We’ve all been there. The holidays got the best of us and as the bills start rolling in after the new year, we realize we may have overspent. Not only do you owe more than you’d like, but the balances are spread out across several credit and store cards (we know, that extra 15% off is hard to resist), and interest is already piling up due to those high-interest rates you didn’t pay much attention to in the heat of the moment. Sound familiar? There’s no need to panic but now that the presents have been opened and the decorations are back in the attic, it’s time to face reality and make a plan to efficiently pay off your debt. If you haven’t considered debt consolidation, you should. Here are four benefits to consolidating your debt.
The primary reason people consolidate their debt is to save on interest charges. Each credit card with a balance is accumulating interest at a rate as high as 30%! By the end of a year, that $100 purchase has turned into $130 and interest is still being tacked on. Credit cards (unless it’s a special introductory offer) very rarely advertise their rates, so you’ll need to check the fine print to see what you are paying, and it can be astronomical.
Once your debt is consolidated, you only have one balance which means you only have one interest charge (likely much lower), and this can turn into huge savings.
Variable Interest Rates
Another thing credit cards don’t advertise is that interest rates are changing constantly and you don’t have to be notified of rate changes. So, when you’re carrying multiple balances with different companies, it’s very challenging to keep up with. While you may have initially had an interest rate of 9%, it can quickly turn into 16%+ without a word.
Consolidating debt with a personal loan will give you a fixed interest rate and fixed terms, allowing you to pay down your debt without any surprises.
Lower Credit Score
We all know that debt affects your credit score, but did you know that carrying multiple balances can also have a negative impact? In addition, if you miss a minimum payment on just one of these accounts, your score will take a hit.
Debt consolidation will help improve your credit score by eliminating balances while also making it easier to pay down.
While not all credit cards have them, it’s not uncommon for credit cards to charge users an annual fee, particularly if their rewards program is significant. Annual fees vary based on the card, but they average around $50 a year. Given multiple credit cards, these can add up quickly.
Eastex Credit Union’s personal loan can consolidate your debt into one low monthly payment. With fixed terms and rates, you will know exactly what your payments will be, and you can budget accordingly to eliminate your debt entirely.