Should You Use a Loan to Consolidate Your Debt with Low Credit Union Rates?

When you get behind on paying your bills, it’s tempting to consider debt consolidation as a way to get your finances back under control. It can be a great solution for some people. For others, it provides near-term relief, but could mean paying more in total interest over the long term.

Here are the pros and cons of debt consolidation, why low credit union rates may make it a good idea and how to go about applying for a loan.

Pros & Cons of Debt Consolidation

The average American carries about $5600 in credit card debt, excluding store cards. That amount has been steadily increasing over the last few years and is likely now being affected by the high unemployment rate due to the COVID-19 pandemic.

Keep in mind debt consolidation is distinct from debt settlement, which is a debt relief solution that, through negotiation with creditors, decreases the total amount you owe. Debt consolidation is a process where you combine debt from several creditors and then take out a loan to pay them off. Used properly it can help you get out of debt sooner.

The advantages of debt consolidation include no longer struggling to make multiple minimum payments and simplifying the process of paying your bills. Ideally, you’ll also realize some savings. For example, low credit union rates can save you a lot of money over the high rates credit card companies charge.

 One of the biggest disadvantages to debt consolidation is the inability to curb spending. The result? More credit card debt at high interest rates plus the payment you must make on the consolidation loan. Many people find this challenging, as most debt consolidation programs take anywhere from two to five years to eliminate the original debt.

How to Consolidate Debt

In addition to a debt management program that includes educational programs on how to manage debt, most people opt for a personal or home equity loan to pay off multiple creditors. Interest rates vary on these loans, but low credit union rates make it an attractive choice.

As you weigh your options, it helps to use a debt consolidation calculator to come up with the total cost, the amount of time you’ll need to pay back the loan, and what impact it might have on your credit score.

Low Credit Union Rates

No matter which type of debt consolidation loan you choose, it pays to shop around to find a rate and term that work for your current financial situation. To learn more about the low credit union rates Clark County Credit Union offers, or to apply for a loan today, contact us at 702-228-2228.