May 8, 2020 by Space Coast Credit Union
You wake up one morning, feeling chilly, then realize it’s because your furnace isn’t working. You call for repair service, only to discover you need a brand-new furnace. While you’re trying to sort that out, you learn that the car your teenager uses to drive to school and work needs a significant repair. And, oh, there’s also that college tuition payment that’s due.
Perhaps you haven’t had exactly that same experience, but you can probably relate to times in life when unexpected expenses keep piling up, and you need to scramble to figure out how to pay them all. It isn’t unusual to rob Peter to pay Paul to ensure all gets paid on time, but then you’re stuck with multiple payments that suddenly take a big chunk out of your monthly budget.
At this point, it makes sense to evaluate whether a debt consolidation loan is the right solution. The term “debt consolidation loan” refers to taking out a new loan to use the funds received to pay off numerous loans, usually ones that are unsecured (with the financing not attached to a home, car, or other owned item).
Advantages of Debt Consolidation Loans
Advantages are numerous. First, there is the sense of relief that you no longer need to juggle multiple loans or worry about forgetting to pay one. When debts are consolidated, there is one convenient payment.
In many instances, the interest rate is lower for your new loan. That’s because when you need to scramble to pay an expense, you typically use credit cards with their higher interest rates. You can see an even more significant drop in the interest rate when the consolidation loan is secured (with the financing attached to a home or other eligible owned item).
Because the interest rate is lower, payments are almost always lower, which gives your budget more breathing room. Or, if you just want to get the debt paid off, you can continue to pay the same amount as you had been, but the balance will drop much more quickly.
Here’s another advantage of a debt consolidation loan. If you’re paying on multiple loans every month, it’s much easier to miss a payment, and that can affect your credit score. When your credit score isn’t as good, you’ll have a harder time getting loans with the best interest rates, and might end up struggling to get loans approved at all. So when you’re proactive and combine the debt into one payment, you can protect your credit.
Using a Home Equity Line of Credit for Debt Consolidation
When you need to consolidate debt, a home equity line of credit (HELOC)
is often a good strategy because of the lower interest rates associated with this type of loan. Payoff times are more comfortable as well, giving you the flexibility to decide whether you want to pay the balance off more quickly or enjoy the benefits of having more breathing room in your monthly budget.
And, looking ahead, when you have a HELOC, you will have a low-interest, low-stress way to handle emergency expenses, bypassing the need for high-interest credit card solutions.
At SCCU, a HELOC is flexible. You can receive cash in one lump sum or access your funds at any time, right when you need it. You will benefit from low credit union rates with no intangible tax. There are no points, no origination fees, and no hidden fees.
Applying is fast and convenient. You can apply for a HELOC for your debt consolidation online
today. Local decision makers provide fast approval times, and you’ll appreciate the fast closings. You can borrow up to 80 percent of your home’s value, or 70 percent on investment properties and interest-only mortgages.
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