Drowning in debt and not sure how to get out of it? You could speak to creditors, budget smarter, make bigger payments or try debt consolidation. Debt consolidation is where you roll several of your debts into a single loan payment. There are a lot of factors to consider when deciding if debt consolation is the answer for you. We help walk you through the decision process.
Debt Consolidation Options
There are three simple ways to consolidate your debt:
- Transfer any credit card debt to a 0% or low-rate credit card. In fact, WWFCU charges you zero interest for the first six months with no balance transfer fees with our Rewards Visas. Other credit cards have similar offers.
- Refinance your mortgage or get a home equity loan if you have sufficient equity and roll your debt into your mortgage payment.
- Get a personal loan that lets you roll all your debt into a single loan payment.
When is Debt Consolidation a Good Idea?
Debt consolidation can be a lifesaver, but it’s not always the best option for everyone. If any of the below sound like you, then debt consolidation might be right for you.
- Your cash flow is able to consistently cover your monthly debt payments
- Your total debt – minus your mortgage – is 40% of your gross income, or lower
- You can qualify for a 0% credit card or a low-interest debt consolidation loan
- You’ve got a plan in place to ensure you won’t rack up more debt in the future
When is Debt Consolidation Not a Good Idea?
You need to be serious about paying off your debt for debt consolidation to make sense. If any of the below points sound familiar, you may want to come up with a different option than debt consolidation.
- You are unable or unwilling to stop using your credit cards
- You know you won’t be able to stick to a monthly budget
- You haven’t done the math to determine if debt consolidation will work for you
- You won’t be able to make consistent and on-time monthly payments
What You Need to Know About Debt Consolidation
- If you’re refinancing a loan to include your debt consolidation, the interest rate may be lower than what you were paying – but the length of the loan will be extended
- Sometimes debt consolidation loan rates can change during the life of the loan
- Debt consolidation is not debt elimination – you’re merging your debt together
- If you’re unable to change your spending habits, you’ll just be making the same debt mistakes in the future, adding to your current debt
Options to Debt Consolidation
As we mentioned earlier, debt consolidation isn’t for everyone. Here are a few other options to consider.
- Debt settlement – If your spending has gotten out of control and your debt is excessive, you might want to work with your creditors to settle, and hopefully reduce, your debt.
- Bankruptcy – This is an extreme option, but if your situation is dire enough, it might be the only solution.
- Debt Counseling – Sometimes it pays to speak to an expert. WWFCU has teamed with GreenPath to offer its members FREE debt management help. Click here for details.
If you are facing tough financial times and are behind in your WWFCU payments, don’t despair! It’s in your best interest to work out a payment plan. Speak to a Member Service Representative at (734) 721-5700 to get started.