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For many people looking for the best method of paying back their debts, debt consolidation might be the best option. Debt consolidation is using a loan or a credit card to pay off several loans or credit cards. This way, your debt repayment is simplified, and you can focus on one balance instead of multiple balances. When you consolidate your debt with Denver credit union, you might even secure a lower interest rate. If you’re amongst those who don’t understand how debt consolidation works, below are all the basics.
How Debt Consolidation Works
When you choose to consolidate your debt, you’ll have to either take out a new loan or maybe a credit card. This loan money is then used to pay off all your debts; this way, you only have to make a single payment monthly. To explain further, let’s imagine you have several credit card balances and also small loans with varying interest rates and amounts for monthly payments. Instead of paying these loans separately, you can choose to consolidate with just a single payment. Collecting a loan to pay off all these little debts from Denver credit union will leave you with one monthly payment every month instead of several. It will also help you cut down on having to pay several interest rates throughout the loan term.
Debt consolidation helps you save on interest payments and is also a great way to increase the timeline of paying off your debt. Although debt consolidation seems like a good option, it is not always the right strategy for many people. You need to ask yourself if it reduces the total amount you will need to pay and reduce the monthly payment. There are different methods you can consolidate your debt, although your options may be limited based on the type of debt and credit standing you have.
Credit Card Transfer
Several credit card companies offer a low-interest balance transfer. With this option, you can decide to consolidate your debt into a single credit card. Note that the interest rate for most balance transfers might increase after a while. You might also be required to pay a balance transfer fee, and the credit card company might not allow you to transfer all your balances.
Home Equity Lines of Credit
Denver credit union offers home equity lines of credit, allowing you to borrow up to 80% of your home’s equity. This way, you can take a certain amount and repay with fixed amounts over a set time. A line of credit is like a credit card; you have access to the money whenever it is required, and you only have to pay interest on the money you used. With this option, you can take the money and pay all the existing debts you have.
Debt Consolidation Loan
Sometimes, you can get a debt consolidation loan from lenders. This loan can either be personal or unsecured. It is meant to help you pay debts and come with a fixed interest rate. The repayment period offered is also relatively stable and allows you to choose your preferred period to pay off the debt.
