I consolidate?

Debt consolidation can be used for almost any type of unsecured consumer debt including credit cards, medical bills, student loans, payday loans, taxes, utility bills and even bills that have already gone to collection. It’s most often used for credit cards but it’s important to consider all debts you owe if you want to make the most of a debt consolidation loan.

Can debt consolidation save you money?

Yes! If you combine multiple debts with high interest rates into one loan with a lower interest rate, you can save tons of money on accumulating interest and pay down your debt faster. Plus, most debt consolidation loans offer a fixed interest rate so you can determine a payment plan and know exactly how long it will take you to pay off your debt- without any surprise interest rate hikes.

How do I get started?

If you’re ready to take the next step in consolidating and paying off your debt once and for all, the first thing to do is figure out what you currently owe and to whom. Make a list of all current loan balances as well as their interest rates. Then, add them up to identify the amount you’ll need to pay them all off. Then, apply for a loan. ECCU’s personal loan is ideal for debt consolidation because it has set terms with a set interest rate. Once approved, you’ll receive the lump sum to pay everything off and be left with one monthly payment, one interest rate and one manageable debt.

Please let us know if you have any questions about whether or not debt consolidation is right for you. We have experts available to review your financial situation and advise on the best next steps.