If you’re not overwhelmed by debt, millions of people only wish they were like you. However, there are more than a few ways people can recover from debt, some of which are better than others. Credit union loans in particular typically come with one significant advantage, but is a getting credit union consolidation loan better than getting one from a bank?
What is Debt Consolidation All About?
Credit card debt consolidation will help give you a clean slate if you want to undo getting yourself into debt. You can use this personal loan to payout smaller debts at a lower interest rate. Those little bills can cause gigantic problems if they get out of hand. However, you can take control and pay them off or consolidate the loans so you have one payment each month.
The thing about a credit card consolidation is that it may not be right for you. Before considering a loan form any source, use this checklist to find out if a debt consolidation loan is a solution you’re looking for?
Is the Debt Problem Solved?
To answer this question, remember why you’re in this bind in the first place? Was it because of unexpected expenses like car repair, medical bills, or loss of income?
If your debt is for any of these reasons, you will probably overcome the debt. However, if it’s because of impulse buys and overspending, a loan may not solve your problems. Before you take out a credit card consolidation, create a reasonable budget, open a savings account, and start being responsible for your credit history. If you take out a loan and you’re not behaving responsibly, you’re going to have the same issues.
Can You Repay the Loan?
If you’re already juggling expenses each month just to make the minimum payments on your credit card bills, then a credit card consolidation can help. The lower interest rate may make paying bills easier, but bundling a lot of loans together could make your monthly payments go up and give you a shorter length of time to repay the money.
Speak to a loan agent to figure out how you’re getting out of debt and the best option for credit card consolidation. The loan officer at the credit union can work to provide better interest rates, terms, and give you a total balance.
If you’re depending on an inconsistent stream of earnings to repay debt, like a part-time job, or hoping for a substantial windfall, it may be hard to stick to an aggressive repayment plan. However, you can make extra payments periodically. Although you can’t predict when you’ll have extra money, they will help in the long run.
Will a Credit Card Consolidation Cover My Debts?
In the US, most households are in debt with their credit card companies for as much as $15,000. That’s a significant portion of their wages. Add to that the average vehicle loan is around $25,000, so it’s plain to see where the bulk of their debt is. One of the primary concerns when considering a credit card consolidation loan is the monthly payment. Bundle the most significant debts and consolidate them into a personal loan.
Are Interest Rates Too High?
This is where going with a credit union might be a better play than a traditional bank. Interest rates on credit union loans tend to be less because those institutions operate on a not for profit basis. Yes, you do have to be a member of the credit union to qualify.
However, rules have become increasingly relaxed in that area, so you generally don’t have to be a member of any specific group to join a credit union as in the past. Given you need the lowest interest rate possible to make a consolidation strategy effective, credit unions are good places to look for these loans.