If you’re like millions of other Americans in a similar position, you’re always looking for ways to intelligently pay down some of your debt. There are several advisor types and methods out there in this area, including businesses based entirely around this theme.
At Wasatch Peaks Credit Union, we’re here to help with everything from home loans to construction loans, car loans and others. One strategy we often recommend to our clients looking to reduce their debt balance: Consolidating loans. What is this process, and is it right for your situation? Let’s take a look at all the basics here, plus how you can go about getting started if you determine loan consolidation is the way to go.
Loan Consolidation Basics
Simply put, loan consolidation is accomplished when you combine multiple balances from different lenders into a single loan you’re repaying to a single lender. During this process, you’ll be issued a separate loan by this lender that allows you to pay off other debts, then you will take on a single debt to this lender alone.
There are several options available here, and which are best for you will depend on your situation. These loans are generally set with a fixed interest rate, one with a repayment period of two to five years. These rates can regularly be lower than those you’d be dealing with for multiple other loan types, though again, this will vary based on your individual factors.
Preparing to Consolidate
As you consider consolidating your loan balances, take the time to make a list of all your loans and credit balances being carried. Don’t just list principal here – also include interest rates for each debt, and what you’re paying each month.
From here, order your debts from the highest interest rates down to the lowest ones. Those with the highest rates should be at the top of your priority list in all cases where your loan isn’t large enough to pay off all debts at once – it makes sense that you’d want to put down those with the highest rates first, leaving the lower ones until later.
If you’re concerned about your credit score and how it will be affected by consolidation, speak to our pros first. We can tell you about any unique circumstances that may impact your score.
Applying for Consolidation
There are three primary methods available for applying for loan consolidation:
- In person: You can apply at one of our branches, where our representatives are happy to help you get started.
- Online: There are numerous online tools for applying for debt restructuring or consolidation.
- Call: Finally, most financial institutions still maintain robust phone service networks and can help you via this method if you’re most comfortable with it.
For more on consolidating loans, or to learn about any of our loan services or other credit union solutions, speak to the pros at Wasatch Peaks Credit Union today.