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Ultimate Debt Consolidation Guide

Are you struggling with high-interest debt? Debt consolidation or taking multiple debts and combining them into a single debt can enable you to better manage your debt. For example, rolling the balances of several high-interest credit cards into a low-interest balance transfer card can leave you with one, easier-to-budget payment each month. Your goal is to concentrate on that single debt source and pay it off as quickly as possible. Here are some options for debt consolidation. 

Home equity loan for debt consolidation 

Using a home equity loan for debt consolidation can be the perfect choice for homeowners who have equity built in their homes and the ability to repay the loan. Home equity loans can provide a fixed low-rate solution to higher interest credit card debt.  Benchmark Federal Credit Union, for example, offers competitively low home equity loan rates and no closing costs. Those Benchmark members who qualify can borrow up to 90% of the appraised value of their home.

The pros of using a home equity loan for debt consolidation include:  

  • Consolidating to one monthly payment each month.
  • The rate is fixed so your payment stays the same.
  • Secured loans typically have lower interest rates than unsecured debt.

Look for a lender with low or no fees when exploring your options in using a home equity loan to consolidate debt. Compare all costs and fees when determining the best option, in addition to the interest rate. To qualify for a home equity loan, you’ll need a certain percentage of equity in your home. This may vary according to the lender. You will also need a good credit rating and the ability to pay back your loan or risk losing it. You can borrow a higher amount if the equity is available, making a home equity loan may be a good option when struggling with higher debt balances. Tap to view the rates and terms at Benchmark Federal Credit Union.

HELOC for debt consolidation

A home equity line of credit or HELOC is similar to a home equity loan. It enables you to borrow against your home’s equity and use the cash to pay for just about anything. While it may be a good, low-rate option for debt consolidation, it’s risky if you don’t feel you can make the payments. Because your home is used for collateral, it can be in jeopardy. A HELOC is a smart option only if you are sure you can make your payments.

The benefits of Benchmark Federal Credit Union’s Ultimate HELOC

Benchmark Federal Credit Union is offering members more flexibility and the lowest monthly payment with the Ultimate HELOC.

  • Introductory 6-month rate of 1.99% APR**
  • Borrow up to 90% of the appraised value of your home on amounts between $10,000 and $250,000.
  • Interest-only repayment option (lowest possible monthly payments)

Balance transfer credit card for debt consolidation

A low-interest rate balance transfer credit card might be the right choice for an individual looking to consolidate a smaller amount of debt. The idea is to consolidate all of your high-interest credit card debt to one low-interest card. To be eligible for the lower interest rate or a special introductory rate, the borrower would need to have a good credit score. Using a balance transfer credit card, rather than a term loan would enable you to pay the balance off on your own schedule. If you’re working with a special low introductory rate balance transfer card, it’s in your best interest to pay off the balance while the low rate is still in effect. Your local credit union is the perfect place to start your search for a low-interest balance transfer credit card.

The benefits of Benchmark Federal Credit Union’s VISA Platinum Credit Card  

  • 0% APR* for up to 12 months
  • No balance transfer fees
  • No annual card fees
  • Rates as low as 8.9% APR* after the intro period expires

When comparing balance transfer cards, be sure to compare any balance transfer fees and annual fees. They will cut into your savings. It’s also important to consider what the rate will convert to when the low-interest period ends. You don’t want to be lured into a low rate that converts into an extremely high interest rate when the intro period ends. If you can pay off your debt during a 0% introductory period, you will save significantly on interest.

Comparison of $10,000 credit card balance transfer 

Existing Card                                                    Benchmark FCU Balance Transfer

18.99% APR 0% APR introductory rate for 12 months
  8.90% APR rate after 12-month intro period
$300 monthly payment $300 monthly payment
It will take 48 months to pay off balance+ It will take 36 months to pay off balance+
$4,325 total interest paid $593 total interest paid

+Assuming you don’t add any additional debt to the balance.

 

Consolidating debt with a low-interest loan or balance transfer credit card

Prior to beginning your search for a low-interest loan or credit card, check your credit score. Borrowers with the best scores are eligible for lower rates. When shopping lenders, compare APR, as well as all costs and fees involved in borrowing. If you are getting a loan, use it to pay off your debt immediately. Then, concentrate on making your monthly payments and getting your loan or credit card balance paid off as quickly as possible. We hope this information helps you determine the right debt consolidation solution for you.

 

*APR = Annual Percentage Rate. Rate subject to change & based on an individual’s credit history. 0% Intro Rate is valid for purchases & balance transfer from other institutions for 365 days from card opening. The 0% rate will be in effect for up to 12 months from card opening & after 12 months the rate on all unpaid balances will convert to the rate member qualified for at card opening. 0% APR promotional rate is only valid on new VISA® Platinum Cards & subject to expire without prior notice. 

**APR = Annual Percentage Rate. Rates are for qualified borrowers and are subject to change without notice. Introductory rate of 1.99% APR is for the first 6 months. At the end of the introductory term, the rate reverts to rate according to credit score at time of application: as low as Wall Street Journal Prime Rate – .51% for 80% LTV** and Wall Street Journal Prime Rate – .26% for 81-90% LTV***. Floor rate is 3.99% APR. $100 application fee for loans under $25,000. Early termination fee of $250 if HELOC is paid off & closed in the first 12 months.  $100 cash bonus for acquiring a new or refinancing a HELOC held at another institution & will be deposited into member’s account after loan closing.  Promotional bonus & rate are subject to institution’s discretion & may be discontinued without prior notice.

***LTV = Loan to Value

 

 

 

 

 

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