Trying to get out of debt? If so, you’re not alone.
Each year, millions of Americans struggle with managing their debts. Average personal debt – exclusive of home mortgages – climbed to more than $38,000 in 2018, from $37,000 the previous year, according to Northwestern Mutual’s 2018 Planning & Progress Study. Additionally, the study reported that fewer people said they would carry no debt in 2018, and two in ten said they would allocate 50-to-100 percent of their income toward debt repayment.
The most common household debts include mortgages, auto loans, credit cards and student loans. In fact, in the third quarter of 2018, total U.S. household debt rose for the 17thconsecutive quarter to a record $13.5 trillion.
While many consider carrying debt to be a necessary part of life, it is very easy for it to become overwhelming. However, with the proper planning and strategy, you can pay off your debt – and free up much-needed funds – through consolidation.
Debt consolidation is the strategy of taking out one loan to pay off several. Because there are so many different kinds of debt, consolidation becomes a smart option for those who want better terms, one payment, and generally, a lower interest rate.
However, as with any program to start tackling debt, consolidation requires smart thinking about multiple obligations at varying interest rates and terms, personal credit limits and how it will affect your future spending. For example, credit card debt is a common dilemma many of us find ourselves in.
The average U.S. household with credit card debt had an estimated $6,929 in balances carried from one month to the next, according to Nerdwallet’s 2018 American Household Credit Card Debt Study. The worst credit card problems stem from two factors: they’re easy to use and credit cards often have high interest rates. Nerdwallet reported that as of August 2018, credit card accounts on which interest was assessed charged an average annual percentage rate (APR) of 16.46%.
Debt consolidation is one way to tackle fast-growing, high interest rate debt from multiple credit cards growing faster than they can be paid off. This allows you to bring all of your debt together under one loan – with one rate and one payment.
However, if you do choose to consolidate, it is important to consider canceling one or more of the high interest rate cards to avoid falling into the same trap in the future.
Understand Your Options
While a debt consolidation loan can help you pay off debt, several other lending tools can also be used.
If you have an auto that is worth more than you owe, you have equity in your vehicle, and you can use this equity to pay down debt.
Funds from home equity lines are another option that offer fixed- and variable-rates. Many financial institutions offer preferred lines of credit with lines starting at a few hundred dollars so you don’t rack up a lot more debt as you work to pay existing debt down.
Find the Right Partner
When looking to consolidate debt, it’s important to work with a partner that you trust to have your best interest in mind. Find a financial institution to help you develop a plan with an eye to your long-term financial future.
For example, Truliant offers a range of debt consolidation options, along with our No-Cost Credit Review and our TruFinancial Checkup, which reviews your entire financial picture to find ways to help you save money.
And remember, as you plan, make sure you understand upfront how long it will take to pay off your consolidation loan, and how much you can afford in payments. With proper planning and the right guidance, you can bring yourself out from under the stress of rising debt. For more information, call 800-822-0382, or find a location nearest you at Truliantfcu.org/locations